10 Questions With Legg Mason Focus Trust's Robert Hagstrom

Click on the company name to jump to Hagstrom's comments on the stock.

AOL Time Warner

General Electric

Home Depot

Honeywell

Liberty Media

Lucent

Merck

Microsoft

3M

Nextel

Nokia

Nortel

Tyco

USA Interactive

Vodafone

Wal-Mart

"Put all your eggs in one basket and -- watch that basket."

That morsel is doubly apt for this week's 10 Questions. For starters, fund manager Robert Hagstrom puts that idiom to work every day at his (FOCTX Quote)Legg Mason Focus Trust fund, which holds a mere 18 eggs, er, stocks. Second, the quote comes from Samuel Clemens' legal sleuth Pudd'n'head Wilson, and Hagstrom -- a prolific author in his down time -- has a hot-off-the-presses book, "The Detective and the Investor". The purpose of the book: Instructing investors how to apply the methods of great fictional detectives to make better stock-picking decisions. It couldn't be timelier: If Sherlock Holmes had been around to sniff into WorldCom, Tyco and Enron's books, perhaps Wall Street would have avoided those massacres.

Hagstrom has played stock-market sleuth for years -- at the helm of the focus fund since its April 1995 inception. While concentrated funds' returns often provide as many twists and turns as a Poe mystery -- Legg Mason Focus is no exception, having had a rough 2000 -- Hagstrom's performance handily beats his peers and the broader market over the long haul. His five-year average annual return of 4.33% places him in the top 6% of the large-cap blend category, according to Morningstar.

It seems fitting that among Hagstrom's 18 stocks are three companies with such labyrinthine structures that much of Wall Street has shied away: AOL Time Warner, General Electric and Tyco. But Hagstrom thinks he has cracked all three cases and in the following pages, he lays out the compelling evidence. He also weighs in on other subjects, including Microsoft, winners and losers in the telecom sector, stocks he has sold, interest rate cuts, deflation risks and, of course, his new books.

The interview, like most worthy yarns, is stuffed with juicy information and, like all good authors, Hagstrom ties it all together in the end. We think investors will find it a most enriching read. ...