Investing Outside the Box

What's in a name? Not much, apparently, when it comes to Intrepid Small Cap (symbol ICMAX). The $88-million fund holds some decidedly big companies, such as Newmont Mining (market capitalization: $20 billion) and Dutch brewer Heineken ($16 billion). Unable to find stocks that met his criteria, manager Eric Cinnamond also kept as much as 40% of the fund's assets in cash last year. Thanks to that decision in particular, Intrepid was one of only six diversified U.S. stock funds to make money over the past year. "Maybe that proves that the right way to manage assets is not to sit in a style box that a consultant told us we need to be in," says Cinnamond.

To be fair, Intrepid in its current incarnation isn't entirely devoid of small companies. At last report, it had 42% of its assets in small companies and 28% in micro caps (as well as 15% still in cash). Cinnamond, who launched the fund in 2005, looks for stocks that sell for at least 20% below his assessment of the underlying company's value. He prefers high-quality concerns with little to no debt and strong free cash flow (the money left over each year after capital outlays).

Cinnamond is especially drawn to energy stocks (21% of assets). Unit Corp. (UNT), a natural-gas producer, is his biggest holding. With 569 billion cubic feet of natural gas and more than 120 rigs, Unit is worth about $2 billion, or $42 a share, says Cinnamond. The shares, which he first bought last October at less than $30, closed at $35 on May 8.

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