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March 23, 2005

Lessons in Picking Winners: A Stockpicker Sees Market Favoring Late-Stage Cyclicals

By Kathryn M. Welling

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Think about it. How many Wall Streeters could honestly tell you they've had a lot of fun at work over the last five years? The dawn of the new century, alas, just has not been especially kind to most portfolio managers. Which might lead you to bet that chatting with David S. Wilson would be anything but uplifting. After all, Dave certainly picked a less-than-felcitous time, back then, to part company with a long-time compatriot and set up Wilson Partners and its management company, Wilson Capital Management and go sailing solo in increasingly crowded and storm-tossed hedge fund seas.

But you'd lose that bet. If anything, he's been re-invigorated by the challenge. You see, Dave isn't "most portfolio managers." As his hedge fund's roughly 100 percent total net return over that span (versus about a 12 percent drop in the S&P and more than a 40 percent plunge in the Nasdaq) neatly illustrates, the avid sailor is not in any sense an "average" portfolio manager-and his fund's return is decidedly better than the averages. Dave is a stockpicker of the old school, an intrepid researcher with a nose for value and a second sense about incipient growth. Also, the kind of a guy old-fashioned enough to know when it's better to trim sail and preserve capital, rather than run head-long into a gale-and to act on that knowledge and experience.

Your clients must expect you to beat the S&P by a wide margin without even breaking a sweat. The last five years haven't been the easiest in which to rack up a 15 percent compound annual return, as you have done.

What's in store for 2005?

Wish I knew. I have been totally surprised. I expected the usual seasonal pick-up in the averages, because of the seasonal cash flows and also because over the last few years it has just seemed that money has followed performance. My grandiose plan was to start selling everything Jan. 15th.