Jordan mixes a gutsy investment style with protective measures that are designed to limit losses. At times when he has not been able to find enough good investment ideas or feels the market is headed for a spill, the fund's stake in cash has been as high as 20%. At the end of 2007 cash stood at 15% of assets after the sale of some brokerage stocks. The securities appeared attractive when he bought them during the year, but headed south later on with other stocks in the financial sector. By the end of January the fund was fully invested again as Jordan picked up some commodity stocks in niches with constrained supply and strong demand, such as steel and precious metals.

Despite the brokerage stock misstep, the fund ended 2007 with a one-year return of nearly 26%, thanks to large bets in more profitable sectors as well as protective measures such as moving into cash from time to time and buying index put options. He used the latter technique early this year with put options on energy ETFs, a move that he says played a significant role in maintaining performance.

Jordan Opportunity Fund's decidedly un-mutual-fund-like disregard of style boxes, benchmark weightings and stay-fully-invested philosophies are an outgrowth of Hellman Jordan Management, a firm founded by his father, Jerry Jordan Sr., in 1979, after a stint of over a decade as a fund manager at Putnam. The younger Jordan joined the firm, which manages some $550 million in assets in separate accounts, in 1996.

A Short Recession

Jordan believes that many investors are being spooked by a U.S. market that is decelerating rapidly, a shrinking European economy, and a Japanese economy that is probably in recession. "But you've got South America, Russia and all of Asia still growing firmly. A lot of that is due to raw material production, because demand continues to be good. One thing to keep in mind is, amidst all the recessions we've had in the last 25 years in the United States, we have never had negative oil demand. So when it comes to commodities, demand continues to be there in developed economies."

He points out that most recessions over the last 30 years have lasted no longer than six months or so, and believes this one is likely to follow a similar pattern. Although he acknowledges problems in the financial and housing sectors, he points out that jobs in the health care, manufacturing and other service industries remain secure, and that the Fed's moves to cut interest rates early this year, though delayed too long, will keep the economy from heading into a freefall. "The fourth quarter of 2007 marked the first recessionary quarter and I believe we will be pulling out of it by the second half of the year," he says. "Overall the recession won't be that bad, but I don't think we'll see robust consumer spending for awhile."

Positive trends such as substantial buying by insiders, high dividend yields and attractive valuations will help lead the market higher this year, although there will be a lot of bouncing around in the interim. "Things are going to be fine over the next couple of years," he says. "This is not like 2001, and we are not in the midst of a wipeout."

As most investors focus on what can possibly go wrong with the stock market or the economy, Jordan is solidifying a foothold in companies whose stocks are selling at reasonable valuations that have the potential for expanding price-earnings multiples. Many of those stocks are in the health-care sector. Medtronic, the largest maker of cardiac devices in the country that has also seen success with its neurological, diabetes and spinal products, peaked in 2000 at $63 a share and is now trading in the mid-forties.

"This is a stock whose multiple has traditionally been in the 25 to 30 range that is now selling at just 18 times earnings," he says. He believes earnings growth will reaccelerate in 2009 to a rate of 12% to 15%. He also likes Humana, whose HMO business is growing earnings at a rate of 15% to 18% a year, and Hologic, whose Lorad division makes leading-edge digital mammography and breast biopsy systems. Both stocks should benefit from an aging population and growing need for health care services and equipment.

In the energy sector he favors oil service and drilling companies such as Schlumberger because of strong demand for their services. He says the stock, which has traded in the $70 to $80 range recently at a historically low valuation, could rise to $120 over the next 18 months. While he is treading lightly in financial services, he owns shares of Blackstone Group, a large private equity and hedge fund manager that has seen strong growth in assets under management. Commodities plays include steel maker Nucor and U.S. Steel. With inventories at 10-year lows, he believes that even a small economic uptick could drive steel prices in the U.S. upward by 15% to 20%.

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