October 26, 2020 BARRON’S 27
portunities during those spans, and that it
wasn’t practical to put new capital to work.
When the coronavirus hammered stocks
in the spring, he reopened the fund. “I had
more ideas than money to invest—the first
time I’d had that feeling in a decade or
more,” he says.
Wallack starts his research by identify-
ing underperforming companies. From
there, he and value team analyst Andy Pe-
ters dive into the qualitative and quantita-
tive work, much of which comes from T.
Rowe’s analysts. Wallack also imposes an
absolute valuation metric on companies.
Rather than try to predict the future, he
runs base-case scenarios and models the
upside and downside, narrowing selections
by which opportunities offer the best re-
ward for the risk.
What Wallack wants in a company “is
what everyone wants,” he says. That means
oligopolistic industries with a handful of
competitors, companies with a tailwind of
growth, and ethical and business-savvy
management with hidden assets and levers
they can pull to unlock profitability. Find-
ing all those characteristics at a price cheap
enough to make it a buy is the real chal-
lenge, he says.
“It’s not so much the quality of the com-
pany as the quality of the investment op-
portunity,” he observes, echoing former
colleague Brian Rogers.
Mid-Cap Value has a turnover of 32%
and 98 holdings. Wallack will hold stocks
as long as the compounded return potential
is attractive, relative to the risk. He has a
list of buys, sells, and what he calls purga-
tory—companies where the investment
hasn’t worked out as hoped. “You have to
have a steely eye to determine whether your
investment thesis is still worth it,” he says.
Like cathedrals that have endured for
centuries, established companies that have
been through several market cycles are
what Wallack seeks. He seldom invests in
new businesses, and avoids companies that
were leveraged buyouts. “By the time pri-
vate-equity firms are through with them,
they’ve milked as much profitability as they
can, and often you have a smoldering husk
that remains prettied up for the IPO [initial
public offering],” he says.
One stock he bought more of during the
spring selloff was timber companyWeyer-
haeuser(WY), his No. 2 holding and a
long-owned name. When Covid-19 hit,
Weyerhaeuser shares fell, on the assump-
tion that the housing market would dry up.
Wallack says the stock slid into the teens,
reflecting only the value of its timber re-
serves and not its lumber products.
He also added to his position in food-dis-
tributorSysco(SYY), another longtime
holding and a market leader. Wallack hud-
dled with T. Rowe analysts to estimate how
much long-term damage the coronavirus
could inflict on Sysco, versus how well it
might bounce back from its pandemic lows.
They braced for the stock to hold near $25
for an extended period, but it has re-
bounded to around $60.
He is waiting for his investment in his
No. 6 holding, natural-gas producerEQT
(EQT), to work out, believing it represents
value. EQT’s new management, including
CEO Toby Rice, have been disciplined as
they lowered capital spending and im-
proved the balance sheet, Wallack says.
Even if natural-gas prices don’t rise, he says
the fund won’t lose much. But if prices do
go up, “we could make quite a bit.”
Wallack’s process hasn’t changed much
during his years managing the fund. His-
torically, Mid-Cap Value has performed
well going into and out of downturns be-
cause it is diversified, with an emphasis on
absolute value.
The fund manager is sticking with his
bottom-up process, even as the current
times are particularly turbulent. “It’s about
applying the principles consistently, year
after year, and hopefully that will deliver
good results,” he says.
Looking ahead to 2021, Wallack be-
lieves that things will get back to some
sort of normal. Yet the degree of uncer-
tainty ahead—with the election and the
impact of the pandemic—makes him all
the more determined to rely on his pro-
cess. “I have to be ready for anything,” he
says. “I know at what prices I want to buy
and sell my stocks. I keep an active list of
potential buy candidates and manage that
way.”B
T. Rowe Price Mid-Cap Value
Total Return
1-Yr 5-Yr 10-Yr
TRMCX 3.7% 6.9% 9.5%
Russell Midcap Value -2.8 6.1 9.9
Top 10 Holdings
Company / Ticker % of Assets
Bunge / BG 3.1%
Weyerhaeuser / WY 2.7
Flowers Foods / FLO 2.4
News Corp / NWS 2.4
Cardinal Health / CAH 2.2
EQT/EQT 2.2
Select Medical Holdings / SEM 2.1
State Street / STT 2.1
Patterson Companies / PDCO 2.0
Fresnillo / FRES.UK 1.9
Total 23.1%
Note: Holdings as of Sept. 30. Returns through Oct. 19; five- and 10-year
returns are annualized. Sources: Morningstar; T. Rowe Price
Scoreboard: Negatives Abound
(It’sadownkindofworldrightnow.U.S.stockfundsfell0.64%,theS&P500wasoff0.86%,bonds slipped,
andevenreliable counterweightpreciousmetalsdipped2.45%.OnlyLatinAmericashone,up2%.
OneWeek Year-to-Date
U.S.STOCKFUNDS – 0.64% 5.89%
TOPSECTOR/LatinAmericanFunds 2.02 – 29.59
BOTTOMSECTOR/PreciousMetalsEquityFunds – 2.45 36.54
S&P500 – 0.86 6.89
U.S.BONDFUNDS – 0.15 3.65
BloombergBarclaysAGGBond – 0.46 6.39
THEWEEK'STOP25
Fund InvestmentObjective OneWeek Year-to-Date
HennessySmCpFinlInv/HSFNX FinancialServices 8.88% – 19.6%
RMBInvFnlSvcI/RMBLX FinancialServices 6.04 – 21.7
JHancockRegBankA/FRBAX FinancialServices 5.60 – 27.0
GlobalTacticalInst/GIVYX GlobalMulti-CapCore 5.51 1.1
VictoryGlNatResY/RSNYX GLNaturalResourc 5.42 4.0
RydexBankingInv/RYKIX FinancialServices 4.45 – 25.5
KineticsInternetNL/WWWFX Science&Tech 4.18 12.6
HotchkisMidCapValI/HWMIX Mid-CapValue 4.16 – 20.6
NuanceConcValL/SInst/NCLSX AltLong/ShortEq 4.16 1.0
FidelitySelBanking/FSRBX FinancialServices 3.95 – 28.8
InvenomicInstl/BIVIX AltLong/ShortEq 3.91 – 5.2
TRowePriceIntLtAm/PRLAX LatinAmerican 3.89 – 25.6
HuberCapSCValInst/HUSEX Small-CapValue 3.54 – 22.9
1919FinlSvcsA/SBFAX FinancialServices 3.45 – 17.3
BlackRockLatinAmerA/MDLTX LatinAmerican 3.37 – 33.4
HotchkisGlobalValI/HWGIX GlobalMulti-CapValue 3.26 – 19.1
CliffordCpFocSCVInst/FSVVX Small-CapValue 3.25 – 4.4
CommonwealthAfrica/CAFRX EmergingMarkets 3.21 – 23.2
CannabisGrowthI/CANIX Specialty&Misc 3.17 – 14.0
HuberCapMCValInst/HUMEX Mid-CapValue 3.07 – 22.4
UndscMgrBehValL/UBVLX Small-CapCore 3.04 – 17.6
GabelliEqGlbFnSvI/GFSIX GLFinancialSrvcs 3.02 – 19.2
CalamosPhineusLng/ShI/CPLIX AltLong/ShortEq 2.88 0.3
FidelityAdvComEqpA/FDMAX Science&Tech 2.84 – 2.4
FidelitySelCommEqp/FSDCX Science&Tech 2.81 – 1.7
THEWEEK'SBOTTOM10
Fund InvestmentObjective OneWeek Year-to-Date
CGMTrRealtyFund/CGMRX RealEstate – 5.86% – 6.0%
GothamShortStratInst/GSSFX AltLong/ShortEq – 5.48 – 14.4
IssacharFundN/LIONX FlexiblePortfolio – 5.32 15.7
SparrowGrowthFundNL/SGNFX Mid-CapGrowth – 4.87 66.5
CatalystInsidrBuyingI/INSIX Multi-CapGrowth – 4.68 5.2
DelawareSmCapGroInst/DSGGX Small-CapGrowth – 4.68 62.2
VoyaCorpLeaders/LEXCX Large-CapValue – 4.54 – 7.1
GothamDefLong500Inst/GDLFX AltLong/ShortEq – 4.31 – 11.9
CounterpointTactEqI/CPIEX AltLong/ShortEq – 4.14 – 23.6
PIMCOExtendDurInst/PEDIX CorpDebtBBBRtd – 4.11 22.7
THELARGEST25
Assets 3-Year* 1-Week YTDFund (billions) InvestmentObjective Return Return Return
AmericanFundsGroA/AGTHX $109.7 Large-CapGrowth 16.8% – 1.34% 22.0%
FidelityContrafund/FCNTX 108.1 Large-CapGrowth 18.2 – 1.51 24.8VanguardWellingtonAdm/VWENX 92.3 MixTgtAllGro 8.5 – 0.48 4.4
AmericanFundsBalA/ABALX 81.6 MixTgtAllGro 7.8 – 0.71 4.3AmericanFundsEuPcR6/RERGX 76.9 IntlLarge-CapGrowth 5.9 0.30 7.5
AmericanFundsIncA/AMECX 70.7 MixTgtAllMod 4.2 – 0.49 – 2.1PIMCOIncomeInst/PIMIX 67.1 Multi-SectorInc 3.7 0.16 1.9
Dodge&CoxIncome/DODIX 67.0 CoreBond 5.5 – 0.27 6.9AmericanFundsICAA/AIVSX 62.3 Large-CapCore 8.5 – 0.61 5.1
Dodge&CoxStock/DODGX 60.6 Multi-CapValue 4.1 0.04 – 7.7AmericanFundsCIBA/CAIBX 58.8 GlobalEquityIncome 1.9 – 0.64 – 4.8
BlackRockCashInstSLA/ 58.7 InstlMoneyMkt NA NA NAVanguardPRIMECAPAdm/VPMAX 58.6 Large-CapCore 11.3 – 0.58 5.2
AmericanFundsWashA/AWSHX 58.6 Large-CapCore 8.4 – 0.32 – 0.7TRowePriceBCGro/TRBCX 54.4 Large-CapGrowth 21.0 – 1.13 28.0
AmericanFundsFInvA/ANCFX 54.1 Large-CapCore 9.2 – 0.87 3.7PIMCOTotRtnInst/PTTRX 53.7 CorePlusBond 5.1 – 0.41 7.3
MetWestTotalRtnI/MWTIX 51.7 CorePlusBond 5.6 – 0.41 7.4AmericanFundsCWGIA/CWGIX 51.0 GlobalLarge-CapCore 6.2 – 0.19 2.8
AmericanFundsNPerA/ANWPX 51.0 GlobalLarge-CapGrowth 13.4 – 0.81 16.6VanguardWellesleyAdm/VWIAX 48.0 MixTgtAllocCon 6.4 – 0.56 3.8
VanguardSh-TmInvAdm/VFSUX 47.6 ShortInvGrade 3.6 – 0.05 4.4VanguardIntlGroAdm/VWILX 46.6 IntlLarge-CapGrowth 16.7 – 0.49 35.4
VanguardTgtRet2025Inv/VTTVX 46.5 Mixed-AssetTarget2025 7.0 – 0.38 5.3DoubleLineTotRtnI/DBLTX 43.6 USMortgage 3.6 – 0.28 3.3
*Annualized10/19/2017to10/22/2020.ThroughThursday. Source:Lipper