Romick, despite finding very little he likes in the stock market at current prices, says he's still happy with ConocoPhillips, a major holding in his fund.
Again, the math: Romick runs through the cash ConocoPhillips generates relative to its spending needs. Then he looks at the company's market value, which hasn't risen nearly as fast as the market values of other big energy companies since the end of 2005. He figures ConocoPhillips is being penalized because some investors fear it overpaid for natural gas giant Burlington Resources last year.
ConocoPhillips stock, at $70.19 on Friday, is down 2.4% year to date. That's just fine with Romick, who focuses on the cash the business is throwing off. "I don't see how I lose long term," he says.
His shareholders have reason to trust him. Over the last 10 years his FPA Crescent fund (which is closed to new investors) has had just one losing year, a 6.3% decline in 1999.
For many hard-core value investors, the fun is in finding smaller companies with potential earnings power that the market may not fully appreciate.
Zeke Ashton, managing partner of Centaur Capital Partners in Southlake, Texas, and a speaker at the conference, said he liked the prospects for a new line of business that Santa Ana-based Collectors Universe Inc. is developing.
The company, best known as an authenticator of collectibles such as coins and autographs, has been investing heavily to build a grading franchise for diamonds and colored gemstones. For now, that expansion is depressing earnings -- which means Collectors' investors have to be willing to be patient. The stock, at $13.76 on Friday, has made no net progress in two years.
Bona fide value investors pride themselves on their calm, self-control and willingness to wait for their reward.
To paraphrase Buffett, before buying a stock, ask yourself whether you'd still do it if you knew you couldn't trade out of it for five or 10 years, and you had to rely on your faith that the business would be worth much more when that period was up.
If you don't have that faith, you may have identified a trading opportunity but not an investment that qualifies as a genuine value.
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tom.petruno@latimes.com
