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Three 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/info581.htm

TWST: What is your investment philosophy at Oppenheimer Capital?

Mr. Degenhart: We manage over 400 million within the small cap area. About 75% of our assets are for variable annuity plans within life insurance companies. Our accounts include the OCC Accumulation Trust (a commingled product currently offered by 12 insurance companies) and Sun Capital Value. The remaining assets are for ERISA and WRAP accounts. In our mid-cap group, I also work closely with Gary Chin, a Senior Analyst here. It’s a big universe out there, so we try to be very efficient. We narrow the universe down by focusing on two things when we look at a company. First, there’s what we call franchise value, companies that have some sort of value-added aspect to them. They sell to niche markets and have leading market shares, high barriers to entry, sustainable profitability, or an attractive competitive environment. Those characteristics can be found through screens where we look at profitability ratios and consistency. We also find strong franchise values by doing fundamental research, meeting companies at conferences and going to visit companies out in their offices when we travel around the country. After we have identified companies that we believe have franchise value, we add them to our watch list, track them, and wait for attractive entry points. Those attractive entry points might be triggered by an unfortunate event like 9/11. They might be triggered by sector-specific incidents that cause companies in the whole group to go down. In that case, we would try to buy the best company in that group. So we’re identifying the franchise value and then we’re looking to identify strong management teams. Those things often go hand in hand, but not always. In looking at management teams, we look for depth. We don’t typically want to see a one-man show; we like teams. We want depth, experience, a strong, consistent track record, low turnover of management, and a management team whose interests are aligned with shareholders, preferably through direct stock ownership and not all through options.

TWST: That’s an interesting statistic. This may be the place to learn about some stocks that are not so well known but are growing fast. Can you make any suggestions?

Mr. Degenhart: One of my favorites is a utility, MDU Resources (NYSE:MDU), a company with a very solid long-term track record. It’s a company with an acquisition element to it, but the acquisitions they do are always relatively very small and strategic. About half of their business is in the traditional electric generating business. But then they also have businesses in the aggregates area where they are a supplier of rock, sand and other intermediates for construction, highway building, bridge building, etc. They have a small E&P division. They have a division that services electric utilities by outsourcing line repair and things of that sort. So this is a company that, again, we believe has a great management team and a very solid long-term track record. Sales and earnings have grown at a compound rate of 18 and 16 over the last 10 years. Another name that we have been doing well with is Fresh Del Monte Produce (FDP), a household name. This is the Del Monte brand of pineapples and bananas that you find in the supermarket. We believe that management here is very shrewd and very disciplined in how they allocate capital. They’re building an infrastructure of refrigerated warehouses around the country, and once they have completed that in the next year or so, they’ll be able to gain significant share, simply by executing better than the competition. Another company that is somewhat in the turnaround camp is Interface (IFSIA), an Atlanta-based manufacturer of carpet tiles. This would be carpeting that is the size and shape of ceramic tile, but it’s carpet. They have a 40% share of these carpet tiles. This is a business that historically has sold primarily to the office environment, so the stock has been impacted by lower office occupancy rates and slowing office construction. Here’s another situation similar to Big Lots, where the CFO has been promoted to CEO and has made many changes throughout the company, one of which is redirecting the focus of the company where they will still sell to the office market, but they’re also focusing on education, hospitality, government and retail markets. They’ve signed up two or three national retailers as customers that are standardizing on their product for new stores and remodels. They’re also talking to the big box DIY accounts like Home Depot and Lowe’s to possibly get distribution.

This special report includes:

1) Investing in Small Cap Value Stocks - Mark F. Degenhart, Senior Vice President for Oppenheimer Capital, examines portfolio management strategies in this timely and deeply informative 4,000-word interview from The Wall Street Transcript.

2) Mark Gorodinsky, a Portfolio Manager of the RSI Retirement Trust Emerging Growth Equity Fund with Retirement System Investors Inc., examines portfolio management strategies in this timely and deeply informative 2,400-word interview from The Wall Street Transcript.

3) H. Edward Shill II, Chief Investment Officer of QCI Asset Management, examines portfolio management strategies in this timely and deeply informative 2,800-word interview from The Wall Street Transcript.