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Former Oakmark Manager Sanborn as Defiant as Ever

Value manager considers himself vindicated by past two years' events.

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In March 2000, Robert Sanborn was at the bottom of the heap. One of the most vocal proponents of value investing, his Oakmark Fund (OAKMX) had posted an especially weak return in 1999 and early 2000. The fund suffered enormous shareholder redemptions, and ultimately, Sanborn lost his managerial post. In some quarters, including the Morningstar.comConversations board for his fund, Sanborn was regarded as an old-school investor who just didn't get the new economy. More than two years later, former Sanborn picks such as Philip Morris (MO) have rebounded sharply, and the dot-coms that he shunned have taken a pasting. We sat down with Sanborn, who now runs a hedge fund, to discuss his current views on the market.

Morningstar: You're a bottom-up stock-picker. But in the big picture, how do you have your fund positioned?

Sanborn: It's really been the same for me since 1999. In general, small caps are still more attractively priced than larger caps. I would say, lower-expected-growth stocks are still more attractively priced than higher-expected-growth stocks. While that basic relationship hasn't changed, the opportunity now is nowhere near as good as it was in March 2000. You know, Cisco (CSCO), which I've shorted, was at $80 then and it's at $15 now. The thing that's amazing is that even at this price of $15, it happens to trade at five times revenues. What the hell was it doing at $80? It was trading at 25 times revenues and is a large-cap company.

Scott Cooley does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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