September 1, 2003
Keep Large And Small In The Mix
At mid-year 2003, investors were at a crossroads. The market’s strong spring seemed to have bulls ready to sharpen their horns for a new run upward, while weak economic signals had bears licking their chops. Dawn Alston Paige, portfolio manager for Piedmont Investment Advisors in North Carolina, took a position between the two extremes.
“Our take on the market is very constructive,” says Paige. “While it has experienced some weakness in the past, we see it stabilizing going forward because of corporate earnings growth — which we anticipate will be better than expected going into 2004 — and because of the liquidity the Federal Reserve has pumped into the market.” Paige’s advice to investors is to spread money between stocks with good earnings growth prospects and stocks that are trading at a discount to their fundamentals, making sure they include large and small companies in the mix. She says that type of diversification will help cushion returns if the market has a relapse, and at the same time, open the way for strong gains as well.
Paige and partners Isaac Green and Sumali Sanyal, all CFA charter holders, launched Durham, North Carolina-based Piedmont in August of 2000, ending the year with $500,000. They have since grown their accounts to more than $260 million. Paige’s duties include managing one of the firm’s small- and mid-cap core portfolios which, as of mid-June, was up 18.1% compared to the Russell 2500. Another portfolio of hers, a traditional small-cap core value mix, was up 20.5% as of the same date compared to the Russell 2000.
Paige’s Private Screening selections include companies with a stock market value of $4 billion or more, and smaller selections valued around $300 million. Paige was sure to cover a wide array of industries as well, from the high growth biotechnology sector to the steady earnings of food processing.
Dean Foods (NYSE: DF), one of Paige’s favorites, is the nation’s largest dairy products company. When dairy products leader Suiza bought Dean in 2001, it chose to keep the smaller firm’s name. Paige says the merger will create $150 million in cost savings for the company in 2004, and with milk prices up, the company’s to-the-door delivery is doing well.
Biotech outfit Sepracor (Nasdaq: SEPR) saw its shares advance due to enthusiasm about FDA approval of Estorra, its insomnia treatment. Additionally, the company’s successful asthma medication, Xopenex, could keep revenues growing over 30% this year. And Paige says that while prices are going up in its market, Oxford Health (NYSE: OHP) is poised to do well because it can offer their insurance holders more services without raising their costs as high as the competition.
Berry Petroleum (NYSE: BRY) is a small, West coast oil exploration and production company that Paige says could well become a takeover candidate in the industry’s recent round of consolidations. Paige’s final pick is ADC Telecommunications (Nasdaq: ADCT), a company that makes telecom equipment for cable companies offering telephone and high-speed data transfer services. ADC is inexpensive, has a solid balance sheet, and could