With the stock market back at record-high levels, good values are increasingly hard to find. But that has never stopped Marian Kessler and her co-managers at Becker Value Equity (BVEFX, 800-551-3998) from reeling in good buys, even when they have to cast a wider net. Their long-term record as value investors is superb. Since its inception in late 2003, Becker Value Equity has handily beaten both the S&P 500 and the major value indexes, returning 7.8 percent annualized, and with less price volatility. How? Founded in Portland, Ore., in the 1970s, Becker Capital Management has never veered from its conservative, value-oriented approach, keeping a cool head even in hot markets, as you’ll see below.

With the market recently at new highs, how tough is it to be a value investor right now?

This is a pretty picked-over market, and a fairly expensive one, that’s being driven by relatively low-quality earnings growth. So it’s been tougher, but there are always opportunities out there, especially since our focus is on individual stocks. In the first quarter, for example, we were finding value in several midcap companies, primarily in the consumer discretionary space.

A lot of the earnings growth we’ve seen has been coming from share repurchases. Corporate coffers are pretty full, and companies are investing in themselves. They’re also focusing on financial enhancements, such as restructuring debt and doing things such as “dividend arbitrage”— purchasing put options on the stock before the ex-dividend date and then exercising the put after collecting the dividend. This makes perfect sense. But when a company’s future earnings are driven by the chief financial officer, we don’t have the kind of market in which that earnings trajectory is sustainable.

So how have you been positioning your portfolio?

We’ve been fairly defensively positioned, buying good-quality companies with stable to growing earnings at attractive valuations. This really helped in the fourth quarter of last year and the first quarter of 2013.

From a bottom-up standpoint, we’ve been choosing stocks that have a higher return on invested capital than their cost of capital, a positive spread. That didn’t seem to matter in 2011 and the first three quarters of 2012 because it was a very headline- oriented, macro-driven market.

In the fourth quarter of 2012, however, things changed dramatically. Suddenly, the correlations dropped and investors were really looking at companies that had strong fundamentals and could actually increase their earnings in a variety of economic environments. That return to fundamentals really helped us. And we had a good fourth quarter and a good first quarter, as we were rewarded for doing bottom-up research rather than just being subject to the whims of a very sector-driven market.

Right now, the market seems to be pretty unfazed by headlines. What do you make of that? I think there’s a certain amount of jadedness in response to the bad news from Cyprus, since its economy is smaller than Vermont’s. I also think investors are generally more jaded about the news coming out of the European Central Bank (ECB), particularly since nothing drastic has emerged and everyone’s sort of muddling along. We’re muddling along with the sequester, and we’ve muddled through the fiscal cliff. There’s a certain amount of belief that global governments are going to underwrite stock prices. That is what’s implied by the government stimulus programs.

The Federal Reserve’s latest round of quantitative easing involves buying $40 billion a month in mortgage- backed securities and $45 billion per month in Treasuries. That’s continuing for an unspecified duration. There does seem to be sort of a universal agreement that governments will support asset prices: Japan just announced an aggressive stimulus program, the head of the ECB says they’ll do whatever it takes, and the US is maintaining low interest rates to spur employment and allow companies, particularly financials, to recapitalize.

It won’t be pretty when it ends. But the Fed is committed to keeping bond yields low at least though 2014, so any policy change will probably be a function of stronger economic growth and lower unemployment. And it’s possible the inflation that results from all this stimulus will actually be good for stocks, though potentially disastrous for bonds.

What sectors do you see as the most overvalued at this point?

The least amount of opportunity is probably in telecoms, even though we added a new name in the space this past quarter. Utilities are also very expensive at this point. Executives from AT&T (NYSE: T) were in our offices a couple of weeks ago, and we were actually laughing about them boasting one of the highest multiples in the whole S&P sector. Who would have thought that AT&T would be selling at 17 times earnings? While we still own AT&T, we recently sold Verizon Communications (NYSE: VZ). Consumer staples also look really expensive right now, because they’ve been perceived as the safe place to be. So companies such as Procter & Gamble Co (NYSE: PG) and Kellogg Co (NYSE: K) are fairly to really aggressively priced.

What are the best values in the market today?

In the first quarter, we swapped Verizon, which was a name we owned for about four years, for Vodafone Group (NSDQ: VOD). Vodafone is a wireless company outside the US with a big presence in South Africa, Turkey, India as well as the more troubled eurozone. Vodafone also owns 45 percent of Verizon Wireless, and that’s a great and potentially wonderful asset if they can monetize it.

Vodafone, particularly relative to Verizon, is mispriced. When you strip out its stake in Verizon Wireless, Vodafone is selling for less than 5 times enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization). We bought Vodafone before press speculation over the Verizon Wireless stake, which has been valued well in excess of $100 billion. Vodafone’s shares currently yield 5.3 percent, and the stock is much cheaper than Verizon in what has become a highly valued space.

Some of the stocks that had been market leaders, such as retailers, have really dropped over the past two quarters, and we’ve found a couple of interesting stocks in that space.

We have a new position in Kohl’s Corp (NYSE: KSS). It’s out of favor and selling at about 10.5 times trailing 12-month earnings. Kohl’s has a similar business model to JC Penny Co (NYSE: JCP), so it’s been caught up in the negative sentiment surrounding that firm.

However, Kohl’s has significant cash flows, a solid balance sheet and is buying back about 10 percent of its stock every year. It misfired last year due to inventory issues, and same-store sales have been running negative. But it has replaced management in a number of key areas over the past six months, it’s clearly addressing its troubles from last year, and same-store sales comparisons will be much easier this year. So it’s an inexpensive stock and trades at a 30 percent discount to Target Corp (NYSE: TGT), which we sold in the quarter to buy Kohl’s.

What are some of the lesser-known names you like?

We’ve recently added Howard Hughes Corp (NYSE: HHC), which isn’t really followed on Wall Street. It’s a small-cap real estate company that was spun out of General Growth Properties (NYSE: GGP) when it went bankrupt in 2010. It’s a development company with really great assets in Las Vegas, Hawaii, Houston and New York, areas where the real estate market is rebounding strongly.

Homebuilders are currently selling at about 3 times book value, on average, while Howard Hughes is priced at about 1.3 times book. And that book value is probably greatly understated. Since Howard Hughes was spun off from a bankrupt company, its assets were significantly written down in the process and are likely worth far more than what’s currently on the books.

Howard Hughes’ stock is not very liquid, but it’s a very attractive long-term holding in the residential and commercial space.

The materials sector looks pretty interesting, too, since it faced a tough first quarter. A recent addition here is Allegany Technologies (NYSE: ATI). This is a very out-of-favor name that has disappointed on earnings, and expectations are low. It’s basically a stainless-steel company, and that market has come under pressure over the past year largely because Boeing Company (NYSE: BA) pulled its brand new 787 planes due to engine-safety concerns.

But things look like they’re going to be improving, since Allegany is a supplier of titanium and nickel for next-generation engines, and we’re seeing a great deal of activity in incorporating these new engines into air fleets worldwide. Allegany is trading close to its book value, and it has a tremendous amount of earnings leverage along with a solid balance sheet.