On My Mind
The Value Player
James M. Clash, 09.16.02

One of the best value managers in the small-company arena is a reformed techie. Preston Athey started out as a tech analyst at T. Rowe Price (nasdaq: TROW - news - people ). But then, he says, "I began to lose my zest for untried companies." So in 1991 he moved down the hall to head the fledgling (founded in 1988) Small Cap Value Fund. While he limped along in the Internet era, he has turned in an admirable long-term performance--with a 6.8% return in the last five years. More impressive is what he has done since March 2000: an annualized 14.7% when the market was falling.

At 53, Athey has lived a colorful life. As a young ensign he was an aide to the prickly Admiral Hyman Rickover, father of the nuclear Navy. Athey, an accomplished a cappella singer, has cut a CD of standards and contemporary songs. But the types of stocks he prefers are far from glamorous.

Athey's largest sector holding, which constitutes 22% of the fund, is in beaten-down financials, with names like insurer Brown & Brown (nyse: BRO - news - people ) and investment provider Allied Capital (nyse: ALD - news - people ). In fact, Athey holds few tech or energy stocks, though the recent decimation there has him nibbling on some low-fliers. Tetra Technologies (nyse: TTI - news - people ) (energy equipment, P/E 17) and C&D Technologies (nyse: CHP - news - people ) (electrical equipment, P/E 20) are recent buys. Ever searching for undervalued companies, Athey also scores gains via takeovers. Up to 7% of his fund gets tendered for annually. Example: Puerto Rican Cement (building materials), taken at a 56% premium by Cemex (nyse: CX - news - people ).

A bonus is that he has accomplished all this fairly cheaply. Expenses run just 85 cents per $100 of assets. The bargain-minded Athey has a portfolio averaging 17 times trailing earnings, less than two-thirds the S&P 500 multiple.

The fund recently closed to outside investors, although it could soon reopen if the market plunges again. The last close was March 1996 to November 1998. But if you're rolling over your 401(k) from an old job, you can get in now.

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