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Talking Panic Buying With Joe Feshbach

Hedge fund manager Joe Feshbach looks for value in crisis. The manager of Joe Feshbach Partners seeks out companies that are in trouble, anything from accounting scandals to criminal investigations to management turmoil. In short, Feshbach likes to buy when everyone is selling. In an interview with, he describes his contrarian style and some of his picks. As always, the positions mentioned are subject to change without notice.

Your portfolio is very concentrated. Why?

Joe Feshbach: Concentrated investing has been advocated and practiced by many legends of the equity markets, including Warren Buffett, Carl Icahn, Joel Greenblatt and others since time immemorial. We hold six positions today, because we believe that by investing very selectively in very few situations where we have developed specialized expertise, we can significantly outperform over a three- to five-year horizon. By diversifying beyond 10 stocks, academics have demonstrated that it is highly likely that your returns will closely mirror the market.

Talk to us about investing in companies under government investigation.

United Rentals (URI ) became subject to a formal order of investigation from the SEC regarding certain accounting matters in the summer of 2004. This kicked off a panic selloff followed by a relatively protracted period of stock underperformance. We got involved in July of 2005, when the chief financial officer was fired for failing to cooperate in an audit committee investigation tied to the SEC inquiry. Our theory was that the issues in question were from periods several years back, and investors were missing the strong business performance of the company. The stock has appreciated about 70% from our cost, as the investigation turned up little of concern and their business remains healthy.

What about accounting scandals or restatements?

One of our largest positions today is Sirva (SIR ), which has been in the midst of an accounting flap including accusations of impropriety by the company's former CFO, an SEC inquiry, a multiyear restatement, delayed SEC filings and violations of loan covenants. The stock has declined from $28 at its peak in 2004 to just $8 or so today, and slightly above our average cost. We believe that the scandal has disguised a strong business, which, while having a few issues around the edges, may be as much as 60% undervalued today. Our intensive grass-roots research and financial analysis skills (honed during our years on the short side) have given us great confidence in this situation.
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