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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/info626.htm

TWST: Tell us about NCM Capital Management and your responsibilities there.

Mr. Jones: NCM Capital Management is located in Durham, North Carolina. Our firm has 16 years of history. We run approximately 2.5 billion. We manage products across nine disciplines: six equity and three fixed income. We have clients that include states, municipalities, Taft-Hartley, college endowments, corporations, savings plans and the like. I am the Chief Investment Officer, and I share those duties with our Chairman and CEO, Maceo K. Sloan. We divide up our equity product management across four portfolio managers: myself, Patrick Lyons, Shayne John, and Maceo K. Sloan. So the four of us provide the equity management operation at NCM Capital. I specifically manage growth portfolios, and most of my clients would be benchmarked against the S&P 500 or growth indices such as the Russell 1000 Growth Index.

TWST: What is your investment decision-making process, and how do you screen these companies for investment?

Mr. Jones: We have a stated investment philosophy for each of our six equity products. Basically, we use screens to sort out a reasonable working group of candidates for potential investment. And so we would be looking at things such as market capitalization and growth characteristics, financial strength characteristics, to reduce a broad universe of potential candidates to a workable universe that we would actually do further investigation and fundamental analysis upon. If we are talking about growth products, we want companies that have superior growth versus their peers and industry group. We don’t want to pay an outrageous p/e multiple to participate in that growth, so we’re looking at growth to p/e ratios, we’re looking at earnings multiples. We want companies that have managed to surprise by a penny or more in their most recent quarterly earnings reports. We’re looking for a company with rising earnings estimates going forward. That’s a key ingredient. And we want the balance sheet to be as good right now as it’s been in the last five years, or to be showing improvement in statistics such as leverage and interest coverage ratios. So, obviously, on the growth side, with the slowdown in the economy over the last two years, it’s been a difficult environment to get the kind of growth that existed in the years prior to 2000. It’s been tough, needless to say, for growth investors. A big part of what growth investors have invested in historically is technology, and that’s been under tremendous pressure with the weight in the S&P 500 dedicated to technology companies dropping from over 35% to barely 13.5% today. Technology-based companies have undergone tremendous decapitalization over the last couple of years. So we have to go elsewhere to find growth these days than where we used to shop prior to 2000.

TWST: Healthcare distribution is one of the sectors you mentioned exhibiting some growth opportunity. What has attracted you there?

Mr. Jones: Cardinal Health (NYSE:CAH) is our main play there; it is a distributor at the wholesale level to drugstores and other retailers of drugs. This is a growth business. I mean, the population of older people is growing quite rapidly. The need for and the rate of consumption of drugs are going to do nothing but increase. Cardinal provides a professional distribution system that can handle the great bulk of drugs, then deliver them in an efficient manner to a specific drugstore to fulfill all of their needs and manage the various disease programs, and also provides great computer support and advanced inventory management techniques. The demand for that wholesale drug distribution is only going to grow. Cardinal Health, in our opinion, is the most competitive company in that space and will continue to gain market share.

Larry Jones, co-Chief Investment Officer of NCM Capital Management Group, examines portfolio management strategies in this timely and deeply informative 5,000-word interview from The Wall Street Transcript.

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