Registered investment advisor Frank Martin has managed money for more than 40 years and was able to avoid big losses from the dot-com bust of 2000 and the financial crisis of 2008. Now he's applying the strategies he's used in his private-client portfolios to a new mutual fund.

Martin, started Martin Capital Management LLC, a registered investment advisory firm based in Elkhart, Ind., in 1987, primarily focusing on fixed-income investing. In 2000, he shifted to an equity value orientation and today has more than $190 million in assets under management in separately managed accounts. He launched the Martin Focused Value Fund (ticker: MFVRX/MFVIX) in June, which now has just over $15 million in assets.

The long-time manager says there's one thing in particular that makes his new fund stand out. "It seems there are very few one-stop shops that aren't hedge funds for the small investor, and what makes us pretty radically different from other places that they might look is that, as has been my behavior in the past running private money, there are times when I hold lots of cash," says Martin, who's penned two books, including A Decade of Delusions: From Speculative Contagion to the Great Recession, and written numerous essays on investing.

"Our average exposure to equities during the Lost Decade was 50 percent," Martin says of investments in his clients' SMAs."People don't typically run with that much cash, and in the fund we have an even greater percentage of cash. So for the retiree who tends to be a little terrified when he has major paper losses in his portfolio, and then sometimes will do irrational things, we don't expose him to those kinds of down sides because emotionally he can't take it."

An independent audit of the firm's composite total returns on its SMAs from January 1, 2000, through December 31, 2010, shows Martin handily beat the Standard & Poor's 500 index in years the index did the worst and underperformed in the better ones. For example, the composite's total return net of fees was 16.27 percent for 2000 and -6.97 percent for 2008 compared with -9.10 percent and -37.0 percent, respectively, for the S&P 500. For 2010, however, he made 1.33 percent compared with 15.06 percent for the S&P. Gary J. Sieber, Martin Capital Management's chief marketing officer, says audited results are not yet available for 2011 yet, but performance was flat.

Over the entire 10-year period ending December 31, 2010, the composite's annualized return was 5.78 percent, compared with 0.41 percent for the S&P, demonstrating that Martin's strategy has been one for long-term investors. 

In fact, Martin describes himself as a patient investor, and he is being particularly cautious these days because he believes the United States is on the eve or in another economic slowdown. "All the stuff I watch suggests without topline growth it's a possible recession in the making, with earnings being propped up by some things that will be nonrecurring," he says. "Earnings estimates, whether bottom up or top down, were still rising through mid 2009. By that time we'd already reached the bear-market low. Actual earnings had turned down right around the end of the year in 2007, but the earnings forecast kept going up for another year and a half. That's earnings forecasts, they tend to lag reality by some significant measure."

He believes the current stock market is overvalued, based in part on what he thinks is a very reliable indicator -- Yale Professor Robert Shiller's 10-year moving average price/earnings ratio (often referred to as CAPE or PE10). "This is a fool's rally," Martin says. "It's largely driven by corporations repurchasing shares and also driven by the fact that interest rates give people no alternative but to go reaching for something -- and necessity never made a good bargain."

In Martin's view, the U.S. is continuing in a period of low GDP growth and the "great deleveraging cycle" has a long way to go. On the international front, he's concerned about the connection between European and U.S. banks and whether what happens in Europe produces a contagion that drags down the U.S. with it. That situation and inflated valuations are "a grey swan lurking," Martin maintains.

"What is right to me is having the liquidity so if everyone else panics one of these days, like in 2009, I have not only the money or the liquidity, but I also have the temperament to step up," he asserts.