The Dow Jones industrials are on their way to a 200-point decline. But in his office near Beverly Hills, Bob Rodriguez is as cool and relaxed as his clothes -- a plaid shirt and khakis -- suggest. For the manager of FPA Capital fund, a collapsing stock market means opportunity, not angst. What else would you expect from an investor who has nearly half of his stock fund's assets off the table?

Rodriguez's approach to money management is quaint -- some might say archaic. Nowadays, most managers run their funds fully (or close to fully) invested. Not Rodriguez. If he can't find stocks meeting his rigorous price criteria, he goes on a buyer's strike. Rodriguez also runs a bond fund and takes the same approach to fixed-income investing. If bond yields aren't attractive, he converts FPA New Income into a quasi-money-market fund. And if investors don't like his style, Rodriguez says, they don't need to hang around.

Truth be told, Rodriguez, 57, doesn't seem to want new money. The $2.3-billion Capital fund (symbol FPPTX) has been shut to new customers since July 2004. First Pacific Advisors, which Rodriguez heads, charges front-end commissions on four of its five funds. But it doesn't levy those annoying 12b-1 market fees or, consequently, sell alternative share classes, which are usually designed to pay advisers to deliver their customers' assets and which often confuse investors. FPA doesn't employ a marketing director. It doesn't even have a receptionist.

For marketing, Rodriguez need only let the funds' results do the talking. Capital's annualized return of 16.4% over the past 20 years to June 19 is surpassed only by that of a sector fund, Vanguard Health Care. Over the past five years, Capital returned 15% annualized, three percentage points per year ahead of the average small-company value fund. New Income (FPNIX) returned an annualized 5% over the past five years and 8% over the past 20. It has never had a down year since Rodriguez began running it (and Capital) in 1984.

KIPLINGER'S: You seem to enjoy it when the stock market sinks, don't you?
RODRIGUEZ: Yes. We are pretty well structured here.

What's it like to come in on a Monday morning and realize that nearly half your shareholders' money isn't on the table? It doesn't bother me. Nowadays, there's a sense that you're not really working, you're not really earning your fees if you don't invest all the money you control. But that's not how I view my job. If you're in an environment with a high level of substandard investment opportunities, are you really doing your shareholders a favor by deploying capital into marginal investments? I would argue that you're not.

But if you're wrong, you can quickly lose a lot of business. That's right. I had that very discussion with a friend of mine -- someone with a major growth-fund organization -- in January 2000. For the better part of a year, I had been talking about the rank speculation in the market. I was saying that any manager who invested in a dot-com should be fired. My friend said, "We've got to buy these things because if we don't and these stocks continue to rise, we will underperform and we will be fired." I responded, "If you buy those stocks and they and the market collapse, you will be fired as well." So door number one, you get fired; door number two, you get fired. What is the difference between the two doors? With door number one, you play the speculative game and you're fired because you destroyed capital and you also destroyed your investment integrity. With door number two, you get fired, but you retain your investment integrity.

Are things as loony today as they were in 2000? No. But when I screen stocks by my criteria, the number of qualifying companies with market capitalizations between $150 million and $3 billion -- the area of the market I focus on -- climbed during the selloff from 72 to 85 out of 9,440 companies. The lowest number I've ever gotten was 47 -- in March 1998 and January 2004. Well to me, 72 or 85 versus 47 is not a lot of difference. Normally, 250 to 300 companies show up.

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