"How much money could we lose?" That's the first question co-managers Jeff Arricale and David Giroux consider when evaluating a stock for the T. Rowe Price Capital Appreciation fund.

And that extra-cautious mindset is exactly why losing money hasn't been much of an issue throughout the fund's history. The portfolio, which is designed for stability with its blend of value stocks, convertible bonds, traditional fixed-income offerings and cash, has racked up positive returns every year for 15 consecutive years. And it has averaged a total return of 12.3 percent a year over ten years.

That record was mostly built under other managers - Arricale and Giroux took over the fund in June. But the pair had worked closely on the portfolio with former manager Stephen Boesel for years, and they insist that the approach will remain the same. Like Chuck Royce, right now they're positioning their portfolio more defensively in preparation for a slowdown in economic growth. That means buying into businesses that are less economically sensitive and offer relatively high dividend yields. It also means building positions in a number of possible takeover candidates and in companies that are restructuring and can therefore achieve double-digit earnings growth without depending on a rapidly expanding economy.

One of those restructuring stories is Tyco International, the conglomerate that will be breaking itself up into separate electronics, health-care and fire and security businesses. While Tyco currently trades at about 15 times its projected 2007 earnings, the managers note that the three companies' peers typically trade for higher P/E multiples. "When we look at where we think the parts are going to trade over the next three years, it's our most compelling idea in the portfolio," Arricale says.