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Of Yahoo! and Puccini
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April 22, 1999: 2:07 p.m. ET
Amerindo fund manager Alberto Vilar loves talking about music and the Net
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NEW YORK (CNNfn) - Fund manager Alberto Vilar spends his days tracking Yahoo!, but his heart belongs to Puccini.
Vilar may not have even launched the Amerindo Technology Fund -- or gone into finance -- if his traditional Cuban father had not forbidden him from studying music.
"I wanted to lock myself in my room at age seven and listen to classical music," Vilar said recently. "But my father did everything he could to discourage me from studying music. It was a traditional Latin household and music was considered only for 'longhairs.' "
Soaring returns with Yahoo!
Vilar, 58, a prominent New York philanthropist who has donated millions to the Metropolitan Opera and other organizations, is president of Amerindo Investment Advisors, a $3.36 billion investment firm in New York.
But Vilar is also getting attention these days because of the Amerindo fund, which earned 86.55 percent year to date as of Thursday with a stake in Yahoo! (YHOO) that climbed as high as 42 percent last fall. The fund is up 152.73 percent over 12 months and is ranked second in its category in that time by fund researcher Morningstar.
"We have been a marquis name in technology for 20 years," Vilar said. "We are where the action is. I hundred-trillion-percent guarantee that."
Sometimes described as arrogant, Vilar's face softens when he talks about music. He is a stylish man who lives out of suitcases, frequently traveling around the world to throw on a tuxedo for musical performances in between business appointments.
In an interview in a conference room adorned with a reproduction of the chandelier that hangs in the Metropolitan Opera, Vilar was travel-weary but gracious after returning from a weekend of music at the Salzburg Easter Festival in Austria. In a few hours, he planned to fly to Puerto Rico for the Operalia Competition, Placido Domingo's international singing contest. Vilar is a sponsor.
"There is something extraordinary and unique about a trained opera voice," he said. "A beautiful sound comes into your mind and it does something to you."
'Let your winners run'
Vilar has the same level of intensity about his stock-picking decisions as he does about music.
The fund nearly lost its status as a mutual fund in late 1998 because it had such a large stake in Yahoo!, said Scott Cooley, an analyst at Morningstar. Under the law, a fund cannot have greater than a 25 percent holding in one company by the end of a quarter.
The fund got around the rule by changing its fiscal year to end on Oct. 31. The law allows a fund to make that change once every 10 years.
The fund later sold some shares of Yahoo! in January, and Vilar says the stock accounts for about 27 percent of the portfolio now.
The change could create a big tax hit for shareholders by the end of this fiscal year, Cooley said. The amount of the tax tab will depend on how the market does this year, whether the fund has any losses to offset its gains, and whether a lot of new money flows in, he said. That could mean anybody who buys shares this year would get a big tax bill without profiting from the big returns.
Vilar said funds inevitably make changes when they have big gains and losses.
"That's a one-time event that's behind us," Vilar said. "The worst thing in the world isn't sending a check to Uncle Sam. That means you've made money."
From Beethoven to Wall Street
A 1962 graduate of Washington & Jefferson College, Vilar had no formal music training but spent his life studying major pieces of music from Mozart to Wagner. As a child, he would pretend to be a conductor, standing on his father's ottoman as he led an imaginary orchestra.
Divorced with no children, he said his music is his family.
"I do some of my best thinking at an opera house or a concert hall during pieces of music I don't like," he said. "It sets you free. You're having a three-minute break and you don't have to wait until the curtain comes down."
He started Amerindo Investment Advisors in 1979, and said the company "pioneered the management of emerging growth portfolios." The company focused on small portfolios of 15 to 20 stocks in young technology companies.
He started the fund in 1996, at a time when the Hambrecht & Quist Growth Index had started to plunge. The fund lost 18.11 percent in 1997 but gained 84.67 percent in 1998. Emerging technology stocks -- especially Internet issues -- helped fuel the turnaround.
Vilar likes to say he lets his winners run. His firm bought America Online (AOL) at 37 cents a share that are worth about $150 a share today.
His other favorite stocks include Amazon.com (AMZN), eBay (EBAY), Inktomi (INKT), and VeriSign (VRSN).
Vilar said smaller portfolios make sense because about one-third of the holdings are likely to increase 5 to 10 times in value over the years.
The fund originally required a minimum investment of $150,000, but in March 1998 it introduced a share class for small investors with a minimum of $2,500. It also started offering the fund through fund "supermarkets" like Charles Schwab.
"That's the way we built our record, by letting our winners run," Vilar said. "We've never had a big stock fall apart."
But with such concentration comes extreme risk.
"Any time you let a stock run up to 40 percent of your portfolio, you have to have a lot of convictions," Cooley said. "There aren't a lot of funds like this."
The fund's net asset value (NAV) lost 12.02 percent on Monday when the Nasdaq Composite plunged 5.6 percent, according to Morningstar.
Vilar shrugs off volatility, and points out that the fund erased most of those losses by Thursday.
In a Dec. 31, 1998 letter to shareholders, Vilar predicted that Yahoo! would keep soaring even after its 700 percent rise during the year.
While he thinks a 20- to 25-percent correction could take place in the emerging growth/Internet sector, Vilar said Internet stocks will "roar back."
"At this stage a correction would be healthy," Vilar said. "One should take advantage of (a correction) by adding to the sector."
And his message to shareholders about the Amerindo fund?
"This is going to blow you away," he said with utter confidence. "And you should want to be there. We can help somebody energize, dynamize and change their portfolio." 
-- by staff writer Martine Costello
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