Oak Value Fund : A bent for Buffett

Larry Coats Jr. favors a Warren Buffett-style approach to buying stocks. That is, he searches for companies with sustainable, high returns and low debt whose shares trade at a discount -- and in fact counts Buffett's Berkshire Hathaway Inc. as one of the top holdings in the mutual fund he runs.

Like Buffett, Coats is a believer in finding companies with what he refers to as "moats and castles," areas of competitive advantages combined with proven economics. "Those businesses should be worth more," said Coats, co-manager of the Oak Value Fund (OAKVX) with David Carr Jr. "They tend to have a higher probability of controlling their future."

Predictability is a key part of valuing a company, with value determined by the amount of cash an enterprise can generate over time, according to Coats. "If you can't understand the business, you can't value it," he said. "If you can't value it, you shouldn't own it."

Coats concentrates on companies with operating margins and return on equity greater than 20% and leverage -- debt to total enterprise value -- below 20%. About 40% of the revenue of the portfolio's companies comes from outside of the U.S.

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