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Value Investing at Its Best

Cramer’s focus has always been stocks. But after constant questions about mutual funds he decided to dedicate one part of his latest book, Stay Mad for Life, to the subject. That’s how he found Ron Muhlenkamp, founder and president of Muhlenkamp & Co.

When it comes to choosing a fund, Cramer has said, it’s the guy in charge that matters and not the portfolio. If that’s the case, then Muhlenkamp is the manager to get behind. He brought in 25% returns in 2000 and 9% in 2001, two bad years for the market, and his five-year average return is more than 15%.

Muhlenkamp’s investing philosophy is “simply to find good companies and when, their prices are cheap, to buy them,” he said, and that usually means finding companies that have fallen out of favor with the market. After all, “the only way to buy a good company cheap is when somebody doesn’t like it,” he said.

That was the case when Muhlenkamp picked up UnitedHealth. The stock took off when the Street hated it, but Muhlenkamp already had a stake by then. The company continues to perform, he said, regardless of its popularity with the Street.

Altria is also a part of Muhlenkamp’s portfolio, and he said there’s still room for profit as the company plans to split the domestic and international divisions.

Devon Energy has done well, but “we’re willing to run on momentum, but only if we respect the company,” Muhlenkamp said. He said he doesn’t think the stock is fully priced yet.

Muhlenkamp has owned Cemex for four years, getting great returns for two of them. With a return on equity near 20%, and the price-to-earnings ratio at about 10, the stock is hard to resist. And CX is cheaper lately, giving investors an opportunity to buy in.

Muhlenkamp is a buy, buy, buy, Cramer said.

Jim's charitable trust owns Altria.

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