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Jeff Auxier, Auxier Asset Management

Whether it's working his farm or running a mutual fund, he takes a cautious approach to risk.

Laura Lallos, 04/01/2009

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Jeff Auxier's second career as a successful hazelnut farmer isn't far removed from his day job.

The farm is outside Portland, Ore., near the end of the Oregon Trail, and Auxier Asset Management's small office is nearby. There, Auxier buries himself among trade journals covering sectors from banking to beverages, seven newspapers a day, and piles of 10Ks. He describes his typical day as a solitary "grind, reading as much as I can in eight to 10 hours" to find consistent businesses with solid fundamentals and little debt.

His experience farming echoes his investing criteria: "You get a huge appreciation for the risk of commodities," he says. "We run debt-free because of the respect I have for how quickly things can change."

Buffett Takes a Call
After graduating from the University of Oregon with a finance degree in 1981, Auxier was set to get an MBA and head to New York to embark on a more conventional investing career. He says that he changed his mind after a call to his hero, Warren Buffett, "who would not know who I am today, but who kindly took the call." Auxier decided to stay local and focus on finding value-priced companies that Wall Street "despised." He started his career as a retail broker, then a separate account manager at Smith Barney, before founding Auxier Asset Management in 1998. He is guided by the classic Buffett nugget: First and foremost, never lose your principal. "I sailed through '83, '87, and the tech downturn [in 2000-2002] thanks to following Buffett's advice," Auxier says.

Auxier Focus Fund AUXFX has held up relatively well during the current bear market, too. A 25% one-year loss through January puts it in the top-quartile of moderate-allocation funds tracked by Morningstar--and 13 points ahead of the S&P 500, which Auxier uses as his benchmark. Although Morningstar classifies the fund as moderate-allocation, Auxier considers himself an equity investor, first and foremost. The fund's current 30% stake in cash and bonds reflects his conviction that corporate bonds at current yields are safer bets than the stock market--and that stock valuations are still too high.PAGEBREAK

Auxier is most enthusiastic about the "dull and mundane: companies offering better values and understandable products," he says. Discount retailers Wal-Mart WMT and Costco COST are the obvious destinations for retrenching consumers in a recession. Customers will also likely continue to buy the products of Coca-Cola KO and Philip Morris PM, "which did well in past deleveragings in the 1920s and 1930s."

That said, Auxier is not excited enough to hold stakes much larger than 2% at today's prices. "When Philip Morris was at eight times earnings, as in 1987, then it was OK to concentrate," Auxier says. "In the 1980s, food stocks were at four or five times earnings! I'm not as comfortable at 12 or 15 times earnings."

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