10 Questions: At Charles Bath's New Value Fund, There's No Room for Tech

Do you own either now?

I don't own Pfizer. And Schering-Plough I do not own for much of the reason I bought it. When I bought Schering-Plough in 1987, after they'd had a few years of disappointing results because of a big product that went bad and they didn't have anything to replace it with. When Claritin was approved, it grew the earnings in the company for more than a decade; as investors we did very well. Now that Claritin has gone off patent, they're replicating the problem they had before, but they haven't gotten the new product yet.

They have a new cholesterol drug jointly managed with Merck(MRK Quote), which looks reasonably interesting. But the cholesterol market is just too well penetrated and there are issues around their cholesterol drug. I'm concerned that it will not be as successful as people hope. So I don't think that product line will boost Schering-Plough's growth.

But if I find another great 14-year situation, I'll jump in (laughs).

Schering-Plough brings up another question because it has some SEC Reg FD disclosure issues. How much do you factor these headline-risk items into your investment philosophies?

It's just another variable to be put into the mix; you don't ignore it. In fact, with Schering-Plough, they have exacerbated their policy because of manufacturing issues with the FDA. They had hoped to get a substitute product for Claritin on the market to transfer their Claritin patients into a product called Clarinex, but because of manufacturing issues with the FDA they didn't have time and weren't able to do that and that became a huge issue. So these are issues that cannot be ignored, but you also can't say that, "Gee, because there was a problem with the FDA there is not any price that I will buy the stock." Of course there is a price. But the price goes lower the bigger the issues are.

10. What's the company you feel most comfortable sleeping at night knowing it's in your portfolio?

Merck(MRK Quote) is a company I have liked for quite some time. It probably got too much negative press lately over a slowdown in earnings. I like the management, but Wall Street views it as kind of stodgy.

We need to be more independent in our analysis of management. Merck's management has done a lot for shareholders over the years. Merck stands out in terms of owning the stock for a very long period of time.

Are you concerned about the competition Merck faces from generic drugs?

They have some important products going off patent, which has been a drag on the company. But they have a lot of relatively new products that can drive the growth for some time. A lot of those issues are behind them now.