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MuhlenkampMemorandum

Issue 89 Published First Quarter January 2009


On December 31, 2008, the Net Asset Value of the Muhlenkamp Fund was $38.60, down $26.40 year-to-date.

Quarterly Letter Announcements


by Ron Muhlenkamp 2008/2009 IRA Contributions

Contributions can be made to your


IRA for tax year 2008 by the due date
In 2008, we had a lousy year. Bank balance
for filing your 2008 tax return, not
sheets are much
It’s not much comfort to know that nearly including extensions. For most people,
stronger partly due to
everyone else had a lousy year also. this means contributions for 2008
infusions of capital by the U.S.
must be made by April 15, 2009.
government. Leverage on the balance
In reviewing our thinking and our This includes Traditional, Roth, and
sheets of brokers and hedge funds has
newsletter over the past few years, it’s clear Coverdell Education Savings Accounts.
been reduced dramatically. Mortgage rates
that we failed to appreciate the degree to
have declined significantly, allowing most When making a contribution between
which a number of problems would come
mortgages to be refinanced at lower rates January 1 and the due date for filing
together to create a mutually reinforcing
and make the resets of ARMs (Adjustable your tax return, we suggest that you
downward spiral in nearly all asset prices.
Rate Mortgages) written 2-3 years ago to specify the year for which you are
This asset list includes stocks, real estate,
be less painful. The price of commodities making the contribution. Too many
commodities, and bonds (with the lone
has fallen, most significantly, energy and people realize too late that they
exception of Treasury bonds). We believe
food grains. made a current year contribution
the one common driver to all these asset
prices is that some of the owners had to (the year in which the contribution is
Some of the items we track to monitor
sell, and that the subsequent markdown actually received), and not a prior year
the effectiveness of the actions by the
in prices forced additional selling. Most contribution (the year for which they
government have improved, including the
of the selling should now be completed, are filing their return). If you have any
rates at which banks lend to each other.
but if there is another round, it should questions, please call us toll-free at
It now looks like the main reason many
occur in Q-1 ’09 as people respond to (877)935-5520, extension 4.
people fear that market prices will fall
yearend statements and companies satisfy further is that they’ve already fallen. But For tax year 2008 and tax year 2009,
their auditors. Meanwhile, we think many they’ve already fallen to levels that appear traditional and Roth IRA contribution
of the specific fundamentals that drove the to represent the best values in over twenty limits are the lesser of $5,000 or 100%
forced selling have been alleviated. years. of your earned income. “Catch-up”
contributions for persons age 50 and
Just as today’s prices in housing represent
above are $1,000. Please refer to IRS
attractive levels to buyers, we believe
Publication 590 for more information.
today’s prices in many stocks and bonds
represent attractive levels to buyers. CESA annual contribution limits are
$2,000 for each beneficiary. Please
While we continue to monitor the
refer to IRS Publication 970 for more
fundamentals and the effects of
information.
governmental actions, we’ve begun
putting our cash back to work. You can download copies of the
above mentioned IRS publications at
The comments made by Ron Muhlenkamp
http://www.irs.gov.
in this article are his opinion and are not
intended to be investment advice or a forecast Remember: It’s not too early to begin
of future events. Copies of past newsletters are funding your 2009 IRA. Equity returns
available at www.muhlenkamp.com. compounded over long periods can be
truly amazing.

continued on page 6
MuhlenkampMemorandum

Intelligent Investing with Steve Forbes


Ron Muhlenkamp was a recent guest on much match with each other. The best if you’re lucky and you’re the only person
a new web-based program, Intelligent companies, by and large, have the best there, you may get a $100 item for $20.
Investing with Steve Forbes. The video reputation -- but we don’t know how to More often than not, everybody else has
interview is available at www.forbes. quantify reputation. We do know how to been playing the same game and it ends
com. Following is sample content from quantify return on shareholder equity. up selling for $85 or $90, or maybe $110
the video. or $120. But the point is, right now in the
Historically, we tell the public that we’re stock market, there’s been no reason for
Steve Forbes: trying to buy Pontiacs and Buicks when anybody to step up and make an opening
The veteran go-anywhere mutual fund they go on sale. Some folks say the only bid. So prices just keep falling based on
manager talks about finding value in the stocks you want to own are the best investors who must sell.
bear market and the real financial weapon companies, but the best companies don’t
of mass destruction: mark-to-market go on sale very often. Now happens to be Steve Forbes:
accounting. a time when the Cadillacs are on sale, not You talked about return on equity. But,
just the Pontiacs and the Buicks, but the you also like to buy companies that are
Ron, we’re in one of these extraordinary Cadillacs are on sale. out of favor. That often means they’ve
periods in investing where a month seems taken a loss where they have zero ROE.
like a decade. I first would like you to The average return on equity for How do you try to take a long-term view?
give our viewers and listeners a roundup companies we own is 18%. Corporate
of your investment philosophy, which is average ROE throughout America is about Ron Muhlenkamp:
2
not the usual pigeon-hole things we see. 13 and, frankly, has been between 12 and I learned a long time ago that
You’ve described it as go-anywhere, macro 15 since World War II. It’s an amazingly “turnarounds” (i.e. a company that has
economics, and bottom fishing. stable number. The best companies run been profitable and isn’t today) take about
around 20 (ROE), or maybe a little above three times as long as they’re supposed to.
Ron Muhlenkamp: that. So at 18 (ROE), we think we’ve got
We like to invest in good companies at least Buicks. When interest rates are We have found, in many cases, you can
when the price is right. We prefer stocks 5% or 6%, and inflation’s on the order of find companies that are quite profitable,
to bonds because we want management 2%, if we can get an 8%-9% return on our but get cheap for any number of reasons.
working for us as opposed to against us. investment, we think that’s worth book Some people think cheap companies
There are two ways you can put money value. In this case, that would be about an mean a low price-to-book (P/B) ratio.
into a company. You can loan it money, 11 or 12 multiple. We think that’s not true, unless they’re
in which case management’s job is to profitable.
minimize your return. Or, you can actually In today’s economy, however, we can get
be an owner of the business, in which case an 18-20 ROE at P/Es (price-to-earnings More often than not, we have found
management’s job is to maximize return. ratios) below 10. So, today, we can companies that were quite profitable, but,
We like management working for us. buy Cadillacs below Chevy prices. The for some reason, they were out of favor.
difficulty is, of course, that two months It might be that the phases of business
We think in terms of investing in ago you could buy Cadillacs at Pontiac cycle were not in synch, or akin to buying
companies, as opposed to buying and prices; they keep getting cheaper. We think small, non-tech firms during the ‘dot-
selling stocks. We’re small enough that we this is due to forced selling. com’ era. Usually, there are bargains just
can’t really buy companies like Warren because people think the times were worse
Buffet might, but that’s the philosophy I tell folks if you want to understand than reality.
we follow. We always want to own good markets, go to auctions. When you go
companies, and our definition of a good to an auction, the auctioneer, if it’s a Where you can make money is the
company starts with return on shareholder $100 item, will start by asking for a $100 difference between perception and reality.
equity (ROE). opening bid. And then, he’ll go from $90
Steve Forbes:
to $80 to $70 to $60. There’s no point in
If you made columns and sorted Can you give a couple of quick examples
making an opening bid until he gets to
companies by return on equity and then from the past where reality diverged from
$20. You say, “Okay, I’ll open a bid.” Now,
by reputation, you’d find they pretty perceptions?

MuhlenkampMemorandum is a quarterly information service of Muhlenkamp & Company, Inc. ©2009


MuhlenkampMemorandum
Ron Muhlenkamp: gets pooled with other mortgages and Forced selling is when a fund manager
Back in early 2000, when everybody subsequently sold (securitized) to another gets redemptions and, in turn, must sell
wanted to talk about dot-com’s, we were institution. The originating bank gets its securities. You’d like to sell what you
investing in housing stocks which, at money back and, on the same dollar base, want; if you can’t, you have to sell what
the time, were four times earnings. We can now write another mortgage. This you can. For example, if you’re a hedge
thought the economy was going into a action doubles the velocity of the money fund manager and you’ve just gotten word
slowdown, probably a recession. As a – that is, the money turns over much from your banker that he’s been carrying
result, we expected earnings would get cut faster in the economy. When coupled with you at a 10-to-1 leverage, but, going
in half during that slowdown, effectively the amount of leverage hedge funds were forward, he’s only going to carry 5-to-1,
paying eight times earnings. The great willing to absorb (often twenty- or thirty- you have to sell half what you own. That’s
surprise was earnings did not fall. to-one), the velocity of money increased forced selling.
still more.
Steve Forbes: Steve Forbes:
How do you know when to get out? Steve, as you know, the change in money, Explain mark-to-market.
times velocity, equals the change in price
Ron Muhlenkamp: times quantity. What the government is Ron Muhlenkamp:
Buying is a science; selling is an art. The now trying to do is keep quantity from My best explanation is to use an example.
rules say that when the stock isn’t acting as collapsing, resulting in a serious recession, Most people are familiar with fixed-rate
well as it should, it’s time to sell it. In this or prices from collapsing too fast. 30-year mortgages. The great thing about a
regard, we’ve done less well than we had fixed-rate mortgage is that you know what
several times in the past. Steve Forbes: your payment is this month, and next
Now, this gets to the strange market month, and next year, and five years from
Steve Forbes: that we’re in. I mean, even in the Great now. It’s a contract and it’s in the deal.
Especially in housing? Depression where you had bank failures,
they were small banks. Most of the large Let’s contrast that with adjustable-rate
Ron Muhlenkamp: mortgages. With an adjustable-rate 3
banks survived. Most of the large insurers
Housing we held a little longer, but we’re mortgage, the fear was that the interest
survived. No big bank failure in Canada.
out of it. We relied more on backlogs rate moves from 6% to 8%. (Now, the
No big bank failure in Britain. This one,
than we should have. Those backlogs hope is, it moves from 6% to 4 percent.)
it’s the big ones that are going down
disappeared. As a consequence, your monthly
like bowling pins. What is happening
here? Did suddenly companies like AIG payments might jump by $200 or $300 a
Recently, we misjudged the velocity of month, which is $2,000 or $3,000 a year,
become totally insolvent, or Bear Stearns
money. If you took your signals from and scary to people.
and Lehman? In many cases they were
the Fed over the last five years, they’ve
cash-flow positive to the end. What’s
essentially been backwards! The Fed Let me posit a third type of mortgage:
happening here?
started squeezing interest rates in 2005-06, an adjustable-principal mortgage. In this
and the “shadow banking” community Ron Muhlenkamp: scenario, the principal amount of your
(including hedge funds, along with banks I deal with a little bank located in Mars, mortgage is up for renewal on an annual
and other Wall Street firms) continued Pennsylvania. And I asked, “How does all basis and the maximum you can borrow
creating, or leveraging, money at a much this affect you?” He said, “It hasn’t affected is 80% of what a similar house in your
faster rate. The Federal Reserve can create us at all. We take deposits from local neighborhood sold for just prior to your
money simply by printing it. The money people. We make loans to local people. It’s anniversary date.
created by the Fed can be further leveraged had no effect.”
by banks by lending 8-10 times what they Under this circumstance, what you paid
have on deposit. The “shadow banking” The small banks weren’t playing with the for the house is irrelevant; what you think
system created still more money. The derivatives. They weren’t financing Wall it is worth is irrelevant; and what the
velocity of money kept growing until July Street. They weren’t financing the credit house was valued at last year is irrelevant.
2007 and, then, fell off a cliff. Velocity expansion where all this has settled. Under this circumstance, let’s say a similar
collapsed. And even though the government forced house in your neighborhood comes up
capital into the nine largest banks in the for sale as part of an estate…and the
Here’s what happened: country, it hasn’t helped much because of house you think is worth $200,000 sells
two dynamics: forced selling and mark-to- at auction for $150,000 just before your
Instead of a thirty-year mortgage which anniversary date.
market accounting (FASB 157).
is held at a bank or S&L, the mortgage
continued on page 6

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MuhlenkampMemorandum

Questions and Responses


At our investment seminar on November generally look at owning 25-40 securities. has averaged roughly 14% since WW II, so
18, 2008, Ron Muhlenkamp presented Right now, we own approximately 30 that becomes our starting point.
Bailouts, Your Dollars & the Whole stocks, spread out among a number of
Credit Mess to an audience of clients, businesses. If the numbers look good, we dig deeper
shareholders, and prospective investors. by checking financial statements and
Afterwards, Ron entertained questions Today, we own more technology stocks annual reports. If satisfied, we call the
from the audience. than ever because we think there are company’s management. Our three
world-class companies selling at cheap favorite questions are:
A video of the presentation and a booklet prices, including IBM, Cisco, and Oracle.
summarizing its content are available on These companies have an average ROE 1. Are there analysts who do a good job
our website at www.muhlenkamp.com. well in excess of 20% and P/Es ranging covering your company?
If you prefer, call us and we will mail you from 9-15, which, in our terms, makes
This saves us time because we can work
these materials. them Cadillacs selling at Chevy prices.
off their efforts.
The Portfolio For the first time ever, I bought Berkshire
2. What metrics do you use to judge your
Hathaway. You all know that Berkshire
What are you doing with the portfolio company’s performance?
Hathaway is Warren Buffet’s company.
today, and what timeframe do you look at He started this year with about $40 Some use ROE, some use Discounted
when making investment decisions? billion in cash. He invested $5 billion Cash Flow, others use Economic Value
4 into Goldman Sachs as preferred stock Added, and so forth. All are valid, but we
The timeframe for making investment
and is getting a 10% rate. Buffett also put want to know what they use.
decisions is 3-5 years. When we purchase
$3 billion into GE (General Electric) as
a stock, we intend to hold it for three or
“preferred’s” and is getting 10 percent. So 3. At what point on that metric do your
more years. Depending on what happens
the reason we bought Berkshire Hathaway executives or employees start earning a
at the federal and international levels, it
is that he had $40 billion in cash, bonus?
may take longer, but we are confident we
understands credit, and could write his
will survive this downturn. We want to know what they’re trying
own terms.
to accomplish with shareholder money.
We continue to cull stocks that disappoint;
What is your cash position? Sometimes they set their hurdles too low,
that is ongoing. Disappointment can
in which case we’re not interested. Our
come in the form of earnings, growth As of midsummer, we were running about job is to figure out whether the company
prospects dimming, or when a company 25%-30% in cash, but it hasn’t been will reach its goals and figure out what
falls short of our expectations. enough to protect us. we’re willing to pay for that.
At the same time, we have started We use cash in two ways: Finally, we talk with the company’s
buying. We believe we are buying
customers. If the customers are happy, the
Cadillac companies, selling well below 1. As a “parking place” between the sale
company is doing something right.
Chevy prices. In other words, we are of one position and the purchase of
buying companies with above average another. What are your thoughts about investing
profitability as measured by return on in bonds?
equity (ROE) which sell at below average 2. As a defensive measure when we see
prices as measured by price-to-earnings risk in the marketplace. If you know what you are doing in the
ratios (P/E). Company size is of little bond market, you can find a lot of bonds
How do you conduct your research?
importance. selling dirt cheap. But, if you don’t spend
We begin with various databases, 60 hours a week conducting investment
How many stocks are in the mutual fund research, you are competing with those
looking for companies with good ROE
and what are some of the holdings? of us who do. I once worked for an
and modest P/E ratios. As a working
definition, ROE is the rate of return of insurance company which, in general,
We think of a normal stock position as
earnings based on the equity capital. It isn’t very good at valuing stocks, but darn
being 2½%-4% of the portfolio, so we

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MuhlenkampMemorandum
good at valuing bonds. So, the chances How much longer do you expect the money. When the economy is operating
of you getting a good deal in a bond recession to last? below capacity, printing money is not
that some insurance company analyst or inflationary. But when the economy picks
private equity analyst hasn’t discovered is We have had eleven recessions in the US up, the extra money has got to be sopped
pretty slim. economy since World War II. This time, up.
it’s the US economy and, likely, the world
With investing, it’s helpful to remember experiencing recession. Recessions serve a Right now, there is probably a greater
the old proverb: “A buyer needs a useful purpose; they correct the excesses of risk of deflation than inflation. In this
thousand eyes, a seller needs but one.” the prior expansion. country we tend to associate deflation
with depression because the last time we
How much has the Fund dropped in total What do you all do in a recession? You had the two they came together. The Fed
investments? just told me, you work a little harder and is trying to offset the deflation caused by
spend a little less. If you do that for six or the collapse of the velocity [of money]
The Fund has gone from close to $3 nine months, those of you that don’t lose by shoveling money into financial
billion in assets to just under $1 billion. your job — and 97% of you won’t lose institutions.
your job — will say, “Gee, I am in a little
If you’re worried about whether the firm is The comments made by Ron Muhlenkamp
better shape,” and start pulling out your
still solvent, yes, the firm is solvent. in this article are his opinion and are not
“wish list” once again. That is the normal
The Government and the Economy pattern of recessions. intended to be investment advice or a forecast
of future events.
Do you have an opinion on TARP (Troubled We think the only thing that could
Assets Relief Program), and should the prolong this recession is if the federal As of 12/31/08, the Fund held: IBM, 5.2%,
government be assisting the auto industry? government doesn’t get it right and messes Cisco, 4.8%, Oracle, 4.3%, Berkshire
things up. Milton Friedman said that in Hathaway, 5.7%, Goldman Sachs, 0.0%,
We don’t like the fact that we had to do the 1930s we turned a normal recession GE, 0.0%, Ford, 0.0%, GM, 0.0% and
it, but we think TARP was necessary. As into a depression by doing three things: Chrysler, 0.0% as a percentage of net assets. 5
stated during my presentation, we think
the government has been attempting to 1. In order to protect our gold supply, we Fund holdings and sector allocations are
prevent credit problems from going to raised interest rates. subject to change at any time and are not
Main Street; it has not bailed out Wall recommendations to buy or sell any security.
Right now, we’re lowering them.
Street.
Current and future portfolio holdings are
2. In order to balance the budget, we subject to risk.
We don’t think a bailout of Ford, General
raised taxes.
Motors, and Chrysler is necessary. Some
people tell me that as a matter of loyalty President-elect Obama has promised to Glossary
we should help Ford, General Motors, do that, but he’s promised to do it for only
and Chrysler. I think the free market Price-to-Earnings (P/E) is the current
5% percent of the people.
works the other way. It is the job of a price of a stock divided by the trailing 12
producer of goods to make the best 3. In order to protect our manufacturers, months earnings per share.
product at the best price it can to serve the we raised tariffs.
consumer. We all get to make our own (Discounted) Cash Flow is a method of
choices about whose products we want We’re not doing much in terms of valuing a project, company, or asset using
to buy. There is no shortage of cars, and protectionism, so we don’t see this as a the “time value” of money. For example,
certainly no shortage of good cars. In fact, problem. all future cash flows are estimated and,
Ford, General Motors, and Chrysler are then, discounted for the cost of capital
What about inflation? and perceived uncertainty.
making good cars these days. They are just
not competitive in terms of the prices they All the money the federal government is Economic Value Added (EVA) is a way
pay to the UAW (United Auto Workers) to currently pouring into the markets will to determine the value created, above the
do it. need to be absorbed once the economy required return, for the shareholders of a
turns around and starts moving up. We company.
Folks, this issue will be decided politically.
had a somewhat similar experience in
The big questions are always political.
2001, when the Federal Reserve lowered
interest rates to 1% and was printing

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MuhlenkampMemorandum
you don’t treat capital, as you would a what would be left over for shareholders if
Steve Forbes common stock and a mutual fund? a company shut down its operations, paid
continued from page 3 off all its creditors, collected from all its
Ron Muhlenkamp: debtors, and liquidated itself.
I don’t know. The only thing I can think
In turn, your bank or S&L would say, of is the Financial Accounting Standards Return on Equity (ROE) is a company’s
“All we can loan you for the next year Board (FASB) doesn’t want to reverse itself net income (Earnings) divided by the
is 80% of $150,000, or $120,000.” All in a year. owner’s equity in the business (Book
of a sudden you’ve got to come up with Value). This percentage indicates company
$40,000; (the difference between the The only rationale for mark-to-market is profitability, or how efficiently a company
original fixed-rate mortgage amount of that market prices are always fair. We think is using its equity capital.
$160,000 and the adjustable-principal on average they’re fair, but, at any given
mortgage amount of $120,000). What time, they may not be.
would this do to your planning and Announcements
budgeting? Is there anyone here who Steve Forbes: continued from page 1
would purposely get an adjustable- But as you well know, if you were told,
“Sell your car in the next ten minutes,” 2008 Distributions
principal mortgage – knowing that next
year the 80% you have in principal might you’d get a very different price than if you
An income dividend of $0.141981 per
be $40,000 less? You would have to create could sell it over ten days or ten weeks. As
share was paid on December 29, 2008
a cushion to stay afloat! Bernanke in testimony has pointed out,
to shareholders of record on December
there’s a difference between a distressed
26, 2008. There was no capital gain
Steve, this is called “mark-to-market.” price and one held to maturity.
distribution in 2008. IRS Form 1099-
Think of what that does to your planning
Ron Muhlenkamp: DIV will be issued during January 2009
and budgeting. If I’m faced with that, I’m
Yes. to all taxable accounts that received a
going to try to gather every dollar I can,
6 dividend in excess of $10.00.
in case I have to come up with $40,000.
That’s the impact of mark-to-market. Steve Forbes:
How long will this play out? And how is it Reminder:
They’re marking the value of my house
and my mortgage to what happened in affecting your investing decisions? As you
For all redemptions over $50,000
the neighborhood. That’s what every know these otherwise solvent companies
from any account, the signature(s)
bank and every insurance company in are being run into the ground with the
on the redemption request must be
the country is faced with since November short-selling because of forced selling and
guaranteed by an “eligible guarantor
2007. mark-to-market? Where does this end?
institution.” These include banks,
Ron Muhlenkamp: broker-dealers, credit unions and
Steve Forbes: savings institutions. Signature
Now, if there’s a mortgage-distress sale The SEC could suspend it overnight. Chris
Cox, the head of the SEC, can suspend guarantees will be accepted from any
that goes, say, for 70 cents on the dollar, eligible guarantor institution that
even though the mortgage payments are it. He can’t rescind FASB 157, [mark-to-
market], but he can suspend it. participates in a signature guarantee
being made, even though the bond is program. A notary public is not an
being serviced, they have to write it down. For the entire interview, visit acceptable guarantor.
Which means they have to raise more www.forbes.com and look for the topic
capital, which means the rating agencies Intelligent Investing. Please refer to the most recent
now will knock them down…And so it Prospectus for additional information.
As of 12/31/08, the Fund held AIG, 0.0%, as
goes in a death spiral.
a percentage of net assets. Any tax or legal information provided is
Ron Muhlenkamp: Fund holdings and sector allocations are merely a summary of our understanding
You got it. subject to change at any time and are not and interpretation of some of the current
recommendations to buy or sell any security. income tax regulations and is not
Steve Forbes: exhaustive. Investors must consult their
Why, in Washington, have they not called Current and future portfolio holdings are
subject to risk. tax advisor or legal counsel for advice
a timeout for an accounting standard that and information concerning their
is clearly going against every established Glossary
particular situation. Neither the Fund
banking and insurance principle of the Book Value (BV) or “Book” is the owner’s
nor any of its representatives may give
past, which is you don’t treat reserves, equity in the business. It is often quoted as
legal or tax advice.
Book Value/Share. Book value is, in theory,

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MuhlenkampMemorandum

Mark Your Calendar If you would like to talk with us at Tony Muhlenkamp will deliver Bailouts,
the show, please stop by our exhibit Your Dollars & the Whole Credit Mess
The World Money Show booth, #503.
For more information, please call our
February 4-7, 2009 AAII – Coastal Carolina Client Service Department at
Gaylord Palms Resort, Orlando, FL (877)935-5520 extension 4.
March 11, 2009; 7:00 p.m.
Ron Muhlenkamp will deliver the Calabash Fire Department The Las Vegas Money Show
following free workshops: 892 Persimmon Road, Calabash, NC
May 11-14, 2009
• Back to Basics: How to Make Money in
Tony Muhlenkamp will deliver Bailouts,
the Current Investment Climate Mandalay Bay Resort, Las Vegas, NV
Your Dollars & the Whole Credit Mess
• Recessions: What Do They Look Like?
For more information, please call our For more information, visit
• Bailouts, Your Dollars & the Whole Credit www.moneyshow.com or call
Mess Client Service Department at
(877)935-5520 extension 4. (800)970-4355.
• Where to from Here?
If you would like to talk with us at
AAII – Columbus Chapter
To register, please call (800)970-4355 the show, please stop by our exhibit
or visit www.moneyshow.com and March 26, 2009; 8:00 p.m. booth, 605. Speaking engagements to be
reference priority code #012877. Caffe Daniela determined.
652 North High Street, Worthington, OH

Average Annual Returns as of 12/31/08


Three Year to One Past 3 Past 5 Past 10 Past 15 Since Inception
Month Date Year Years Years Years Years 11/1/1988
Muhlenkamp Fund 7
Return Before Taxes -21.88% -40.39% -40.39% -17.55% -5.52% 3.14% 7.62% 9.13%
Return After Taxes on Distributions*+ -21.98% -40.47% -40.47% -18.34% -6.09% 2.69% 7.19% 8.68%
Return After Taxes on Distributions
and Sale of Fund Shares*+ -14.22% -26.25% -26.25% -14.04% -4.31% 2.85% 6.87% 8.31%
S&P 500** -21.94% -37.00% -37.00% -8.36% -2.19% -1.38% 6.46% 8.37%
Expense Ratio: 1.15%
Performance data quoted represents past performance and does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than
their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data
current to the most recent month end may be found on our website at www.muhlenkamp.com.
The Fund imposes a 2.00% redemption fee on shares held less than 30 days. Performance shown does not reflect redemption
fees. Had a fee been reflected, performance would be lower.
*After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of
state and local taxes. Actual after-tax returns depend on your situation and may differ from those shown. Furthermore, the after-tax returns
shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or IRAs.
+
Returns subject to change pending valuation of qualified dividend income percentage.
**The S&P 500 is a widely recognized, unmanaged index of common stock prices. The figures for the S&P 500 reflect all dividends reinvested
but do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index.
Information contained in this newsletter does not constitute an offer to sell, or a solicitation of an offer to buy shares of the Muhlenkamp
Fund, nor shall any shares be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be
unlawful under the securities laws of such jurisdiction.
Mutual fund investing involves risk. Principal loss is possible. The Fund may invest in smaller companies, which involve additional
risks such as limited liquidity and greater volatility. The Fund may also invest in foreign securities which involve greater volatility
and political, economic and currency risks and differences in accounting methods.
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The
Prospectus contains this and other important information about the investment company, and it may be obtained by
calling (800) 860-3863, or visiting www.muhlenkamp.com. Read it carefully before investing.
The Muhlenkamp Fund is distributed by Quasar Distributors, LLC. (1-09)

MuhlenkampMemorandum is a quarterly information service of Muhlenkamp & Company, Inc. ©2009


www.muhlenkamp.com • (877) 935-5520
Muhlenkamp & Company, Inc.
5000 Stonewood Drive, Suite 300
Wexford, PA 15090-8395

MuhlenkampMemorandum
Inside this issue:
• Ron’s Quarterly Letter
• Intelligent Investing with Steve Forbes
• Questions and Responses

At our investment seminar on November 18, 2008,


Ron Muhlenkamp presented Bailouts, Your Dollars
& the Whole Credit Mess to an audience of clients,
shareholders, and prospective investors. Afterwards,
Bailouts, Ron entertained questions from the audience.
Your Dollars, A video of the presentation and a booklet
& the Whole summarizing its content are available on our
Credit Mess website at www.muhlenkamp.com. If you prefer,
call us at (877) 935-5520 extension 4 and we will
mail you these materials.