Value Added


New Funds That Focus on Good, Cheap Stocks

Steven Goldberg

A student of famous value investor Michael Price has launched two promising funds of his own.



When David Marcus was a college student, he served as an intern answering shareholder phone calls at the Mutual Series funds. After finishing school, he landed a job at the renowned value shop and worked there the next 13 years. By the time Marcus left in 2000, he was manager of Mutual European fund and co-manager of Mutual Discovery and Mutual Shares.

Now Marcus, 44, has launched two funds of his own, and they both look like winners. The funds, Evermore European Value A (symbol EVEAX) and Evermore Global Value A (EVGBX), practice the brand of value investing made famous by Michael Price, one of the most successful investors of the 1980s and 1990s. Price retired from Mutual Series in 1998 at the age of 45, two years after selling the Mutual Series funds to Franklin Templeton for $630 million two years earlier. During Price’s 22 years at the helm, Mutual Shares, the firm’s flagship, returned an annualized 18% -- an average of two percentage points per year ahead of Standard & Poor’s 500-stock index. Equally, if not more, important, Price’s funds lost less than their competitors in down markets.

Evermore boasts several Mutual Series graduates. One, Jae Chung, co-manages both funds. Two other Mutual Series alumni help run the fund firm but don’t pick stocks. Price, a friend of Marcus’s, is on the management company’s “board of advisers,” which assists the firm in setting business strategy but not in choosing stocks.

Marcus shows every sign of having absorbed Price’s value-investing tenets. He possesses other strengths, too. He’s smart, patient, and knows stocks inside out. They’ve been his passion, he says, since age 11.

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Price tutored a number of other top-notch stock pickers. Since his departure, the Mutual Series funds have continued to employ the same value philosophy and keep risk low. They’ve also delivered solid results. Mutual Global Discovery A (TEDIX) is my favorite in the group.

Wintergreen Fund (WGRNX), run by Mutual Series alumnus David Winters, has also performed well. And bond giant Pimco, eager to broaden into the stock-fund business, recently snapped up two other Mutual Series veterans.

Evermore might even do better than the other Price progenies. Price trusted Marcus with more assets than anyone else at Mutual Series. Marcus shows an aptitude for building a business as well as managing money. And he’s picked up a lot since Price retired.

Most of Marcus’s expertise lies in Europe. (Chung is the Asia hand.) Marcus ran European money for many years for Mutual Series, private investors and hedge funds. He left money management for several years to work with a Swedish businessman. In that position, Marcus operated businesses and restructured them. “Most people who manage money have never run a business,” Marcus says.

Both Evermore funds will focus on buying good, cheap stocks rather than forecasting economic change. But they won’t ignore the big picture. “In 23 years, I’ve never owned a Greek stock,” Marcus says. But in light of the Greek debt crisis, “we’re now interested,” he adds. “We want to buy where others are selling. History has proven repeatedly that you have to look for opportunities where people are panicking.”

Marcus looks for stocks selling at a steep discount to the underlying company’s fair value and catalysts that can unlock that value. Catalysts can be restructurings, changes in the executive suite, share buybacks, spinoffs, mergers and acquisitions.

Marcus is currently foraging among sleepy European conglomerates that realize they must adapt to a rapidly changing global economic order or die. German-based Siemens AG (SI) is one favorite. The unwieldy conglomerate is involved in everything from energy to health care. Now, under its first non-German chief executive, the firm is selling assets, moving production offshore and shucking product lines in which it can’t be number one or two. “It’s going through a massive restructuring,” Marcus says. “But most people are so jaded by the image of a lumbering giant they don’t see the change.” Siemens, which trades in the U.S. as an American depositary receipt, sells for 12 times Evermore’s estimated earnings for Siemans of $7.23 per ADR for the year that ends this September.

Evermore Global is more appealing than the Europe fund because of its broader mandate. Global can own as much in Asia, Europe or the U.S. as it deems prudent. At last report, it had 31% of its assets in Europe, 30% in the U.S., 9% in Asia and 30% in cash. It invests in companies of all sizes, can own bonds and can sell stocks short -- that is, bet that they’ll fall in price. Global will generally hedge away all its currency exposure, meaning its shareholders shouldn’t suffer because of a strengthening dollar.

The fund’s Class A shares levy 5% sales charges, but you can buy them without the loads through Schwab and some other online brokers. The funds have $5,000 minimums and charge hefty expenses: 1.60% of assets annually.

Putting a proven manager who has been schooled by a greater teacher in charge of his own fund is often a recipe for success. That’s why I’m so high on the Evermore funds.

Steve Goldberg is an investment adviser in the Washington, D.C., area.



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