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Remember GARP investing? Lately, some funds have been making headway with its investment strategy which is based on buying growth stocks at reasonable prices.

Last summer, when I first spoke with Jay Sekelsky, portfolio manager on two of Mosaic's funds, (800-368-3195)--- the Mosaic Focus Fund, (MOFSX), and the Mosaic Investors Fund, (MINVX)---the funds were essentially fully invested and he was sticking with his firm's buy only established large-cap-companies that are well managed and priced right. The strategy during the previous year, 1999, hadn't paid off particularly well. But that was two years ago. Now the story is a different one.

In 2000, both funds ended the year up well over 10 percent while the average large-cap value fund was up 1.36 percent, according to Lipper. At the end of the first quarter 2001, the average large-cap value fund down over 7 percent, while the Mosaic Focus fund was up 0.79 percent, and the Investors Fund, off about 3 percent.

Of the two funds, Focus is the more aggressive typically keeping between 12 and 18 stocks in its portfolio. The Investors Fund, on the other hand, will hold about twice as many names, half of them the same as those in the Focus Fund.

Here's more from Sekelsky about about how he manages the funds:

Q: You've got to be pretty happy now that things are going your way.

Sekelsky: I am. But, I should preface that by saying (that) in 1999, we had a very difficult year because we stuck to our (investment) discipline. And, that year those were the worst stocks to be in.

Q: Was that because tech stocks were the place to be?

Sekelsky: It was tech, small companies, dot coms and unproven companies. When you have very exuberant growth in the economy and in earnings in general--- for both the S & P and for the market--- investors tend to gravitate towards stocks they think are home runs and exit quality meaning they pass on Johnson & Johnson-type companies and start buying companies that don't have much of a track record.

Q: Are you finding a number of good companies to invest in right now or are you sitting with a lot of cash.

Sekelsky: We've got about 15 percent cash in both the Focus and Investors' funds. That's been true for the last three or four months and, that's high for us. We would rather be fully invested. I guess what that tells you is even with the correction in the market, we don't find as many opportunities as you might suspect. The problem is, many companies are in a profit recession so earnings are coming down just as rapidly as are their valuations. And valuations have not gotten to a level that we find particularly attractive.

Q: What stocks are you buying?

Sekelsky: Cisco is an example of something we just started to nibble at. We started buying it in the teens, $13.9, didn't fill our position and have room to add to it. Our next buy level is somewhere closer to the $10-12 range.

Q: So you think it has room to fall?

Sekelsky: We do. If you go back to the valuations that the stock had in the early and mid-90s, you could see it go down to the eight to 10-dollar range based on earnings. Because we look at companies to hold for the long-term, when you take a look at Cisco and their sales and revenues, we think that there is a decent probably that they can double their sales in the next four years. If they can do that, and if they can maintain their margins and continue to trade at four times sales, the stock price will roughly double over the next four years. That works out to be about an 18 percent return per year and gets the stock back to about $25. If that happens, you've probably outperformed the market but investors who bought the stock a year about still only have a third of their value. And that's why valuation is so important when you're investing.

Interpublic Group, which is an advertising company, is another stock that fits our profile. It's the type of stock that has had 25 consecutive years of increased earnings in the double digit range, has a balance sheet of very high quality, strong management, and because of the slow down in the economy, the stock has dropped in price. Right now it's trading around $35, down 30 percent from its 52-week high. We see it growing 15 percent per year and can easily see that stock back up in the $50 range.

Q: What about the economy. Are you looking for a v-shaped or u-shaped or any other kind of shaped recovery?

Sekelsky: I heard that there was the possibility of a Nike swoosh-shaped recovery. We're not really banking on any letter-type of recovery other than just a long slow grind up.

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