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Turkish delights
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February 29, 2000: 7:23 a.m. ET
Top-performing Lexington manager looks to 'new economy' for his winners
By Staff Writer Jeanne Sahadi
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NEW YORK (CNNfn) - U.S. investors seeking more bullish prospects than American markets to bolster their funds might consider investing in Turkey.
The Eurasian nation's stock market was one of the world's best performers in 1999, and funds that placed bets in Istanbul have been reaping the rewards.
Take Lexington Worldwide Emerging Market Fund. It rose 113.2 percent in 1999, and is leading the pack among emerging market funds year-to-date with a gain of 24.77 percent as of Feb. 25.
Last year, the fund had 17 percent of its assets in Turkey. But portfolio manager Alfredo Viegas says he decided to take some profits at the start of this year and has pared that allocation to about 10 percent. That's still more than double its recommended weighting.
"We still think Turkey's pretty compelling," Viegas said.
In his view, economic growth and corporate profit show tremendous promise, attributable to the country's privatization plans coupled with a decline in interest rates and inflation -- all of which should bring billions of dollars into the market.
"The name of the game in Turkey has been conglomerates and the banks. But we feel that's not where the future returns are going to come from," Viegas said.
His top picks fall squarely in the new economy sector.
Viegas is throwing the fund's money behind telecom equipment makers such as the French-owned Alcatel, which does a substantial portion of its business in Turkey. And he sees powerful growth in players such as Turk Telecom and Turkcell, which will be privatized in the coming months.
The media sector is another area holding his attention.
"The new economy places a lot of value on intellectual property and content," Viegas said.
Consequently, he's invested in newspaper and magazine publishers Hurriyet and Dogan Yayin. The latter publication is starting an Internet portal, good for bringing together the sizeable number of Turkish citizens living abroad, he said.
Viegas' list of favorites also includes companies that are retooling themselves to accommodate the new economy.
Vestel, one of the world's largest producers of television sets, is developing TVs with a built-in Web connection, and has started Vestel.net, which sells Internet access packages. "It's poised to be the America Online for Turkey," Viegas said. "They've realized the person who buys TVs is also the person who's going to buy a computer and go on the Internet."
Currently the company's stock is trading at about six times earnings, which reflects investors' perception of the company as a TV maker, he said. But once it gets into the ISP market, he added, "the market value will explode."
But as red-hot as Turkey is, think long and hard before exposing your portfolio, especially if you're considering investing in a single-country fund, Morningstar analyst William Rocco cautioned.
"The best way to play emerging markets is through a diversified fund," Rocco said.
Keep in mind, too, you can't get in on the 1999 gains anymore. And like all emerging markets, Turkey can make for a highly volatile play, which is why Rocco asks, "Can you handle the kind of volatility you're going to get? For most people the answer is 'No.'"
But if you can, he said, plan your international investments with a long-term horizon.
Take a wireless trip around the world
Speaking of the "new economy," the Guinness Flight Wireless World Fund was launched Monday.
The idea behind it is this: Just as you're now able to use your Palm Pilot to buy stocks, someday you'll be able to use your cell phone to buy a Coke from a vending machine, snag a dress when you need a little retail therapy, or just compare prices on that CD player you're scoping out at the electronics store.
Thanks to technological convergence, the possibilities are endless. Investec Guinness Flight Global Asset Management is betting on those companies it thinks will realize them first, said Jim Atkinson, head of the company's U.S. operations.
"There's a heckuva lot more going on than just telecom," Atkinson said.
The new no-load fund will invest at least 85 percent of its assets in wireless communications companies as well as businesses that benefit strongly from wireless technology. But, Atkinson said, "they will be slanted toward tech and telecom" -- or what he calls "the usual suspects."
The company said likely holdings will include Nokia (NOK: Research, Estimates), LM Ericsson (ERICY: Research, Estimates), CellPoint and the Swedish-and-Finnish-based bank Merita Nordbanken, which has a pilot project with Nokia and Visa to use cell phones as credit cards.
The fund, which raised $2 million its first day out, is managed by Nigel Dutson and requires a minimum investment of $2,500.
Some long-term winners and losers
You know you're not supposed to take the pulse of a fund every 10 minutes -- after all, you're a long-term investor, right? So take a look at these five-year returns as of Feb. 25.
Among U.S. diversified funds, the large-growth Rydex OTC Fund was the top performer with a gain of 58 percent, according to fund-tracker Morningstar. It was followed by RS Emerging Growth, which rose 51.49 percent; Fidelity New Millennium, up 47.60 percent; Fremont U.S. Micro-Cap, higher by 47.53 percent; and Van Kampen Emerging Growth, up 47.32 percent.
Rydex had another notable fund -- the large blend Rydex Ursa, which fell 14.59 percent, making it the worst-performing U.S. diversified fund. Other losers in that category included Liberty-CrabbeHuson Special Fund, which fell 4.27 percent; and Ameritor Industry, which shed 1.35 percent. 
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