Where Trevisani Sees Opportunity Today

Jason Stipp: Now speaking of the stock picking that you do, I think it's interesting that you have really outlined three types of names that you look for in the portfolio, basic value names, some of the strong franchises as you were saying selling at a good price. Consistent earners is a second one, and emerging franchises, so maybe newer companies that have really great prospects.

Given that you look for these three types of stories and the recent environment, have you found more opportunities in one or the other or how would you characterize the mix of opportunities that you are finding in that framework?

Wendy Trevisani: We're right now fairly evenly balanced, which I think we're 40, 40, 20. 40% basic value, which tends to be more cyclical, more exposed to economic fluctuations. Arguably some value is being created there, especially in the financials, but we're still relatively light in that area, maybe that will change.

Consistent earners tend to be more defensive. Healthcare, consumer staples, but we've also had opportunities to add to those stocks. They've been hurt for various reasons and whether its inflationary concerns or healthcare reform, so each of those categories are about 40%.

Emerging franchises are, as you mentioned, the faster growing companies in our portfolio and that hovers around 20%. We do limit it at 25%, because of the higher beta nature of the stocks. The tendency for them to may be have a bit of a higher valuation, but the growth prospects are much stronger.

And I think that there has been kind of a collective pullback in the markets and we've had opportunities across the board and also for balance like that we should be well positioned to be able to do well whether the markets go up or go down or go sideways. It allows us the ability to protect in down markets and participate in up markets by retaining that diversification.

So, I think right now there is no one basket that's particularly intriguing. I think it's very much more stock-specific opportunities that we're finding.

Stipp: Sure, any recent names that you've been particularly excited about for the portfolio?

Trevisani: Yeah. There are some names that are out of favor that we own that we think are unfairly penalized for various reasons. One I would mention is Carnival, the cruise operator just reported good earnings. They give such a level of granular detail in their next few quarters because they have visibility because people book their trips in advance and everything looks good. Pricing looks good; bookings look good, onboard spend, which is where they make most of their margins, looks good; and I think the stock has suffered unfairly. It's trading at kind of a very low valuation on trough earnings because people are concerned about the consumer, maybe they are concerned about oil spill or whatever that maybe, but fuel prices are a big cost for them.

So if they come down that feeds right into their margin. They are great at cost controls. They have a very healthy balance sheet. They operate in a duopolistic environment. So that's one that we've been adding to that we think is interesting.

Volkswagen is a newer name in the portfolio, a clear beneficiary of a weaker euro. As a big German exporter, they have a very solid franchise in emerging markets where they are growing quite nicely, and I think they are improving their business in the U.S., and a weak euro will allow them maybe to further improve their position in the U.S.

So that's another name or a type of name that we're looking at, a name that really hasn't done much for a long time that we think has a lot of possibility of improvement.

Stipp: Wendy, thanks for investment ideas and for your insights today.

Trevisani: Thank you.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.