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Six 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/info562.htm

TWST: I notice you have quite a large holding in Phillips Petroleum and Conoco.

Mr. Schmeidler: Phillips (NYSE:P), actually, relatively speaking, has done pretty well. It’s obviously selling for more than we paid for it. But more important than that is that when we bought Phillips, it had acquired significant Alaskan assets from Atlantic Richfield. Atlantic Richfield had merged with British Petroleum and had big Alaskan assets. The Federal Trade Commission wanted Atlantic Richfield to divest some of those assets so that the merger could go through. Phillips acquired those assets. In the process, they leveraged their balance sheet, and because of the leverage Phillips sold at a big discount to cash flow from operations — something like 6.5 times cash flow. We liked the assets and we liked the valuation, so we bought Phillips.

TWST: Do the premium increases, as a result of 9/11, include life insurance or just property and casualty?

Mr. Schmeidler: I think there is some element of life insurance involved, too, but less so. It’s more property and casualty. Bear in mind, also, that when you say since 9/11, we were interested in insurance before that, because the pricing cycle, which had been so negative for a dozen years, started turning very positive, and that had nothing to do with what happened in September. What happened in September just augmented it to such a degree that instead of a company having the ability to raise prices maybe 5% or 10%, now they can raise prices 15% or 20% or 30% and sustain it because there just isn’t enough reserve capacity anymore in the industry. Businesses need insurance. Individuals need insurance. So there isn’t much choice. It’s almost as important as food and shelter, and it becomes something that has, I would say, almost an inelastic demand. It’s not inelastic but it is a lot less discretionary than many other things. So that’s an important area of investment for us, and it has been for a couple of years, but it was augmented further by the events in September.

TWST: Are there any other growth areas you can tell us about?

Mr. Schmeidler: Another area that we have a modest interest in is housing because of the demographics. Because we have close to 100 million people under the age of 25, and people buying second homes, first-time homebuyers are coming into a tight market, which is what has been driving the price of housing as well. So that’s an area of interest to us. Of course, even though the equity market looks fully valued, there are areas of great interest. One is technology. In the technology sector, the most important trend today, from our viewpoint, is the leading-edge chips that are being produced. They’re going to be coming out over the next couple of years. As you may know, existing chips are made on quarter-micron circuitry. A quarter-micron is 1/400 the diameter of the human hair. But now you’re going to see circuits of 0.13 and 0.1, or circuits with a diameter of 1/1000 the diameter of a human hair. Well, that requires all new equipment, and the amount of leading-edge capacity in the world today is in single digits. That has to change. That is changing, as a matter of fact, as we speak, with leading-edge equipment increasingly in demand; and nobody wants to buy last year’s technology.

This special Investing Strategies Report includes:

1) Sarat Sethi, Principal and Portfolio Manager/Equity Analyst of Douglas C. Lane & Associates, Inc., examines portfolio management strategies in this timely and deeply informative 3,600-word interview from The Wall Street Transcript.

2) Frederic G. Burke, President of Johnson Lemon Asset Management, examines portfolio management strategies in this timely and deeply informative 2,600-word interview from The Wall Street Transcript.

3)Arnold R. Schmeidler, President of A.R. Schmeidler & Co., examines portfolio management strategies in this timely and deeply informative 6,500-word interview from The Wall Street Transcript.

4) Jerome H. Walther, Chief Operating Officer of Church Capital Management, examines portfolio management strategies in this timely and deeply informative 3,000-word interview from The Wall Street Transcript.

5) Donevan E. Kukul, Portfolio Manager with Cohen Klingenstein & Marks, Inc., examines portfolio management strategies in this timely and deeply informative 4,000-word interview from The Wall Street Transcript.

6) Paul C. Hogan, Investment Research Analyst at Fenimore Asset Management, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.