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By Gregg Wolper | 10-06-2009 03:57 AM

Oak Value's New Pick in Payrolls, Longtime Play in Gases

Oak Value's David Carr and Larry Coats make the case for new portfolio holding ADP and longtime holding Praxair--which they say is one of the most predictable businesses in the fund's portfolio.

Gregg Wolper: You mentioned earlier talking about the economy that unemployment was still high, and that is a concern. For that reason, it was interesting to see that you bought recently ADP, a payroll processor that has some other businesses.

I think many people would think that would be an unusual choice when unemployment is so high, and most experts expect it to continue to be high or even higher for quite some time. Tell us why you bought ADP.

David Carr: One of the things we find over time is that you rarely get a chance to buy a great company at a cheap price. ADP has got a great history of producing wonderful profit margins, great drop to the bottom line, produces lots of cash flow. They've been good at allocating that cash flow, buying back stock.

Importantly, the management currently we think is quite adept. They've spun off some businesses where they didn't have the kind of leverage and scale to provide consistent operating income increases that you're getting at the businesses that they own now, which are the employment area, employment processing, as well as dealer services.

If you think about it, there probably aren't two areas that are as tough as dealer services with working with auto dealers and...

Wolper: Tell us what they do with auto dealers.

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