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A Seasoned Philosophy

April 05, 2006

WHY ARE FARMING AND MONEY MANAGEMENT SIMILAR? To Ron Muhlenkamp, the 62-year-old founder of the Muhlenkamp Fund, the answer is simple: Both require tractor loads of that rarest commodity: common sense. In Ron Muhlenkamp's view, "Selling stocks is like deciding when to harvest apples." "I'd say I've learned more about investing from farmers than I have from Wall Streeters and MBA types," says Muhlenkamp, whose father, Isidor, owned an Ohio dairy farm. "They know that different seasons require different approaches. Selling stocks is like deciding when to harvest apples. Farmers can't tell you exactly when they plan to harvest, but they know when the fruit is ripe."

Born and reared in Coldwater, Ohio, near the Indiana border, Muhlenkamp has an admirable long-term investment record. One key to his success has been his ability to skip over tectonic shifts in the economy. What explains the sure footwork? Muhlenkamp says it's the ability of every farmer to recognize and react to change. "My dad farmed on a four-quarter cycle," says Muhlenkamp. "I invest on about a four-year cycle."

THINKING IN CYCLES HAS CLEARLY delivered results. As of March 3, the Muhlenkamp Fund (ticker: MUHLX), which has $3 billion in assets, had returned an average 14.57% annually since its inception in 1988. According to Lipper, the New York-based fund tracker, Muhlenkamp has a 15-year average return of 16%, better than 97% of multi-cap value funds; a 10-year return of 15.36%, better than 98%; a five-year return of 12.12%, better than 97%; and a three-year return of 28.79%, better than 97%.

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