George Henning, portfolio manager of the Pacific Advisors Small Cap Fund (PASMX), is a big fan of small caps. Keeping about 40 stocks in the portfolio, the average market cap of which is about $500 million, he understands that many small-cap companies are well-managed and have sustainable growth patterns. Plus, "the balance sheets on a lot of the companies I own have never been stronger," he says. "They have a lot of cash on the books."
Up more than 8 percent this year through August 14, the Pacific Advisors Small Cap Fund was ranked No. 1 by Morningstar in 2003, 2004 and through the first half of 2006. Henning gained an edge from the 18 years he spent in senior management with Chubb and Transamerica. "I learned what to look for in the small-cap arena, where management is critical to a company's success," he says.
Henning prefers to invest in value companies he can hold for three or more years. At press time, holdings included energy, health care for prison facilities and basic industry companies.
Best suited for those who like established small-cap companies, the fund can be volatile. Says Henning, "If you're very risk-averse, you're going to have volatility in a fund no matter how [well it's managed]."
Dian Vujovichis an author, syndicated columnist and publisher of fund investing site www.fundfreebies.com.