MutualFundWire.com: July 5, 2000

MutualFundWire.com

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Wednesday, July 5, 2000

July 5, 2000

Nicholas zapped by tech
From Wall Street Journal
Even the pro's chase returns. That was the "double whammy" faced by investors in the Nicholas Fund which lagged the market, and then piled into techs to make up the shortfall only to see the sector swoon. Of course, to buy the techs the manager sold financial stocks -- including long-time winners -- and rang up a capital gains distribution of $15.54 per share. And so, a fund that lost 2.1 percent created a tax bill on 18 percent of its assets. The article uses Nicholas as a anchor for a story examing the impact tech stocks are having on funds which have historically avoided the sector.

Looking for Goobersmoochers
From Boston Globe
Individual investors at the Morningstar Investors Conference sought a quest for knowledge about their funds, not to mingle with the "goobersmoochers", according to the Globe. Oh yes, a goobersmoocher is a "famous manager or successful financial adviser who made up the bulk of the crowd." The author found that many individual investors were using the conference to answer the basic questions all fund owners should know. What does the fund buy? Why does it buy those things? How does the manager's basic philosophy play out in the fund? What is the manager allowed to do? What gives me confidence that this is a good fund to own?

Co. Stock on 401k hotseat
From Washington Post
Nationally-syndicated Jane Bryant Quinn writes that 401(k) plan participants who are invested heavily in the employer's stocj are "gambling with your future, at doubtful odds." So far, she writes, thousands have hit the jackpot with this strategy at companies such as Intel and General Electric. But these are the lucky ones. Employees at Cendant Corp and IBM, whose stock price plunged by two-thirds in the years after the 1987 crash, are likely less enthused. She also explains that the company 9read plan sponsor) is supposed to put participants interests befor its own and that "if it doesn't, and you lose money, the company could be liable." Pointing to cases of suits over ESOPs Quinn predicts that 401(k) plans will see lawyers over this matter. She cites two cases as testing these waters -- SBC Communications, which replaced Airtoch stock with its own after it acquired AirTouch's plan, and First Union Corp. Her advice to employers: "If you match your employees' contributions, do it with cash, not stock. If you use stock, allow employees to switch into something else. If they own too much stock voluntarily, explain the risk."

Grumpy old men
From Barron's
Value investors at the Morningstar conference were an "embittered, crotchety militancy", according to Barron's. The paper syas that they were "playing the part of this year's Republicans: unswerving in their conservative beliefs, indignant that their faster-and-looser adversaries (growth investors) have been having all the fun, and incredulous that the populace at large has fallen under their enemies' alluring spell." Singled out by the article are: Mark Holowesko, head of research for Templeton (who the paper says compared today's Nasdaq "bubble" to that of Japanese stocks a decade ago), William Leszinske, president of Harris Investment Management ("Growth funds should underperform over the next couple or three years, hopefully"), Third Avenue Fund manager Marty Whitman, (had "little charity toward 'all of you who buy growth stocks'), Dan Fuss, president of Loomis Sayles Funds ("he can deal with the chilly receptions at cocktail parties when he lets slip that he's a bond manager, "but it's just atrocious at client meetings"). The article points to one positive investment idea from the crowd. high-yield bonds. Pimco High Yield manager Ben Trosky is quoted as saying that "investors are being well-compensated for that [rising interest rate] risk."

Of Interest