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Four 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/info599.htm

TWST: Could you give us a brief overview of Principal Capital Management and your responsibilities there?

Mr. Nolin: I manage the Principal Mid-Cap Fund and the separate 401(k) account called Medium Blend. In total there are 1.8 billion in assets under management. We manage in a mid-cap range, and what we consider mid-cap is 1.5 billion in market cap up to 12 billion. We manage a core style, not growth, not value, but the best of growth and the best of value, and that’s core.

TWST: Tell us more about the investment philosophy behind the Fund.

Mr. Nolin: The philosophy behind the Fund is, we really think like business owners, and we view stock ownership as the same as owning a business. Instead of viewing a stock as a piece of paper, we view it as owning a fraction of that company, and your return on that investment is dependent on how well that business does in the future and how much cash that business generates to you as an owner in the future. So we really have a long-term focus, and for us risk is defined differently than for a lot of other participants in the market. We define risk not in terms of beta, but in terms of business risk. How well is this business going to perform going forward? How well it performs is going to determine how much cash that business generates, and that is really what matters to us.

TWST: What has the performance of the mid-cap stocks been like over the past few months?

Mr. Nolin: Mid-caps over the past two and a half years have really outperformed large caps of the S&P 500 by a wide margin, and that has continued over the past couple of months. Although mid-caps over the past couple of years had held up and had generated positive to flat performance in a very down market for the S&P 500, in recent months mid-caps have been taken down along with large caps. For year-to-date we look at the Russell MidCap Index, and that is down a little over 15%. Our Fund is down 10.8%.

TWST: What are some of the sectors that are showing growth potential at this time that you are particularly attracted to?

Mr. Nolin: We really focus on a bottom-up fundamental basis, but one sector in which we’ve found attractive opportunities is outsourcing, companies that do services for other companies that don’t have the scale to do it in-house. Another sector that we’ve owned since 2000 is REITs. We’ve found REITs to be very attractive on a valuation basis, on a dividend basis, and on a growth basis. So we’ve been holders of REITs.

TWST: What REITs are you interested in?

Mr. Nolin: We like to own throughout our portfolio usually the number one or number two company in an industry that meets our definition of having competitive advantages. One example there that we own is Public Storage (NYSE:PSA). Their business is storage. If your garage is full and you need extra storage, you go to Public Storage. They’re the largest company in the industry and have something a little different for the REIT industry — a brand, because they’re national. So we see this as a very good growth company for a REIT, and the dividend yield is around 5%.

1) H. Thomas Smith, the Founder of Birmingham Capital Management, examines portfolio management strategies in this timely and deeply informative 4,400-word interview from The Wall Street Transcript.

2) Earl V. Newsome, Jr., a Managing Director and Co-Owner of Cambridge Financial Group, examines portfolio management strategies in this timely and deeply informative 4,400-word interview from The Wall Street Transcript.

3) K. William Nolin, a Portfolio Manager for Principal Capital Management, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

4) Scott T. Brayman, a Vice President of Sentinel Advisors Company, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.