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Two Rights Make It for Mr. Wright
Pioneer Value Fund
Interview with: J. Rodman Wright

Author: Dave Jennings
Last Update: , :

For complete profile and charts on Pioneer Value Fund
Since assuming the lead manager's role for Pioneer's Value Fund in November 2001, Rod Wright has restructured the $3.3 billion product from multi-cap value to large-cap value at a time when the U.S. economy is showing subtle signs of recovery. Timing to this veteran means first spending it searching for the right fundamental characteristics and patiently waiting for the right price.

Pioneer Value Fund

A: One other area where we have a large position that has recently hurt us but helped us overall is in the pharmaceutical business. We like a lot of the pharmaceuticals. The characteristics of the business are very good. You have a lot of companies that have basically debt-free balance sheets and are enormously profitable - net profit margins range from 10% to 20% or even higher. The average net profit margin for the S&P 500 is about 6%. Collectively, they have a great growth profile. They produce a product that saves the world money. It's a lot cheaper to put someone on a drug, even if it's an expensive drug, than to keep him in a hospital. There is demand for their products all over the world. So, we think that if you can buy these at a discount to the market, that is wonderful. There are a lot of reasons why people don't like them right now, but I think these things will pass. There are some things that you could criticize the industry for around the edges, but ultimately the business itself is a great business. One of the problems is it is very easy to tell when a big blockbuster drug is going to come off patent. You can quantify very readily and easily what's going to go wrong with these companies in the future. But, what you can't quantify very easily is what is going to go right. In other words, what do they have in the pipeline? They don't always show you what's in the pipeline. What's in the pipelines sometimes comes along faster than they expected. Also, things come along that have more than one use or prove to be bigger than originally anticipated. For example, Prozac was originally for depression, then for weight loss, and then it became widely used. It's much harder to quantify the upside than it is the downside in the group.

Q: The graph of the fund tells a story that says you were doing all right up until the midpoint of 2002, then nothing worked in the second half. Now, everything is working its way back from the low in October.

A: One of the great frustrations of this business is that everybody knows in their heart of hearts that there are going to be ups and downs. It's just that when you get a quarter that's down, people start screaming and yelling. We designed the fund with that in mind. When the market is screaming, this fund is not designed to be screaming faster than the rest of them. This fund is designed to participate, to go up nicely, maybe a little bit behind the market, but not to sit there like a lump of coal. On the other hand, when the market is going down, the goal of the fund is to outperform, to go down less. You end up with a lower beta product. But if you do your job right, you should outperform over time with less volatility.

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