Barrons Interview With Jim Stratton
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Date updated:06-08-2008

Stratton has been at least that successful in growing his stock portfolio. What started as a $100,000 fund in 1972 has sprouted into a $140 million entity. According to Morningstar, the Multi-Cap fund is perched in the upper canopy of its large-cap blend peers. At the end of May of this year, its 9.04% average annual 10-year total return ranked in the top 5% of its investment category and exceeded the S&P 500 by 4.8 percentage points. Over five years, a 16.46% average annual return put it in the top 2% of Morningstar's rankings and handily surpassed the S&P 500 by 7.6 percentage points. Last year, Stratton Multi-Cap's 18.76% gain bettered the S&P benchmark by 13.3 points. And so far in 2008, the fund has logged a 0.38% return, which beats the index by nearly six percentage points. Stratton has created a hybrid fund. Until May of 2006 it was known as Stratton Growth; he changed the name to better reflect his stock-selection style. The boss calls himself a contrarian, but doesn't seek out deep-value plays. He estimates that his initial stock selection is rooted 70% in valuation measures; the other 30% is tied to earnings momentum. Stratton's portfolio is packed with 40 to 50 positions, on average, with a mean market capitalization of $21 billion. Still, he's been known to venture into smaller stocks. Morningstar shows just under 25% of Multi-Cap's assets stashed in mid-caps and another 8% closer to the forest floor in small-company shares.

symbol name last price % change open
  • +
  • SCHW
    The Charles Schwa
  • $18.20
  • -0.27%
  • $18.39

Right now, the Stratton fund has a diverse set of stocks. Among its top holdings is financial-services outfit Charles Schwab (SCHW), with a $25.6 billion stock-market value. He likes it both for its 18% earnings growth rate and its ability to snatch market share from retail brokers.

People owning SCHW also tend to own: BRCDCEBAYEMCFCFSFLEXGE

TheStreet.com Rating: C+ What is this?

  • +
  • AME
    Ametek Inc
  • $37.17
  • +1.31%
  • $36.97

Lower on the market-cap ladder is electronic-instruments maker Ametek (AME), a diversified manufacturer with $5 billion in shares outstanding. Ametek stamps out unusual items like vacuum-cleaner motors. "They generate mid-teens growth out of a very dull business," he says. "They're proof that manufacturing of this sort can still be done in the United States."

People owning AME also tend to own: CBBCVBFFNSRSBIBTMOBNIBRK-A

TheStreet.com Rating: B- What is this?

  • +
  • PVA
    Penn Virginia Cp
  • $19.24
  • +6.42%
  • $18.76

Current favorites are natural-gas plays including Penn Virginia (PVA), Chesapeake Energy (CHK), EOG Resources (EOG) and XTO Energy (XTO). Stratton says natural gas is now the preferred fuel for electricity generation and that many of these outfits can boost earnings by 50% or more in the year ahead.

People owning PVA also tend to own: AEISANCXBWNGCHKGMXRHPMZT

TheStreet.com Rating: D+ What is this?

  • +
  • CHK
    Chesapeake Energy
  • $23.20
  • 0.00%
  • $N/A

Current favorites are natural-gas plays including Penn Virginia (PVA), Chesapeake Energy (CHK), EOG Resources (EOG) and XTO Energy (XTO). Stratton says natural gas is now the preferred fuel for electricity generation and that many of these outfits can boost earnings by 50% or more in the year ahead.

People owning CHK also tend to own: ACIAINVANRAPCBBDBTUCMCSK

TheStreet.com Rating: C What is this?

  • +
  • EOG
    Eog Resources Inc
  • $88.18
  • +1.98%
  • $88.30

Current favorites are natural-gas plays including Penn Virginia (PVA), Chesapeake Energy (CHK), EOG Resources (EOG) and XTO Energy (XTO). Stratton says natural gas is now the preferred fuel for electricity generation and that many of these outfits can boost earnings by 50% or more in the year ahead.

People owning EOG also tend to own: AAPLBRK-BCHKGLWIMMRTXNEPL

TheStreet.com Rating: B- What is this?

  • +
  • XTO
    Xto Energy Inc
  • $41.61
  • +1.22%
  • $41.84

Current favorites are natural-gas plays including Penn Virginia (PVA), Chesapeake Energy (CHK), EOG Resources (EOG) and XTO Energy (XTO). Stratton says natural gas is now the preferred fuel for electricity generation and that many of these outfits can boost earnings by 50% or more in the year ahead.

People owning XTO also tend to own: AAPLAPAAUYBPCCMECOP

TheStreet.com Rating: B What is this?

  • +
  • ACN
    Accenture Plc.
  • $40.54
  • +1.78%
  • $40.22

A recent addition is computer-consulting company Accenture (ACN).

People owning ACN also tend to own: RYLSUNMSFTFVZAALD

TheStreet.com Rating: B+ What is this?

  • +
  • MIR
    Mirant Corp
  • $14.15
  • +1.51%
  • $14.14

One stock he likes a lot is Mirant (MIR), an Atlanta electricity producer spun off from Southern Co. seven years ago. Mirant is a pure play on boom times for generators. "Mirant is one of the five merchant power companies around, and all it does is generate power and sell it on the wholesale market," he says. Its earnings are projected to rise more than 100% in 2008 and 21% in 2009. The stock trades at 11 times projected 2009 profits.

People owning MIR also tend to own: AHMAIZALBAMPAVTAXCABBI

TheStreet.com Rating: C What is this?

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