Taking A Page From The Sage

Like Warren Buffett, Thyra Zerhusen invests in just a handful of companies that she has studied in depth

Thyra Zerhusen is clear about her role model: "I want to be the female Warren Buffett," the portfolio manager of ABN Amro Mid Cap Fund (CHTTX ) says with a laugh. Then, embarrassed by her unexpected bravado, she adds: "Oh, I don't know. I try to emulate him, at least." Indeed, like Buffett, Zerhusen practices a know-what-you-own philosophy, investing in just a handful of companies she has studied in depth. She also believes in long-term investing, seeking companies with sustainable business models. She looks for businesses with "economic moats," franchises and patents that can resist the onslaughts of their rivals.

If her goals sound lofty, she has always aimed high. As an undergrad, she studied life sciences at the Swiss Federal Institute of Technology, alma mater of Albert Einstein. "He failed the entrance exam on his first try," Zerhusen notes. "I didn't." She received a master's in economics from the University of Illinois and has worked in the investment industry in Chicago for the past 25 years. Her fund has consistently beaten its peers since she took the helm in June, 1999. In the five years ended on Dec. 31, she delivered an annual return of 15.3%, double the return of the average mid-cap blend fund.

During much of her tenure, Zerhusen has held 20%-plus of the fund's assets in the beleaguered tech sector. "My tech portfolio is pretty mundane," she says. "The only thing I demand is that the company's products not be facing obsolescence problems or severe competition" -- and that the company is profitable. She likes Diebold (DBD ), a maker of automated-teller and voting machines. She also favors Unisys (UIS ), an info-tech-services company that has several long-term contracts with the government, so sales are locked in. "Unisys has a backlog of $6.5 billion in service contract orders," she says.

Zerhusen typically holds fewer than 50 stocks. She wants her companies to be focused as well. "It's important with mid-size companies that they stick with what they know best. They often don't have the depth of management to handle multiple businesses," she says.

Although mid-size stocks in the $1 billion-to-$10 billion market cap range have rallied in recent years, Zerhusen says they still offer better investment opportunities than blue chips. "Mid-caps offer higher growth rates and lower valuations than larger companies, yet they continue to be ignored by many investors, especially large pension plans," she says. If Zerhusen proves right, she'll be a step closer to emulating Buffett.

By Lewis Braham

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