An investment strategist, manager and researcher for more than 30 years, Leuthold is the founder and chairman of Leuthold Weeden Capital Management; a portfolio manager for the Leuthold Core Investment Fund, the Leuthold Select Industries Fund and the Grizzly Short Fund; and chairman of The Leuthold Group, an investment research group.

Leuthold Core Investment is a hybrid fund, rather than one that focuses on a particular sector or investing style. But when Leuthold likes a sector, he goes for it in a big way. "So far, management has proven highly capable, and the fund has a great risk/reward profile," says research firm Morningstar, which has a 5-star rating on Leuthold Core. "But its sometimes-risky bets could backfire."

Shares of Leuthold Core have gained more than 14 percent since he first appeared on Wall $treet Week with FORTUNE last September.

Leuthold describes Core Investment as a fund for someone 48 to 50 years old and starting to think about retirement. Currently, the Leuthold's core portfolio calls for the following asset allocation:

• Equities: 45 percent
  
• Emerging country funds: 8.4 percent
  
• Short-selling fund: 13.4 percent
  
• High-yield corporate bonds: 11.8 percent
  
• Treasury inflation-protected bonds: 10 percent
  
• High-quality U.S. corporate bonds: 8.2 percent
  
• Cash: 3.2 percent
  

From FORTUNE, May 27, 2003:

It's early April and McQuilling, a household products analyst with UBS Warburg, is on the phone with a leading mutual fund manager. He's talking up the prospects for Estée Lauder, a firm that does no banking with UBS. The company had been through two years of bad news, but McQuilling sees evidence that costs are coming down and sales are growing. "It's too early!" screams the investor, who controls tens of billions of dollars. "Enough already!"

"I don't care what the rest of the Street is telling you," McQuilling counters. "This is the beginning of what should be a long-lived trend."

Flash forward to April 30. Lauder announces sparkling results, reporting one of the highest quarterly operating margins in its history, cutting expenses and still posting -- just as McQuilling had forecast -- a 10 percent sales gain. By early May shares are up 25 percent from where they stood at the time he ended his conversation with his client.

Consider it another McQuilling classic. The 37-year-old has made a career out of recommending what everyone else is dumping. During 2002, when he bested the average analyst in his sector by 18 percentage points, McQuilling ran off a string of timely, counterintuitive calls. Take what happened last May 21. Sensing that valuations were at extremes after a two-year run-up, McQuilling cut his ratings on the whole household products sector. That call came as the stocks neared 52-week highs, then began a rapid 20 percent descent. At the very bottom of the selloff in late July, when many valuations were near ten-year lows, McQuilling reversed course, issuing buy calls on Gillette, Alberto-Culver, and Clorox. Investors who listened enjoyed 20 percent gains.

Unlike other analysts in the sector who obsessively measure, say, how quickly diapers fly off the shelves, McQuilling has a passion for currencies. That plays a key role in his research because companies like P&G derive up to half their revenues overseas. McQuilling believes a strong euro will boost profits for the sector this year. But should the sluggish economy start to recover, he warns that investors will shift from defensive stocks to potential growth companies. That leaves Estée Lauder (EL, $34) as one of the few bright spots in any market climate. McQuilling thinks Lauder's profits should jump 5 percent to 7 percent on currency fluctuations alone. And as a company that caters to luxury-oriented consumers, he says, Lauder will benefit from fatter wallets and a 60 percent share of the high-end cosmetics market.

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From FORTUNE, May 27, 2003:

Smith Barney's insurance researcher didn't just take on Conseco, he became part of Wall Street lore. At a time when the reputation of sell-side analysts was undergoing almost daily attacks -- and with Jack Grubman sitting just a few doors away -- Colin Devine engaged in a three-year battle with the insurer that began when he first cited Conseco's rocky business model in a 1999 report. It ended when Conseco, once a major banking client for what was then Salomon Smith Barney, filed for Chapter 11 last fall.

During that period he received verbal threats from Conseco executives and relentless pressure from the outside--including a full-page ad in The Wall Street Journal placed by investing titan Irwin Jacobs that assailed his credibility. (It suggested that he deserved an "Academy Award for Best Actor in ineptness and/or desperation.") How did he withstand such a withering assault? Devine, an ice hockey enthusiast who still plays goalie on weekends for a club team at a Manhattan ice rink, offers this explanation: "I've learned that the more management teams squeal, the more we need to push, because we're hitting the right button."

What's not generally known about the 43-year-old researcher is that while all the turmoil over Conseco was unfolding, he was also hammering away at other insurance companies for not diversifying their investment portfolios and business lines. He has established himself as one of the most prescient forecasters in the business. Take 2002. Devine's portentous calls included pointing out that John Hancock's higher-risk investment portfolio would lead to capital problems. He also told investors to steer clear of Unum Provident because of mounting investment losses and slower premium growth. The stock fell from $26 to $17. In February, with shares at $17, he put a sell on the stock and watched shares plunge below $9. Soon after, the company replaced its CEO. Devine upgraded the stock, catching a bounce-back to $11. Such nimble moves helped Devine post a 15 percent gain on the year -- trouncing his average competitor in the sector by 19 percentage points.

Devine's latest divination is that companies whose fortunes are tied too closely to the life insurance market -- traditionally the bread-and-butter business for insurance -- are in for a precipitous fall. That business, he says with a straight face, "is dead." Opportunity rests instead with insurers who are set on becoming hybrid financial services companies that offer a whole range of retirement-planning products. As Devine sees it, the future is in annuities. With life expectancies stretching into the 90s for people approaching retirement age, the need for investments that pay a guaranteed income will continue to grow. (Only insurance companies are allowed to underwrite annuities.)

To find the capital to fund this flourishing annuity business, Devine predicts that insurers will undergo a fresh round of mergers. And that's a plus for Prudential (PRU, $32). Pru has a low relative valuation (due to weak assets that have been sold), a rising dividend, which he expects to double soon, and earnings that have been growing by 8 percent and are likely to continue at a double-digit clip. These factors make it a probable merger candidate -- either as buyer or seller. For Devine, though, there is one significant downside to the coming merger wave: "When it's all over, in about three years, there won't be any more pure insurance companies to cover. I'll be out of a job."

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