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TWST: Would you begin with a description of Luther King Capital
Management and your responsibilities there?
Mr. Purvis: Luther King Capital Management is an investment-counseling
firm that manages 5 billion in equity and fixed income assets for high
net worth individuals, corporations, endowments and pension plans. We
also manage a small family of mutual funds. Our Small Cap Fund was
started in 1994 and has roughly 230 million in assets. In addition, we
manage another 100 million in small cap portfolios for clients. With
respect to the firm and our investment style, we view ourselves as true
investors and just happen to be investing in the public markets. Our
portfolios are managed with a bottom-up, stock selection process driven
by fundamental analysis. This includes analyzing companies and
industries by focusing on competitive advantages, understanding
management's wealth creating strategies, and using traditional ratio
analysis. As investors, we are also focused on valuation. Really, it's a
straightforward, fundamental driven approach. I co-manage the Fund with
Luther King and also serve the firm as our Director of Research and as a
research analyst. TWST: 2002 was a difficult environment for small cap stocks, but this
year the outlook seems brighter. Tell us about your performance and what
your outlook is for small cap.
Mr. Purvis: You are correct in saying that 2002 was a difficult year.
The Russell 2000, our primary benchmark, was down 21%. We performed
better than that on a relative basis as our Fund was off only 11%. We've
seen a nice rebound in the market with the Russell 2000 up 17% for the
first half of the year. We have not kept up with this frantic pace as
we're up roughly 11%. So far, the lower quality, micro cap stocks have
been the biggest beneficiaries in this rebound. If you think back over
the last couple of years, these are the same stocks that the market beat
down, that didn't have earnings and basically are lower quality
companies. That's what has been leading the Russell 2000 higher. We
believe that the small cap area continues to be an excellent opportunity
for investors to generate strong returns. Using our fundamentals
analysis, we are continually looking for companies that are growing and
management teams that are doing the right things to increase the value
of their businesses. Small companies are usually earlier in their life
cycles and thus have more room to grow than the large caps.
Tickers included in this excerpt: ARG, AW, EVG, GD, JOSB, KEX, LPX, MINI, OSK, SLVN, SYD, TBI, VNX
For more information call (212) 952 7400. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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