Magic Formula: Good Company With Woes --- An American Century Manager Looks for 'Glaring Problem' in a Stock
Kevin Toney likes companies with a solid balance sheet, strong brands and a glaring problem.</br></br>The manager of American Century Mid Cap Value Fund isn't looking for companies in the midst of a train wreck, just those with problems big enough to be noticed by investors but not so big that they are permanent and unsolvable.</br></br>"As value investors, when we're buying a company, there's usually a problem," Mr. Toney said. "That's why it's cheap."</br></br>The conservative investment philosophy of the Kansas City, Mo., fund has paid off over the long term, as it pursues what Mr. Toney calls a "winning by not losing" strategy that limits losses in economic downturns.</br></br>Year-to-date through Monday, the $1 billion fund had returned about 11.4%, outperforming the Standard & Poor's 500 stock index by two percentage points but underperforming its midcap-value category by about 3.2 points, according to Morningstar Inc.