For Subscribers

Get the complete article now!

Five money managers examine portfolio management strategies in the latest issue of The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info545.htm

TWST: Could you briefly give us an overview of the Federated Kaufmann Fund and your responsibilities there?

Mr. Auriana: The Federated Kaufmann Fund is a fund that invests in growth companies, irrespective of capitalization. Lipper has us categorized as multi-cap growth. Morningstar has us as mid-cap growth and that’s what we do. We invest in growth companies. That’s what Hans Utsch and I have done for our entire careers, which, by the way, go back to the mid-1960s. We’ve been running the Fund since 1986. It’s one of the longest terms of any fund manager. I think we’ve been running the Fund longer than 90% of the mid-cap growth funds have been in existence, and maybe longer than 85% of most usual funds that have been in existence. So it’s been a long-term commitment to investing in growth companies. Our investment criteria and process have remained basically unchanged for the last 15 years. We like to invest in companies that are leaders in their industry for the most part. If you look at our portfolio, you’ll see that that’s borne out by investments, for example in Lincare (Nasdaq:LNCR), which is our largest holding and is the leader in home respiratory therapy, and a company like PETsMART (Nasdaq:PETM), which is the biggest factor in retailing pet supplies.

TWST: What are some of the businesses that Cendant (NYSE:CD) is in?

Mr. Auriana: They are primarily franchising in the travel industry, primarily lodging. Our third largest holding is a company called PETsMART, which is the foremost retailer of pet supplies. This investment was unusual for us. It was a turnaround situation and the company is still in the process of turning around. It was our best performing stock last year, in terms of price appreciation. It was up 240% and we thought it was a good area of retailing to be in. We began to accumulate the position when the company hired a new President, Phil Francis, who we felt had the ability to effect the turnaround. He’s pretty much done so.

TWST: So how would you differentiate yourself and your firm from other money management companies that have a similar growth investment style? What are your competitive differences?

Mr. Auriana: There are different investment philosophies and styles. We have our own investment criteria, which I’ve been discussing with you — investing in companies that are leaders in their industry and that are profitable. We are not concerned with earnings momentum or price momentum. It’s really easy to invest, if all you’re looking at is earnings momentum. Price momentum is even easier. So you can be very lazy in this business. I can assure you here we are not lazy. We work very hard doing fundamental analysis and research on individual companies. I don’t know how many growth funds invest on a true, fundamental, bottom-up basis. But we have a wealth of experience here as well. We’ve been at this a long time and we have a team that we’ve built up here to support us. Many of the members of that team have been here for a number of years, and we have a common approach to investing in this business. It’s relatively straightforward. The biggest danger in this business is managing your own emotions.

TWST: What are the major challenges that you’re facing this year?

Mr. Auriana: I think the biggest danger in this business is sticking with your investment philosophy and approach to the market because the market does go through different fads. During those fads, your investment approach may be completely out of style, and your performance may be lagging. But I think you have to stay with what you feel comfortable with. Sometimes your performance is lagging for the wrong reasons.

This special Investing Strategies Report includes:

1) Alexander L. Muromcew, International Equity Portfolio Manager and a Vice President at Loomis, Sayles & Company, L.P., examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

2) Robert L. Lee, Senior Vice President of Sentinel Advisors Company, examines portfolio management strategies in this timely and deeply informative 4,400-word interview from The Wall Street Transcript.

3) Martha Kimball Pomerantz, Investment Principal at Lowry Hill, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

4) Lawrence Auriana, Portfolio co-Manager of Federated Kaufmann Fund, examines portfolio management strategies in this timely and deeply informative 3,700-word interview from The Wall Street Transcript.

5) Paul A. Magnuson, Principal, Senior Research Analyst and Portfolio Manager with NFJ Investment Group, examines portfolio management strategies in this timely and deeply informative 3,500-word interview from The Wall Street Transcript.