Q: To say the portfolio is concentrated doesn't quite make the nut. An experienced eye sees the fund manager has a penchant for a deep value style. How do you view it?

A: Depending upon who you talk to, we’re either value or core. Morningstar puts us in large-cap blend. Some management consultants put us in value. I'd say right now we're tracking closer to value. We really don't try to put ourselves in a box. We're looking for companies that have very predictable fundamentals and have good characteristics as far as return on capital, and we try to pay a reasonable valuation for it. Wherever that falls, it falls.

Q: Are you a one-man operation?

A: We have four people on staff here -- two portfolio managers and two administrators.

Q: Apparently this publicly traded fund is offered to the retail clients, you also manage private money. Are you bringing a reputation to the public marketplace?

A: We're relatively more conservative than most money managers. We really look at the downside more than the upside. We think what kills a portfolio is when you have those positions that are down 75, 80, or 90%. That's the type of thing we try to avoid. So, we're not going to have as many homeruns as another manager might have. But, we're not going to have the disasters that you find in many portfolios. The way we really try to outperform is to concentrate on our best ideas. We think it's virtually impossible to outperform the market over time by having 70 different stocks and having 1 or 2% positions in every single stock. That virtually assures average or below average performance. We try to concentrate heavily in very conservative names. We have very risky characteristics. If you measure us from the standard beta or standard deviation, we’re far more conservative than the typical equity fund. According to Morningstar, there are only a handful of funds that have the five-star performance rating and the lowest risk rating as well.

Q: The fund pays nice dividends to shareholders, which helps. More helpful is the dividend tax relief.

A: We aren't really an income oriented mutual fund.

Q: The largest holding, Berkshire Hathaway, sticks out like a sore thumb. How long have you owned it in the fund and for private clients?

A: The fund didn't start until August 1998. We've held it virtually since inception there. We've also held it in our client's portfolios since 1996. Personally, I've held it since 1990.

Q: What attracted you 13 years ago to Berkshire?

A: To be honest, I just wanted to go to the annual meeting. You had to have a share to get there. I just purchased a couple of shares. Best purchase I ever made. Since then, I've just been accumulating over time. I like the characteristics of Berkshire Hathaway, the people that are running it and the valuation is reasonable, especially in this marketplace.

Q: What were you doing to afford those two shares?

A: I was managing money for another firm at the time. Even when I first started in the mid 1980s, as an analyst, the names that I purchased, Buffett had a position in them as well. So I just started studying his characteristics. The same things that I found had worked in my portfolio were the same characteristics he was looking for: high cash returns on capital and predictable fundamentals. Those are things that are tangible and that you can understand. I am very leery of forecasts and high growth rates that the company hasn't demonstrated in the past. In many of the names in technology and biotechnology, their valuations tend to rely more on the future than the past. That kind of company makes me nervous. If you're wrong it can be ugly.

Q: Yes, you can have your heart broken.

A: Those are the types of positions that can be down 90%. As we've found in the past in many of the hyper growth areas, the management teams have been a bit gamey in the sense of trying to project a forecast they could meet just to get the stock prices up. That just goes against everything we try to look for. We really want shareholder oriented management teams and managements that think like owners and treat us like partners.

Q: Moving on to see how you have adopted Buffett's religion, there is White Mountain Insurance in the portfolio.

A: It's not deep value right now. It's trading close to 1.5 to 1.7 times book, which is pretty much in line with other insurance companies. In some of my individual accounts, I had purchased it even before Buffett had taken a large position. That is another shareholder oriented company run by the best insurance man in the world, Jack Burns. I've ridden his horse a couple of times through some other positions where he was the largest holder. One was FSA, which was one of our biggest positions in the mutual fund a couple years ago. They were acquired by a European insurer. He's one of the few insurance managers out there that doesn't have that mutual insurance mindset. He just wishes he was 45 instead of 70 years old.

Q: What is the turnover like?

A: The nominal turnover is about 4 stocks a year. We don't believe in shuffling stocks around every quarter just for the sake of moving positions around. You should think like an investor when you're buying a business. Just because it moves 10% one way or the other doesn't mean you shift your strategy every quarter and shuffle your portfolio. That kills a portfolio when you have high turnover over time. You realize gains. You have transaction costs. You have opportunity costs. All those things tend to add up over time. When we buy something we want to hold it for three to five years.