A Streak You Shouldn't Overlook

You may not have heard of Brian Barish or Cambiar Opportunity, the mutual fund he runs. But if Barish continues his market-beating ways, he may soon be drawing accolades as the next Bill Miller, he of the record 15-year streak of beating Standard & Poor's 500-stock index (see A Legend Sizes Up the Market, July).

Opportunity, the product of a Denver-based shop that mostly serves institutional clients, has beaten the S&P 500 every calendar year since 1999, the fund's first full year of existence. Only four other funds that focus on the stocks of large U.S. companies can make the same claim. Over the past five years to June 1, Opportunity returned an annualized 11%, outpacing the S&P 500 by an average of two percentage points a year. After those stellar results, investors are finally discovering Opportunity. The fund's assets have expanded from $173 million at the end of 2004 to $2.6 billion today.

When selecting stocks, Barish seeks to achieve the nearly impossible. He wants low-risk stocks with big appreciation potential. To fulfill the low-risk requirement, Barish first pinpoints stocks that look cheap relative to their peers and their own operating history, using measures such as price-earnings and price-sales ratios. He favors market leaders with strong balance sheets, experienced executives and recognizable brands.

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Next, Barish and his team of analysts aim to identify, before the market catches on, companies that are poised for a comeback. To do so, they look eight to 12 months out for a catalyst, such as the launch of a new product, that could drive the stock higher. "If something is imminent, the market tends to sniff it out," Barish says. "But often, the market won't wait around any longer."

The fund's final requirement is its most ambitious. Before adding a new stock, Barish must be convinced that it can return at least 50% over the ensuing 12 to 18 months. This condition whittles down the field of prospects considerably. At the end of the process, Barish is left with a 40-stock portfolio loaded with contrarian bets.

One laggard Barish likes is Intel (symbol INTC), the worst performer in the Dow Jones industrials in 2006. The giant chip maker "has awoken from its titanic slumber and has come back to the market with some very competitive products," he says. Another favorite with a sluggish share price is Swedish wireless-network giant Ericsson (ERIC). Barish says the stock should rise as mobile-phone operators upgrade their networks to accommodate high-speed transmission.

With a return of 6%, Opportunity trailed the market by three percentage points in the first five months of 2007. Given Opportunity's record and Barish's disciplined approach, we think this fund is worth considering for the part of your portfolio that's dedicated to large-company stocks. The fund (CAMOX; 866-777-8227) charges a reasonable 1.20% in annual fees.