Texas Value Investments Return 50+% In Past Year: Douglas Cannon Discusses His Stock Picking Criteria And Current Rationale For Holding Equity Investments

• On 11:10 am EST, Wednesday November 4, 2009

67 WALL STREET, New York - November 4, 2009 - The Wall Street Transcript has just published its TWST Small Cap Value Report offering a timely review of the sector to serious investors and industry executives. This 47 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Small-Cap Value - Capital Preservation - Sovereign Bonds - Precious Metals - Value-Investing - Companies with International Exposure - US-listed Chinese Companies - Risk Limitation - Industry-Diversified Portfolios - Long-Term Value - Micro-Cap Companies - Turnaround Situations - Strategic Buying - Fundamental Analysis

Companies include: Bridgepoint Education (BPI); Compass Minerals (CMP); Flexsteel (FLXS); Hardinge Corp (HDNG); Phillips-Van Heusen (PVH); Adobe (ADB); Affiliated Computer Services (ACS); Alliance Data Systems (ADS); American Water Works (AWK); Atlantic Tele-Network (ATNI); Celanese Chemical (CE); CenturyTel (CTL); Clean Energy Fuels (CLNE); Consolidated Graphics (CGX); Dell (DELL); Dillard's Department Stores (DDS); Drew Industries (DW); Educational Development Corporation (EDUC); First Acceptance Corp (FAC); Forestar Group (FOR); Fresh Del Monte (FDP); Hain Celestial (HAIN); Harbin Electric (HRBN); Huron Consulting (HURN); IMAX (IMAX); IMS Health (RX); Kennametal (KMT); Lamar Advertising (LAMR); NBTY (NTY); Nature's Sunshine Products (NATR); Nobility Homes (NOBH); Omniture, Inc. (OMTR); Perot Systems (PER); Pfizer (PFE); SPDR Barclays Capital International Treasury Bond Fund (BWX); SPDR Gold Trust (GLD); Silver Wheaton (SLW); Tellabs (TLAB); Temple-Inland (TIN); Tempur-Pedic (TPX); Tesoro (TSO); Valero (VLO); Verizon Wireless (VZ); Whole Foods (WFMI); Xerox (XRX).

In the following brief excerpt from just one of the interviews in the 47 page report, a top tier money manager discusses his current stock picks for investors.

Douglas R. Cannon is the Founder and Chief Investment Officer of Texas First Investment Management Company. He has been the portfolio manager for the Texas First Large Cap Value, Small Cap Value, and All Cap Value portfolios since their start in 2000. Money Manager Review, Barron's, Morningstar, and Pensions & Investments magazine have ranked the Texas First portfolios among the top performers in the country over the past eight years. From 2002 to 2004, he was appointed by the Governor of Texas to serve as the Chairman of the Investment Advisory Committee of the $19 billion Texas Permanent School Fund. From 1989 to 1991, he was Deputy Executive Director of the Pension Benefit Guaranty Corporation, with responsibility for managing $4 billion in pension assets. He has 23 years of investment experience, and began his career as an investment analyst researching Southwest-based stocks for Dallas-based securities firm Rauscher Pierce Securities, Inc. (now part of RBC Dain Rauscher, Inc.). He holds an MBA degree from Harvard Business School and a BS/BBA degree from the Wharton School of Business. He is a Chartered Financial Analyst.

TWST: Would you give us some examples of companies in which you're currently invested?

Mr. Cannon: Within the mid-cap area, one stock we bought was Celanese Chemical (CE). That is a company where the stock was trading in the $35 to $50 range in 2007-2008. During that time, as we began to enter the recession, the chemical industry had a bleak outlook and the whole industry sold off, and this company in particular sold off significantly. But in doing the research on it, we believed they had normalized earnings of $3 a share. So here was a company temporarily selling in the $10-$15 range with normalized earnings of $3 a share once the economy got back to normal. In other words, it had a forward P/E on only about 5X.It also had a good cash position and I think that was another key factor when we look back a year ago. Because of economic concerns, it was important to determine that companies had enough cash, enough and fundamental strength to survive any further deterioration in the economy. That factor is not so important today, but it was key about a year ago. In addition, we saw a lot of insider buying in the middle and fall of 2008. So we bought Celanese in October 2008 at $14.50 a share. We sold it in May 2009 at $21.50, so that was a gain of 48%.

Another example is Whole Foods (WFMI). This is a classic case of a broken growth stock. Whole Foods had declined from highs in the $70's in early 2006 to a low of $8 in late 2008. Why did it decline? Well, it was a growth company and the growth investors bailed out when the growth stopped. We noticed in November 2008 that an investor who had made his fortune in supermarkets, Ron Burkle, bought 7% of the company. Combining all of these factors and looking at what the long-term earnings should be, we felt the stock was very undervalued. In December 2008, we bought Whole Foods at $9.50 a share and then sold it in May 2009 for $24.75 for a gain of 119%. We held that about six months. Holding periods, I think, have necessarily shortened over this market cycle because of the irrationality of the stock pricing, in addition to the economic uncertainty. In the past typically our average holding period was 18 months, but we've taken our profits within much shorter time spans this year in order to lock in gains in an uncertain environment.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 47 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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