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By Kevin McDevitt, CFA | 06-08-2011 08:25 AM

Poppe: We're Comfortable With Concentration

The Sequoia manager discusses the fund's new research efforts, number of holdings, and 20% cash stake.

Kevin McDevitt: Hi, I'm Kevin McDevitt, Morningstar fund analyst, and we are here at the Morningstar Conference with David Poppe from the Sequoia Fund. David, thank you for joining us.

David Poppe: Thank you.

McDevitt: So, I wanted to talk to you about some aspects of your portfolio, and one of the things in looking at your portfolio, it seems like there are not that many capital-intensive businesses, and knowing your long association with Warren Buffett and how he has kind of changed his tune to some extent in recent years about capital-intensive businesses, I'm curious how your thinking has evolved and if in any way you are more open or if there are any types of capital-intensive businesses that you might like?

Poppe: I can't speak for him, but I think he has a different set of problems and issues than we have. He has so much capital, he needs to find a way to put large amounts of capital to work on a consistent, predictable basis, and so a utility or a railroad makes a lot of sense if you need to put a lot of capital to work and have a high degree of confidence you're going to make a return.

We don't have excess capital. We are comfortable with the amount of money we have to invest, and we still feel like we have a lot more flexibility and freedom to find, in some cases, smaller businesses that could grow a lot but that don't require as much capital.

I hesitate to speak for him, but I think he would agree it's always better to invest in an asset-light business, if you can find it. There are great businesses out there that are more capital-intensive and will warrant a look for time to time, but I think in general we have a lot more flexibility given our size than he might have.

McDevitt: Looking at the fund itself, you have done a lot of hiring here in the last decade or so. I'm curious where you are allocating your analysts on the fund and what are the new analysts bringing to the table in terms of the research effort?

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