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Fund group goes on attack
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November 5, 1999: 7:39 p.m. ET
Oakmark adviser calls shareholder session to protest Dun & Bradstreet
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Harris Associates, adviser to the well-known Oakmark Family of Funds, is calling a dissident shareholder meeting next week to protest the management practices of one of its top holdings, Dun & Bradstreet Corp.
Harris Associates, the largest shareholder in Dun & Bradstreet (DNB) with a 12.6 percent stake, has invited other major investors to attend the Monday session in New York.
"The
company has dramatically underperformed," said Bill Nygren, manager of the Oakmark Select Fund and a partner at Harris Associates. "This sends a message to management."
Also in this column:
A new book by investing icon John Neff.
Some winners and losers in financial services stocks.
Dun & Bradstreet is one of the largest providers of business-to-business data on credit, marketing and purchasing. Out of 20 million shares owned by Harris Associates, some are in private accounts and the rest is in Oakmark Fund, Oakmark Select Fund, Oakmark Equity and Income fund, and Oakmark Global Fund.
Nygren said investor discontent with Dun & Bradstreet has simmered as the stock has lagged other information-database businesses. Then the company said its July revenues in its credit report business had fallen 13 percent.
"That type of monthly decline was unprecedented," Nygren said. "We were not comfortable with management's explanation as to why it happened."
Harris Associates believes the best alternative would be for the company to find a buyer. While the stock has been trading in the 20s, Nygren thinks it could sell for as much as $60 a share. A buyer with a strong management team in place could jump-start the company, he said. Dun & Bradstreet management disagrees.
"The best way to maximize the value is to solicit bids for the company," Nygren said.
(Dun & Bradstreet declined to comment on the meeting or any of Harris Associates' claims).
"We believe the burden is on management to come up with a business plan," Nygren said. "They have not even come close to doing that."
Nygren expects about 100 of the largest shareholders will attend the session. Harris Associates is billing the event as an informal "town hall meeting" where shareholders can air their views about the company.
While he doesn't expect any votes or other action, the meeting will send a symbolic message to Dun & Bradstreet management, he said.
John Neff makes it sound easy.
As manager of the flagship Vanguard Windsor Fund, Neff beat the S&P 500 22 times in 31 years and became an icon in the mutual fund industry.
"You hold your disasters to a minimum," he says modestly.
Neff barely settled into retirement in 1995 when publishers started pestering him about a book deal to explain how he clobbered the market year after year.
He took it easy for a while, and then he started writing. The result, co-authored by S.L. Mintz and called simply "John Neff On Investing," was released Friday.
"It's a good read," Neff said. "I was determined not to do a how-to book in a pedantic way. There are a lot of lessons in there that could be of value to people."
Neff, a veteran of many important turns in history, from the Nifty Fifty era to the 1989 stock market crash, says the book is part biography, part "nuts and bolts," and part a journal of his years at the Windsor fund.
His investing style was simple. He focused on stocks that nobody else cared about with a low price-earnings multiple and a lot of potential. (The p/e is the stock price divided by the earnings per share).
Neff said it's harder for fund managers to beat the market these days because it has been dominated by a handful of technology stocks, like Microsoft, Dell, Intel Corp., and Cisco Systems.
"Those stocks have lived a life of their own, and unless you own more than 10 percent in those stocks it's going to be hard" to beat the market, he said.
Plus, many fund managers have thrown in the towel and are "closet-indexing," making it harder to beat the averages, he said.
Meanwhile, away from Wall Street, Neff believes some small investors and daytraders may be in for a shock when the market changes because they've grown so used to stellar returns.
Neff thinks Wall Street is close to an "inflection point," where the market will change dramatically. It could mean investors will shift their attention to other stocks, or it could mean a correction.
He recalled that big growth stocks soared back in the early 1970s before crashing.
He still likes those dogs of Wall Street, like home construction companies and real estate investment trusts REITS.
"Our shtick has always been the overlooked stuff," he said.
Morningstar analyst Scott Cooley said recently that struggling financial funds may get a boost from a new banking bill on the table in Washington.
So here are some winners and losers in financial funds tracked by Lipper Analytical Services.
At the top of the list is Fidelity Select Insurance Fund, up 3.03 percent for the week Oct. 28 through Nov. 4 but down 1.30 percent year to date; followed by FBR Small Cap Financial Fund, class A shares, up 2.72 percent for the week and up 0.98 percent year to date; and Homestate Select Banking and Finance Fund, up 2.61 percent for the week and up 19.51 percent year to date.
The top three losers were Fidelity Select Banking Fund, down 1.61 percent for the week and up 0.64 percent year to date; followed by Rydex Banking Fund, advisor class shares, down 1.28 percent for the week and off 4.50 percent year to date; and SIFE Trust Fund, class C shares, down 1.07 percent for the week and up 3.69 percent year to date. 
-- Staff Writer Martine Costello covers mutual funds for CNNfn.com. If you have any comment about mutual funds, you can contact her at cnnfn.interact@turner.com
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