PORTFOLIO TALK HOW TO SPOT TRENDS FOR FUN AND PROFIT
By Patricia Sellers Edward Antoian

(FORTUNE Magazine) – Edward Antoian, 33, is a baby-boomer with a wife and two kids in the suburbs and a mobile phone in his briefcase. He's a pro at discovering companies that should benefit from social and economic trends, and he puts that expertise to work picking stocks for the Trend Fund. It's run by Delaware Group, a Philadelphia outfit that manages $23 billion. Last year all six of Delaware's equity mutual funds outearned Standard & Poor's 500-stock index. The $73 million Trend Fund did the best of the lot, returning 26.8%. This year through mid-August the fund, which carries an 8.5% load, recorded a total return of 47.7%, vs. 26.8% for the S&P 500. That made it No. 1 among 147 capital appreciation funds tracked by Lipper Analytical Services. Antoian talked with Fortune's Patricia Sellers about his winning strategy and the emerging trends he's investing in now:

What's the key to detecting trends? I never say no to visiting a company. I visit over 300 a year, and I'll always go talk to nonpublic companies. That's where I find a lot of the emerging trends. Then, shazam, all of a sudden you find there's this public company that you can invest in. I also read about 40 publications each month, from Women's Wear Daily to Baseball Card Monthly to Stereo World.

How do you decide what to buy? If there's an earnings story, we look for a multiple that's no more than 70% of the annual growth in profits. If the price/earnings ratio is 14, say, profits should be rising at least 20% a year. I sell when the forward P/E exceeds the growth rate. For companies that don't have earnings yet, the key is just to be very, very early. We were buying cellular phone stocks four years ago, when the companies were making pagers and other devices and weren't sure themselves that they were cellular-phone plays. We bought every cellular company that went public, and we made a tremendous amount of money.

Cellular's a high-wire investment now. You're right. In January I had 27% of my fund in cellular stocks, and they've all doubled. Now I'm down to 14%. Expectations got very frothy. I'd say only three stocks are attractive: Cellular Inc., Metro Mobile, and U.S. Cellular.

What's a current trend that investors can take advantage of? There's a limited supply of American companies that consistently produce quality entertainment. Demand for their product is going through the roof because of an increased U.S. television market and lots of new private channels in Europe. I'm particularly enthralled by Imagine Films Entertainment, Ron Howard's company. They have a big hit now with Parenthood, and they have an active television group. The stock was around $2 in November 1987, and now it's at $13. Imagine has no earnings now, but I think it could earn $3 a share in two or three years.

You mentioned Parenthood. Are you investing in aging yuppies and the baby boomlet? Families are having first children at a high rate, and births are projected to be strong through 1991. So I still hold stocks like La Petite Academy, which franchises day care centers, and CPI Corp., which takes pictures of kids at Sears. CPI is growing because parents want a lot more pictures of their first child than they do of their last. The stock is at $28 now. The company should earn $2.10 a share this year, vs. $1.80 last year.

What else do you like? Airline maintenance. I got a quadruple on AAR Corp. stock in four years, and I've got a long way to go. Ira Eichner, the chairman, is well diversified, not only doing maintenance but also selling parts and leasing planes. His premise was to be a low-cost provider of these services to heavily unionized and bureaucratic airlines. Then the airlines got in trouble with aging fleets and requirements for increased maintenance. My favorite stock, though, is Forschner Group, the exclusive U.S. distributor of the official Swiss Army knife. If I ever had a yuppie play, this is it. They all like the outdoors and must have the best equipment. The new president is going to transfer this brand identity to other consumer products. This fall we'll see Swiss Army watches for $100, and one or two new products a year after that. Forschner will probably earn 75 cents this year and $1.25 next year, vs. 34 cents last year. It's a $10 stock.

How do you tell a trend from a fad? I think about that often. Fads -- pet rocks, for example -- create demand, but trends meet real consumer needs.

How would you apply that to investing? Make sure you're early. When everyone tells you about a trend, you're late.