interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Bottom-Up Stock Selection - Cyclical Sectors - Enduring Trends and Thematic Investing - Top-Down Investing

Companies include: Citrix Systems (CTXS); AT&T (T); Caterpillar (CAT); Chevron (CVX); Chubb (CB); Church & Dwight (CHD); Coke (KO); Disney (DIS); Google (GOOG); Home Depot (HD); Honeywell (HON); IBM (IBM); Intel (INTC); Johnson & Johnson (JNJ); McDonald's (MCD); RockTenn (RKT); Schlumberger (SLB); State Street (STT); and many more.

In the following brief excerpt from the Large Cap Value and Other Investing Strategies Report, expert Portfolio Managers discuss the outlook for the sector and for investors.

Edward O'Connor, CFA, is a Partner and Analyst/Portfolio Manager at Cooke and Bieler. He graduated cum laude in economics and philosophy from Colgate University. He served as a U.S. diplomat in Cuba and Guatemala prior to receiving his MBA with concentrations in finance and international business in 1999 from the University of Chicago. Mr. O'Connor then joined Cambiar Investors in Denver, Colo., where he worked as an Equity Analyst and Portfolio Manager, and participated in Cambiar's 2001 management buyout. He joined Cooke and Bieler in 2002.

TWST: You talked about what goes into the stock selection process. Tell us about what leads to exiting a holding.

Mr. O'Connor: We always say that the things that lead you to exit a holding should be the inverse of the things that led you to buy it in the first place. So for us, we buy companies because we think they're good businesses and we think they're undervalued, simplistically stated. So we generally sell them because we think they're either no longer attractively valued on an absolute basis or relative to some other potential holding, or we lose confidence in the business. If we do our jobs right, the former, the valuation being realized, would be more common than the latter, where we're forced to change our assessment of the business.

TWST: Any recent examples?

Mr. O'Connor: As we talked about earlier, the volatility of the market has probably led us to transact more than we would normally; we tend to be a very long-term-oriented investor. But recently, we sold Chubb (CB). That was a stock that had done very well for us. Insurance tends to be a defensive financial. People began to think there was some evidence of a pricing turn, and so Chubb appreciated to the point where it wasn't ridiculously overvalued, but we felt it was probably fairly valued for what it was. And we had other potential portfolio additions, particularly in the financial sector, that were more attractive, so we sold Chubb to put the money into those.

V.F. Corp. (VFC) was another stock that had done very well for us over a number of years. They're a large apparel manufacturer; they make Wrangler jeans, along with North Face outerwear and Vans skateboard-inspired apparel. Very talented management team, great capital allocation and savvy acquisitions. Just recently they bought Timberland (TBL) boots, which is a business that had had some internal issues, but we think V.F. will be able to fix those and it will be another great bolt-on to what they call their outdoor coalition of brands. Unfortunately or fortunately, other investors recognized that, and the stock appreciated to a point where we thought it was fully valued, so we sold. There are examples of things that don't end this happily.

Recently we sold Avery Dennison (AVY), makers of pressure-sensitive labels that you see in office supply stores for mailing labels and things like that. That was a case where the office products business in particular for them was always very competitive, and they were harvesting the cash from that and moving into tags for retail distribution and some other higher-growth areas. And without a lot of explanation, they suddenly began to shift that strategy to commit more capital to the office products business, and not very successfully in our estimation, so that led us to exit that. Management wasn't doing the things we expected them to do and, maybe for competitive reasons that we hadn't been aware of, management's strategy, we felt, was going the wrong way, so we sold.

TWST: What's your general outlook for next year?

Mr. O'Connor: We always approach it from a fundamental basis, so we know there are a lot of worries, and it's hard to know what the Europeans are going to do and what the impact on our side of the Atlantic will be of whatever it is the Europeans do. But if you look at the businesses we own and the businesses we follow, they seem really well positioned. Everybody took a lot of costs out during the downturn. Profit margins have come back, remarkably strongly in the cases where revenue has. The financial companies we follow are all much better capitalized now than they were three or four years ago, so they are much better positioned to absorb any European shocks. So building from the ground up, we're cautiously optimistic about the economic environment in general and stocks in particular for 2012. Things aren't as screamingly cheap as they were in 2009, but we don't see things being overvalued. We think there is a lot of opportunity for patient and careful investors.

TWST: What advice would you offer investors?

Mr. O'Connor: To be patient and careful. We think it's always important to not overreact to headlines, and the market seems to have a hard time doing that - not overreacting. Warren Buffett's advice to try to be greedy when others are fearful, and fearful when others are greedy, has probably never been more applicable. For us, the easiest way to get yourself psychologically prepared to do that is to do a lot of research and make sure you understand clearly what's going on and what's going to drive the results of your investments. I guess that would be the sum of my advice: focus on the things you think you understand best, be patient and careful, because there will be a lot of opportunity if you can see these events as your friend.

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