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Five money managers examine portfolio management strategies in the latest issue of The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info541.htm

TWST: How long has Croft-Leominster been in operation?

Mr. Croft: We’ve been in business since 1989.

TWST: And what are the portfolios and the mutual funds that you cover?

Mr. Croft: Most of our business is private account management for individuals, pension funds, endowments and foundations. We also have a few partnerships and two mutual funds, the Croft-Leominster Value Fund and the Croft-Leominster Income Fund.

TWST: What is the investment philosophy?

Mr. Croft: It’s value oriented, and partly contrarian. We look at stocks that, on average, are selling at lower price to earnings ratios than the overall market, lower price to cash flow, price to book value, and at a discount to net assets. We define value a few different ways, including simply being cheap relative to its long-term growth rate.

TWST: Value, of course, has outpaced growth during the past two years. Do you expect that to continue, and if so, for how long?

Mr. Croft: Yes, I think the last time we spoke, which was about two years ago, was just about at the height of the technology bubble. It was awfully tempting to jump on the bandwagon back then, but we stuck to our knitting and didn’t compromise our approach to investing, in that we could not justify the valuations paid for certain companies. And I think now, it’s more of a stock pickers’ environment. The market doesn’t look overly expensive or overly cheap to us, though I think the technology and telecom area, in general, might still be somewhat expensive. We are looking at a few things there, finally, after years and years. But I do think value, over the long term, will continue to outpace growth. If you go back and do studies, at least on book value, it’s outperformed growth over the very long term. We expect that to continue.

TWST: So you are a stock picker, a bottom-up investor, but do you do any macro work as far as the economic outlook?

Mr. Croft: We’re aware of the macro outlook and we get information from all the supposedly best strategists and economists, and a lot of them have PhDs, and they all tell you different things. So we don’t profess to have a really good handle on the macro outlook all the time. We are aware of it, but our focus definitely is bottom-up. We are optimistic for the markets in the future, though, from our more simplistic macro outlook.

TWST: You haven’t mentioned any coverage of financial stocks. Are there any areas that you are interested in there?

Mr. Croft: Citigroup (NYSE:C) remains one of our largest holdings, and has been one of our largest holdings since 1990. We’re not a very high turnover firm, so we will hold something for 10 years. We still like that a lot; it is still the premier global financial company. When there are depressed markets around the world, and depressed financial assets, Citigroup is usually pretty good at taking advantage of that. It only trades around 13 times next year’s earnings. And we think it probably has a higher growth rate than most other large cap financial companies around the world. We also own companies in the insurance sector.

TWST: What do you think about Travelers being spun off?

Mr. Croft: It’s funny, two years ago they were buying Travelers (TAP) back in, so they’ve gone full circle and spun it back off. You know, it was a good idea two years ago to buy it back in, and it looks already like it’s was a pretty good idea to spin it back off. I don’t expect Sandy Weill at Citigroup to keep doing this. I think this is the end result. But I think that over the longer term he feels that that is a lower growth industry than what he is able to create with the rest of Citigroup.

This special Investing Strategies Report includes:

1) Kent G. Croft, President and Director at Croft-Leominster Inc., examines portfolio management strategies in this timely and deeply informative 4,000-word interview from The Wall Street Transcript.

2) Daniel D. McClure & Keith A. McLean, both Partners with I.G. Investment Management, Ltd., examine portfolio management strategies in this timely and deeply informative 5,400-word interview from The Wall Street Transcript.

3) Norman Gee, Senior Vice President and Senior Portfolio Manager at Freemont Investment Advisers, examines portfolio management strategies in this timely and deeply informative 2,700-word interview from The Wall Street Transcript.

4) David C. Jordan, Chief Investment Officer of First Bruce H. Geller, is Executive Vice President at Dalton, Greiner, Hartman, Maher & Company, examines portfolio management strategies in this timely and deeply informative 4,200-word interview from The Wall Street Transcript.