Smart Enough to Stay Different and Stay Ahead

If mutual-fund managers were ranked according to a Frankness Index, Tom Maguire would probably seize the top spot.

Consider this exchange with Mr. Maguire, the Seattle-based manager of the $1.7 billion Safeco Growth Fund:

"How do you describe your investment style?"

"I try to do things differently because I recognize I'm not smarter than a lot of fund managers," he says with a grin.

Maguire's straight talk flouts the usual industry penchant for the swift spin. His investment returns also pack an unusual, straight-from-the-shoulder punch.

Over the past five years, Safeco Growth has grown an average 22.7 percent a year, considerably better than than the Standard & Poor's 500 Index. Only 5 percent of funds last year outpaced the S&P.

"There are three ways to do well: brilliant forecasting, insider information, and dumb luck," says Maguire. "I'm not really brilliant and I don't have insider information, so I try to do well by doing things as differently from others as I can."

He avoids high-tech (too pricey and volatile). He owns both big and small companies. And his portfolio includes both cheap stocks and those offering galloping growth.

Also, Maguire goes for big stakes in companies he likes. "In order to outperform you have to own as much as possible in a favorite stock because if it works like you believe it will, it will make up for all the mistakes you make."

He put 9 percent of his portfolio in Conseco Inc., reckoning that the life insurer will benefit from customers gained through its purchase of Green Tree Financial Corp.

Other investors reckon otherwise. Conseco is down 34 percent since the merger announcement on June 30, helping pull the fund's performance down to 9.8 percent through Aug. 3, trailing the market averages.

Even so, "I'm a believer in Conseco," says Maguire, asserting that the stock will rise when the market recognizes the payoff from the Green Tree purchase.

"If you want to be on the top of the charts, you have to be willing to be on the bottom of the charts by doing something different," he says.

Maguire says the recent market downturn is a "flushing out" of stocks that are too expensive. He hopes market attention will turn now to more reasonably priced stocks of small companies - small caps in Wall Street jargon.

Investors will "start going back and look for what's cheap, and their attention will turn to small caps," says Maguire. "We're not in a full-fledged bear market," he adds, "but we could see revaluations of big stocks by 20 to 30 percent."

Along with financial stocks, Maguire favors health care because of the vast numbers of aging baby boomers. He also fancies radio, having ridden an industry trend in deregulation, consolidation, and expanding market share with the purchase of stock in Chancellor Media Corp. It's his No. 2 holding.

Maguire has paid - or reaped - a price for his success. Investors have deluged him with dollars, expanding the fund's total assets fivefold since last September.