Individual Investor Brandywine Drunk on Success
By: Craig Schneider (06/26/00)
value investing is back in vogue to better cope with the market's volatility. So why is Paul Lesutis, managing director at Brandywine Asset Management, talking about putting growth stocks in his value portfolio?
One word: Balance.
The notion of adding growth names to the portfolio is a relatively new strategy for the generally deep-value investing-oriented Wilmington, Del.-based firm, which was founded in 1986. Lesutis manages about $1 billion of the $6 billion under management, primarily focusing his attention on large-capitalization domestic equities.
Brandywine primarily reaches out to the institutional investor. However, about 15-20% of its business is with individual investors, through sub-advised mutual funds and wrap accounts for the portfolios of high net worth
individuals.
One of the sub-advised funds includes the $982-million American AAdvantage Large Cap Value AMR (NASDAQ: AAGAX
- news), which has a five-year annualized return of 12%.
So whereas price-to-earnings ratio and price-to-cash flow analysis have their place in his strategy, Lesutis believes growth has its advantages as well. ``We are basically deep value investors,'' he says. ``But I am willing to pay up for better companies with faster, more stable growth.'' Lesutis' unorthodox strategy led him to the beaten down drug stocks two months ago.
Among his picks: Abbott Labs (NYSE: ABT - news), Johnson & Johnson (NYSE: JNJ - news), Eli Lilly (NYSE: LLY -
news), and Bristol-Myers Squibb (NYSE: BMY - news). ``To me, drug stocks were a logical place to move after the sell off in techs,'' he says. ``They are a good anchor if the economy does slow.''
And although the S&P Drug Index has climbed 44% since its low in early March, Lesutis does not feel his drug stocks are overpriced. Why? The fear of the U.S. Government getting involved with changes to Medicare still keeps a lid on the group. As a percentage of holdings, the drug stocks have grown to 8% of his portfolio from nothing at the start of the year.
Well, the stock does seem to top out at 43 for the time being and trade down to 39 and change...not great for the options, but a decent trading range...could use another real
product announcement here.
chris |
