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Clean Sheet
Oppenheimer Value Fund
Interview with: Christopher Leavy

Author: Alexander Vantchev
Last Update: , :

For complete profile and charts on Oppenheimer Value Fund
Under Chris Leavy’s leadership, The Oppenheimer Value Fund has risen from being an underachieving fund to one of the top performing large cap value funds over the past three years. He told Ticker what he believes it takes to beat the peer group year in and year out.

Oppenheimer Value Fund

Q: Aren’t there any other issues that come into play, such as exchange rates?

A: For any company that does business outside the U.S., exchange rates are an issue. This is true for multinationals headquartered both in and out of the U.S.

Q: How do you make a decision to sell or trim a position? Can you give me a few scenarios that you have had in the past?

A: There are three possible reasons. The first is valuation. The second reason would be that the business fundamentals deteriorate. The third reason would be simply competition for capital – perhaps the stock is not a bad idea but we find a better idea and we need to make room for that better idea. The extent to which we trim a position would depend on the extent to which it meets the criteria for the sell discipline. The more that stock meets the criteria for the sell discipline, the more we sell.

Q: Under the policies of the portfolio, you can invest in derivatives and you can also use hedging strategies. Have you taken advantage of those terms at any time?

A: We do occasionally write covered call options although historically that has been to a limited extent and currently we have no covered call options written in the portfolio.

Q: What have your best performing holdings been and what was the story there?

A: As we discussed earlier, our satellite stocks have done well for us. Another example would be McDonald’s. We were interested in McDonald’s because we thought same store sales and margins would turn around due to some of the new innovations the company was implementing. In addition, the company was going to be more frugal with their capital spending budget, leaving more free cash flow for shareholders. Given the appreciation of the stock, we have taken some profits. While we are not recommending investors buy the stock today, it has clearly been a good performer since we purchased it earlier in 2003.

Q: Have you had disappointments with certain equities?

A: Lockheed Martin is a stock that we have eliminated from the portfolio. With the federal budget deficits being where they are, much greater than we thought they would be, we were concerned that would produce some headwind on Lockheed Martin’s revenue prospects looking out a few years. It was a position that we sold in pieces, a couple of different times.

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