May 20--How does Bruce Sherman love the Marcus Corp.? 

Let us count the ways. 

He loves -- all right, he likes -- the company's hard assets, specifically, its array of real estate. He likes the management. He likes what he paid for Marcus stock. 

He likes the Milwaukee-based hotel and theater firm so much, in fact, that his investment company has accumulated, as of its most recent filing with securities regulators, a whopping 35 percent or so of Marcus' publicly traded common stock. 

This speaks well of Marcus. Sherman's track record as a value-oriented money man -- he is chairman and chief executive officer of Private Capital Management, which manages individual accounts for the wealthy -- is outstanding. 

He picks stocks as if he were willing to buy the whole company. 

And he has no problem with holding 7 million shares of a stock -- in this case, Marcus -- that on average trades fewer than 25,000 shares a day. 

Nor does he have a problem with a corporate structure that gives the Marcus family voting control via a special class of stock -- a structure that limits an outside investor's ability to sway management. 

But owning such a large stake in a lightly traded company also raises a logical issue: How do you cash out without driving the price into the ground? 

"A good question," said a broker who handles large transactions. "That's a huge position." 

To the broker and three other investment professionals briefed on the situation, here's one possible answer: Sherman is betting that at some point Marcus will be sold. 

Or as Prima Capital director Cary R. Chapman put it in investment-speak: 

"I would guess -- and this is clearly a guess -- that they think there's some type of liquidity event that's going to occur." 

No such thing is happening, said Marcus Corp. Chairman and Chief Executive Officer Stephen H. Marcus. 

"There's nothing on the horizon like that," Marcus said. 

But Sherman's investment strategy doesn't depend on quick trades. He has held some stocks for eight to 12 years, and the results have been impressive. 

Private Capital Management has posted a 27 percent annualized total return over the past 10 years, 30 percent over the past five years and 38 percent over the past three, according to Prima Capital, a registered investment adviser in Denver that researches the performance of private money managers who cater to the wealthy. 

"Historically, they are probably one of the best managers in our database," Chapman said. 

Sherman and real estate developer Miles Collier founded Private Capital Management in 1985 to look after the Collier family money. Collier's grandfather had made a fortune in streetcar advertising and used part of it to buy more than a million acres of land in southwest Florida, including almost all of what is now Collier County. 

The investment company is located in Naples, the county seat. Last year, Collier, Sherman and Private Capital Management President Gregg Powers sold the firm to Legg Mason Inc. for $682 million in cash, plus contingent payments that could take the price to $1.382 billion. 

Private Capital Management currently oversees more than $10 billion in assets. With a current value of a little over $100 million, the Marcus stake is a small slice of the total pie. 

But it's not as if some computer program told Sherman to buy Marcus and it's now lost amid a portfolio of hundreds of stocks. 

Private Capital Management owns about 60 securities, Chapman said. And when Sherman talks about Marcus, it's clear he keeps close watch on the company. He mentions such details as the new parking garage at the Milwaukee Hilton, a real estate deal in downtown Chicago and last year's sale of stock from the estate of founder Ben Marcus and his wife, Ceil, both of whom died in 2000. 

Sherman's investment style is patient and big on fundamentals. He likes hard assets, strong cash flow and companies he believes the market undervalues. 

Marcus fills the bill. The company long has believed in owning much of the real estate on which its businesses operate. Its assets are worth considerably more than the total suggested by the stock price, Sherman said. 

While the firm shows elements of paternalism, Sherman said, he's very satisfied with management. 

"I think they're executing what they're supposed to be doing, albeit in a family-type environment for a public company," Sherman said. "And you can interpret that any way you want, but it is a closely knit group of people." 

Private Capital Management has been buying Marcus stock since at least 1997, when the firm held 1 million shares, according to a filing with the Securities and Exchange Commission. Subsequent filings show the firm gradually building its stake to about 7 million shares. 

"That is a great sign of commitment to Steve Marcus," said a local money manager who asked not to be identified. Given Sherman's investment strategy, he is "about as friendly a partner as you could ever want." 

The money manager said Sherman potentially could cash out if Marcus' earnings suddenly got so strong that the stock attracted the attention of momentum buyers who bid up the price. 

More likely, the manager said, is that Sherman is banking on Marcus at some point being sold. Similarly, one broker said Sherman could sell large blocks of stock at a discount, but more probably is betting the company eventually will be acquired. 

Christopher J. Grant, president of Nackers & Grant in Brookfield, also sees that as a possibility. 

Also possible, he said, is that Sherman thinks so highly of the company that "he's going to be the Warren Buffett of Marcus Corp. and say, 'My selling period is never.' " 

If so, Sherman can at least enjoy the 22-cents-a-share annual dividend -- about 1.5 percent of the current share price of $14.99. For Private Capital Management, the yield is somewhat greater. 

"My entry cost in this thing is in the single digits," Sherman said. "I'm a $10 shareholder." 

Sherman said a good value investor looks for companies whose cash flow makes it inevitable that, if the market doesn't recognize the stock's true worth, one of two things happens: The company buys back shares, or it seeks "some type of strategic alternative, either partnering or outright sale." 

Marcus has had a stock repurchase program in place for years, but Sherman said the firm had not significantly shrunk its number of outstanding shares. 

After dropping last September, Marcus' stock price marched upward to close at $17.70 on May 1, its highest closing price since mid-1998. Since then, it has fluctuated more than usual, falling nearly $4, regaining most of the loss, then dipping again. 

Sherman said the price probably came under pressure because investors misunderstood a series of insider sales nominally made by Stephen Marcus. In fact, Sherman said, Stephen Marcus was simply settling his parents' estate. 

Marcus confirmed that. He said the stock was sold from his parents' trusts, with his name appearing on the filings because he is a trustee. 

Private Capital Management holds large stakes in other companies, and Sherman noted that one, Dallas-based Software Spectrum Inc., recently announced a sale agreement. The deal, if it closes, will bring stockholders more than twice the share price just before the announcement. Private Capital Management owns 26 percent of the firm's stock. 

Stephen Marcus chuckled when asked his thoughts on how Sherman might eventually cash out his firm's Marcus Corp. holdings, then said the investor likely has calculated that he could sell gradually over time if need be. 

"He's very patient, and he takes his time about doing things," Marcus said. "I have to confess it's an interesting strategy, but it's not unlike the strategy he's done with a lot of other companies." 

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