After 50 years of offering clients a strict diet of large-cap value funds, Philadelphia-based Cooke & Bieler is expanding its menu and adding its first midcap value strategy.
"We have always had a bias toward midcap," said Sam Ballam, principal. "Our large-cap fund has 30% in midcap stocks, and there seems to be a growing interest in it."
Jim Norris, portfolio manager and principal, added that the organization is research intensive, which gives it a competitive advantage for running midcap money. "Midcap companies need to be researched even more thoroughly than large-cap firms, since they (the midcap companies) are not as established or well-followed as large-cap companies."
Cooke's midcap strategy, which will be available both as a separate account to institutions and as a mutual fund for retail customers, will use the firm's trademark strategy of focusing on relative value with some growth characteristics.
"We concentrate on deep value companies that are driven by high-yielding stock with low price-earnings and price-to-book ratios," Mr. Ballam said.
The firm looks for companies that are stable and predictable and that average 12% annual growth.
The mutual fund was funded internally with $1.2 million in February 1998. It was down 8.3% for the year through Feb. 28, compared with its benchmark, the Russell Midcap Value index, which was down 4.04% for the period.
Cooke defines midcap as companies capitalized between $500 million and $5 billion, said John Larson, manager, sales and service.
The top 10 holdings are: B.J. Wholesale Club Inc.; Wendy's International; Molex Inc.; Covance Inc.; Nicor Inc.; Washington Gas Light Inc.; Ambac Financial Group; National Service Industries; Snap-On Inc.; and McClatchy Co.