Undiscovered Managers: Zerhusen’s diverse life experience influences how she invests in mid-cap stocks.

The great thing about this job, Thyra Zerhusen says in a soft, lively voice, is that you’re learning something all the time. She goes to a bookcase in her office overlooking the Chicago River and pulls out a booklet from a French seed company. She recently met the firm’s executives and is unlikely to ever invest in the company, but learning about it helped her to understand Bunge BG. an agricultural stock that she holds in Aston/ Optimum Mid Cap CHTTX. Zerhusen made a lot of money several years ago with another agricultural stock, Monsanto MON, but things have changed so quickly in the field that she’s always on the lookout for new ideas and new ways of thinking.

That curiosity and attention to detail have been big factors in the stellar long-term performance of Aston/Optimum Mid Cap, which Zerhusen has managed since 1999. Like one of her investing heroes, Warren Buffett, she wants to understand a business thoroughly before she invests in it. In a broader sense, this curiosity reflects Zerhusen’s diverse life experience and how it has contributed to the way she thinks about investing.

From Switzerland to Chicago

Zerhusen was born in the Lower Saxony area of Germany and moved to Switzerland with her family when she was a teenager. She got a diploma in life sciences from the Swiss Federal Institute of Technology in Zurich (the same school Albert Einstein attended), after which she spent time in Tunisia working on irrigation projects for UNESCO. In 1970, she moved to her husband’s hometown of Chicago and worked as a transportation analyst while taking grad-school classes at night. I didn’t know what I wanted to do, so I took classes in computers, engineering, city planning, all kinds of things, she says. Economics proved to be her strength, and she got a master’s degree in the subject in 1976.

A tip from a classmate led Zerhusen to Harris Bank, where she got a job as an equity analyst covering publishing stocks. It was there that she learned the essentials of analyzing companies and industries, and that training remains the foundation of her Buffett-style approach to investing more than 30 years later. She learned how to analyze financial statements and identify companies with strong fundamentals. Even more important, she learned the importance of valuation in finding good long-term investments. Throughout her career, she has looked for stocks where there’s a mismatch between perception and reality—where the market price doesn’t reflect a company’s true potential. If she can buy such stocks when they’re depressed even further by short-term market conditions, so much the better.

A good example of how Zerhusen has applied this lesson is her attitude toward media stocks, upon which she cut her teeth as an analyst in those early days. For many years she didn’t find media stocks particularly attractive, but lately she has been seeing a lot of opportunities in the sector. The stocks have been cheap for several years because of a perception that traditional media companies are dinosaurs; most of them got hammered in the 2008 bear market. Zerhusen recognizes that there’s a realignment going on as more content moves from print to online, but she argues that media firms such as New York Times NYT and Gannett GCI (both top-10 holdings in her fund) still have advantages that will enable them to gain market share. She also likes their cash flow and thinks that the market is underestimating such features as Gannett’s stake in CareerBuilder.com. Both New York Times and Gannett bounced back strongly in 2009 from their bear-market lows, helping Aston/Optimum Mid Cap to top-decile gains for the year.

Another case in which Zerhusen took advantage of a discrepancy between perception and reality was her Monsanto investment. She bought the stock during the previous bear market, in 2002, when it was down in the dumps because of fears that its fledgling genetically modified seed business would create Frankenfoods that consumers wouldn’t buy. But Zerhusen liked the company’s strong cash flows and believed that the market was being much too pessimistic. When she sold the stock in 2005, it had more than doubled in price because of tremendous growth and acceptance of genetically modified seeds. PAGEBREAK

Moving Into Mid-Caps

Zerhusen’s time at Harris Bank gave her an excellent grounding in analyzing stocks and industries. After Harris, she worked as an analyst for the Sears Roebuck pension fund, covering all types of stocks rather than just one or two industries. The broader experience gained in that job served her well, so that when Sears outsourced management of its pension fund in 1993, Zerhusen was hired by the Burridge Group to manage mid-cap growth portfolios for institutional clients. She put together very good results there, but she began looking for new opportunities after a few years.

In 1999, she was hired to turn around the Alleghany/Chicago Trust Talon Fund, a struggling mid-cap mutual fund subadvised by Talon Asset Management. Over the next four years, the fund achieved some of the best returns in the mid-cap blend category, and its asset base grew to $200 million from $20 million. When she moved to Optimum Asset Management in 2003, the fund’s board unanimously approved a change in subadvisor so that she could continue to manage the fund.