Vincent Sellecchia, co-manager of the $250 million Delafield Fund, said he's struggling to find stocks to buy, so he's keeping almost one-fifth of the fund's assets in cash.

"We're not market-timers," Sellecchia said in an interview. "But when it's difficult for us to come up with good investments, it tells us something, and we're willing to keep cash on the side."

The New York-based fund, overseen by Sellecchia, 52, and Dennis Delafield, 68, has outperformed the Standard & Poor's 500-stock index for the past four years, producing an annualized return of 19 percent, while the U.S. market benchmark fell 4.7 percent. The total return over four years was 99 percent for Delafield, compared with a 17 percent decrease for the S&P 500.

Sellecchia and Delafield, who have worked together since 1980, are beating the index this year -- and 95 percent of other so-called value funds -- with a return of 6.2 percent by holding an above-average amount of cash. The S&P 500 is up 2 percent in 2004.

The managers look for shares of companies such as Stanley Works and Foot Locker Inc. that they consider cheap relative to earnings prospects. They also want companies that are generating enough cash to buy back stock, reduce debt, make acquisitions or raise dividends. "We're not afraid to buy things that are under pressure," Sellecchia said. Holdings include companies that fell short of earnings estimates, fired executives or sold off business units.

The Delafield Fund has 18 percent of its assets in cash. Concerns about the war in Iraq, China's economy and rising U.S. interest rates may limit market gains this year, Sellecchia said.

"It's a much more unsettling environment than it was a couple of years ago," he said. "That's not to say that we're not putting money to work, because we are, but on a very selective basis."

The fund's cash position was as high as 26 percent in September after falling as low as 7 percent in late 2002. The average stock mutual fund had 4.3 percent of its assets in cash at the end of April, according to the Investment Company Institute.

Delafield started in the investment management business after graduating from Princeton University in 1957. Sellecchia, a Boston College graduate who earned a master's degree in business from New York University, was an analyst working for money manager Mario Gabelli when he joined the newly formed Delafield Asset Management 24 years ago.

Delafield Asset Management, now part of Paris-based CDC Ixis Asset Management, oversees about $450 million for clients. Together, Sellecchia and Delafield own about 7 percent of the shares of the Delafield Fund. Delafield has no plans to retire, Sellecchia said.

The Delafield Fund bought about 125,000 shares of Stanley Works, the largest U.S. maker of hand tools, during the first six months of 2003, when the stock reached a low of $21.

The New Britain, Conn.-based company lost almost half its value in the 12 months ended April 2003 as sales declined and earnings fell short of analyst estimates, Sellecchia said. The fund owned 160,000 shares of Stanley Works on March 31.

Stanley Works caught Sellecchia's attention because the company was expanding its products by selling more security-related items. "We thought the stock made an awful lot of sense," he said. Shares closed Friday at $43.12.

Foot Locker, the New York-based athletic-shoe retailer, got a sales boost from 20 Pack shoes, an exclusive line from Nike Inc. Future sales will be buoyed by the takeover of 353 Footaction USA stores and Nike products during the back-to-school season, he said. The fund held 250,000 shares of Foot Locker in March. The stock, which closed Friday at $23.89, is up 77 percent in the past 12 months.

The Delafield Fund started buying shares of ProQuest Co. three years ago. Based in Ann Arbor, Mich., the company is the latest iteration of the old Bell & Howell Co. and supplies electronic databases for public and academic libraries. The company, which also provides digital archives for newspaper Web sites, has formatted 15 million articles published from 1851 to 1995 for the New York Times, which plans to offer access to the online archive to the public on a fee basis. Last week the company sold one of its units to reduce debt.

Delafield increased its stake in ProQuest to 335,000 shares from 250,000 during the nine months ended March 31, according to Securities and Exchange Commission filings and data compiled by Bloomberg. In that time, ProQuest's stock gained 15 percent. It closed Friday at $27.11 per share.

The fund's focus on finding value occasionally leads to buying shares in companies that are then acquired by other companies. "Sometimes corporations tend to look at the world the way we do," Sellecchia said. For example, Deluxe Corp. of Shoreview, Minn., the world's largest check printer, last month announced plans to buy a Delafield holding, New England Business Service Inc., for $44 a share. The deal will generate about $6 million for the fund, giving managers new decisions about how to use the cash.

The Delafield Fund charges fees of $13.20 for every $1,000 invested, or 1.32 percent, which is below the $13.60 average of competing funds, according to data compiled by Bloomberg. It takes at least $5,000 to make an initial investment in the fund.