Call him the bad-news bull. As chief investment officer of the $1.8 billion Olstein Financial Alert Fund (OFALX2), Bob Olstein has made a career out of digging into the numbers and buying up the stocks everyone loves to hate. The approach has worked nicely. In the 10 years since he started the fund, Olstein has delivered annualized returns of nearly 16%, putting the fund among the top 50 performers in the industry for the 10 years ended Dec. 30.
But Olstein, who had a less-than-stellar year in '05, returning just 2.8%, suspects that the truly big numbers will be increasingly hard to put up. Greatly underpriced stocks are harder to find nowadays, given what Olstein sees as the market's currently fair to slight undervaluation and a rise in the quality of earnings.
"We're going to have to look for what I call the ugly ducklings of the world — the companies where there are either misperceptions, temporary problems or some negative psychology surrounding an industry — to grind out 9% or 10% returns" says Olstein. "They're going to be the stars going forward, the 9% or 10% managers."