Why a Company in Flux Is a Chance to Buy

Some people fear change, but at least one fund manager views it as an opportunity.

"We look for some form of change in a company," says Matthew Kaufler, co-manager of the five-star rated Touchstone Value Opportunities Fund(CCEVX Quote). "It could be internal, like a management change, or external, such as a change in regulations or technology. Either way, the best time to capitalize on a stock is when it is evolving."

For all his talk of change, Kaufler's fund has been a steady performer, averaging 18% annually over the last five years, 6.5 percentage points better than the S&P 500. Year-to-date the fund, which holds only 43 stocks, is down 3.2%, according to Morningstar, compared with a loss of more than 6% for the index.

One of his star performers has been Houston-based Cabot Oil and Gas Corporation(COG Quote), up 33% since the start of the year. Kaufler says the external environment for natural gas is changing. Prices are headed upward as a result of increased demand due to new power plants coming online and the Canadian government raising taxes on domestic production. ...