Q&A: Finding Value With Robert Olstein

Editor's Note: The following is an excerpt available exclusively at TheStreet.com from an interview originally published by Value Investor Insight.

Longtime financial sleuth Robert Olstein is a skeptic at heart. "I always focus on what can go wrong first," he says, explaining that long-term outperformance is "highly correlated with avoiding serious errors." This "defense first" approach has served him well: Through June, the $1.9 billion (OFALX Quote)Olstein Financial Alert fund has returned an average of 15.9% annually -- vs. 9.4% for the S&P 500 -- since the fund was started in 1995.

Olstein finds today's market lacking valuation extremes, and that is fine with him. "It's a stock-picker's market," he says.

Do your good ideas have any recurring themes?

Some of our best investment ideas have been in situations where one division is performing extremely well while another division is being revamped, and the public is unduly focused on the underperforming division. That's currently the case with CKE Restaurants , where the Carl's Jr. division is performing extremely well, while Hardee's is only now improving after years of underperformance.

Another similar example was Tupperware . They started selling in retail stores in the U.S., which turned out to be a total disaster, masking the fact that their international "Tupperware party" business was fantastic. They pulled out of retail in the U.S. and are in the process of building the traditional domestic business back up, while Europe is still going gangbusters. Our stock went from $16 to $23.

Another good flag for us has been when depreciation starts exceeding capital expenditures. Hasbro (HAS Quote) is a great example. Two things had happened with Hasbro. One, it had a lot of licensed products that were losing money because they paid so much to license things like Disney or Star Wars characters, while games like Monopoly were making a lot of profit. On top of that, the company was working off a lot of depreciation and amortization from prior licensing deals -- far above their capital expenditures.