Wall Street Transcript Interview with Randell A. Cain Jr., Portfolio Manager at Herndon Capital Management, LLC: Investing in Value-Creating Opportunities

Wall Street Transcript

67 WALL STREET, New York - July 10, 2013 - The Wall Street Transcript has just published its Investing in Dividend-Paying Companies and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Bottom-Up Stock Selection - Cyclical Sectors, Exposure to Emerging Markets - Large-Cap, Deep-Value - Value Oriented Strategy - High-Quality Companies - Value Investing, Deep Value - Longer-Term Investing

Companies include: The TJX Companies, Inc. (TJX), Ross Stores Inc. (ROST) and many more.

In the following excerpt from the Investing in Dividend-Paying Companies and Other Strategies Report, an expert portfolio manager discusses his portfolio-construction methodology and his investment philosphy:

TWST: What are some of your favorite stock picks right now?

Mr. Cain: It's interesting in answering that for you, because that is a question that we commonly get and is one that we actually don't like answering that much. And the reason why is because every stock we have in our portfolio is there for a reason, and the reason is it was identified as being a value-creating opportunity, went through the vetting process and made its way to the portfolio. So as far our favorite versus our unfavorable, if we have a stock that's not favored, we simply do not own it. We only own companies we have a lot of confidence and conviction in, which is across the whole portfolio, so the largest holding down to the smallest holding is a high conviction holding for us.

Now, the way that is differentiated in terms of portfolio positioning is really performance. We initiate stock positions typically at 1%, and then a follow-on position, if the portfolio needs it in that sector, may warrant an additional 1% purchase. We will not buy more of a stock if buying additional weight of it will take it to the top 10 holdings. And so that is something that we believe that in our process sets us apart from other managers, in that when you look at our top 10 holdings, they truly are not our favorite stocks, showing a subjective bias and showing a lot of conviction. Where we would counter that in terms of others doing this is, how do you know, how do you actually know that these are the stocks that are going to perform? Our top 10 holdings or stocks frequently have been purchased, at least twice, and then, on a basis of capital appreciation, have moved into the top 10 holdings.

Of our top 10 holdings, we do have some stocks across our portfolio that we have a great deal of conviction in, that we do like, that have shown a correlation in certain industries to being better performers. Of those, I'll mention two, TJX (TJX) and Ross Stores (ROST). These are both discount branded retailers that are gradually making their way across the country, Ross coming more so from the West Coast moving toward the east, and TJX being a company that started more so on East Coast and is moving...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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