Robert Olstein, whose Financial Alert Fund outperformed the Standard & Poor’s 500 index in eight of the past nine years, said he tries to avoid money-losing investments by buying stocks that have already collapsed.

Mr. Olstein added to his stake in Tribune Company, the second-largest American newspaper publisher, in January as the stock slid to a 2 1/2-year low. The drop reflected a decline in advertising sales after the company admitted it had overstated circulation at its Newsday and Hoy newspapers in New York.

Shares of Interpublic Group, the fund’s biggest holding at the end of January and the world’s no. 3 ad company, dropped 78% from an all-time high set in 1999. The company reported losses for the past seven quarters and discovered acquisition-related accounting errors this year.

“We like to buy bad news because it produces the right price,” the 63-year-old money manager said in an interview from his office at Olstein & Associates in Purchase, N.Y. “We look first at how much we can lose before we think of the upside.”

Mr. Olstein’s $2 billion fund has risen an annualized 16% a year since it was introduced in September 1995. The only year that he lagged behind the S&P 500 was 1998, when his 15% gain fell short of the index’s 29% advance.

The fund’s 10-year performance was the second-best among 78 “value” funds tracked by Bloomberg that invest in companies of any size. These funds focus on stocks that trade at a relatively low price compared with the value of their assets. The Allianz OCC Renaissance Fund, up 17% annually, was first.

During the past 12 months, the Financial Alert Fund slipped in the ranks because of a plunge in Merck & Company’s share price. The fund is up 1.4%, placing 198th out of 226 similarly run funds.

Mr. Olstein, who has a master’s degree in business administration from Michigan State University, and his associates go through hundreds of financial statements. They look for companies whose noncash expenses, such as costs for depreciation, mask improving earnings prospects. He buys shares trading at a discount of about 50% to free cash flow, or profit from operations minus capital expenditures.

His track record has attracted the likes of George Soros, the fund’s biggest investor.

Michael Vachon, a spokesman for the billionaire financier, declined to comment on the investment.

“Olstein’s curiosity for digging deep into financial reports, and the skill he has for that, is clearly why he has been a successful money manager,” said Howard Schilit, chairman of the Center for Financial Research and Analysis, an accounting research firm in Rockville, Md.

During the 1970s, Mr. Olstein gained prominence by writing a newsletter, Quality of Earnings Report, with Thornton O’Glove. The twice-monthly newsletter alerted fund managers to companies that were burnishing financial results with misleading accounting.

The newsletter at its peak had 120 subscribers who paid about $15,000 a year each, according to Mr. Olstein, who credits Mr. O’Glove with developing his intuition for spotting telltale details in regulatory filings and earnings reports.

Mr. O’Glove, 73, said from his home in San Francisco that he “learned to be even more cynical” through the collaboration. “I used to spend some time talking to management, and Bob always said that was a waste of time.”

Mr. Olstein said the approach reflects a lesson he learned in 1969 after buying shares of Varo, a maker of night-vision equipment, and losing about $10,000. He missed some early signs in the company’s earnings reports that military budget cutbacks would slow growth, and the stock fell more than 50%.

“I listened to what management was telling me rather than make a financial analysis,” he said.

The Financial Alert Fund’s 15 analysts and traders refuse to speak with executives. Employees of the firm are required to limit equity investments to the fund’s shares in order to align their interests with those of holders.

Mr. Olstein trawls for companies that may be understating their ability to grow. Tribune, the fund’s fourth-largest holding as of January 31, may rise to about $58 during the next two years as depreciation and amortization expenses drop, increasing profit, he said. Shares of the Chicago-based company dropped 28 cents to $38.27 in New York Stock Exchange composite trading yesterday.

Expenses to reduce the value of assets such as television-station licenses trimmed net income by $233 million last year, according to Securities and Exchange Commission filings. The figure may eventually drop to about the $217 million the company spent on capital improvements, according to Mr. Olstein, whose Tribune stake equals 2.2% of the fund’s assets.

Interpublic, based in New York, may also report improving earnings by shedding money-losing businesses after a flurry of 273 acquisitions from 1998 to 2002 hurt profitability, Mr. Olstein said. His stake amounts to 2.8% of assets. The stock may rise to about $20 from $12.90 as of yesterday’s close, he said.