Early this year, the fund bought Coach (COH) after the handbag maker reported disappointing sales during the holiday season. While some of the company's lines flopped, sales remained strong in key markets such as China, says Kessler. Coach continues to maintain very strong returns on equity and a rock-solid balance sheet.
A low-risk choice is FAM Value. While the fund often trails peers in bull markets, it topped the average mid-growth competitor by 15 percentage points in 2008. The fund managers seek growing companies with strong cash flows. The aim is to buy when the shares sell for discounts to the fair values.
In recent years, the fund has been buying property and casualty insurers. Profits were hurt as companies lowered premiums in a bid to gain market share. But now the destructive price competition is abating as the industry moves into a cycle of rising premiums, says FAM portfolio manager John Fox. In addition, rising interest rates are boosting bottom lines. This is happening because the insurers invest much of their cash flow into bond portfolios. When rates climb, the bonds provide more income. "The companies will earn more on their assets," says Fox.
An insurance holding is Markel (MKL). In the past, the stock has sometimes sold for 1.5 times the book value. But the shares currently trade for around 1.1 times book.Follow @StanLuxenberg This article was written by an independent contributor, separate from TheStreet's regular news coverage.