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A fund weathers the storm
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October 15, 1999: 5:59 p.m. ET
As Dow dips below 10,000, First Funds portfolio keeps its head above water
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - The Dow is in a correction, investors are worried about inflation, and manager Edward Goldstein's fund was slapped with its worst weekly loss.
But even though the First Funds Growth and Income Portfolio fell about 6 percent in the five days ending Friday, Goldstein said many of his top holdings are still trading near or at their record highs. So he spent Friday doing some buying.
"In the last couple of years, if you buy into a correction you've done well," Goldstein said Friday.
The Dow Jones industrial average dipped below 10,000 Friday and closed down 266.90 at 10,019.71. It has given up 11.5 percent from its August high. Wall Street considers a loss of more than 10 percent a correction.
The First Funds Growth and Income Portfolio has managed to stay ahead of the S&P 500 with winning stocks in technology, telecommunications and energy, Goldstein said. It is up about 10 percent year to date as of Friday, he said.
The fund, with $752 million in assets, has a coveted five out of five stars at Morningstar, putting it in the top 10 percent of its category. It invests in companies that offer "growth at a reasonable rate," that will grow twice as fast as the S&P 500.
Among the top holdings as of Friday are telecom Vodafone AirTouch (VOD); software data storage company EMC Corp. (EMC); advertising firm Interpublic Group (IPG); and banking holding company Wells Fargo (WFC).
David Thompson, who manages the fund with Goldstein, said they started buying EMC at a split-adjusted price of about $6. Now, the stock is trading in the 70s.
"We are finding more things today that we find attractive than at any time in the last two years," Thompson said. "These types of situations (market corrections) are opportunities."
When EMC started its business, IBM was a leader in storage data. Now, EMC has snapped up about 35 percent of the market, Thompson said.
Telecommunications stocks like Vodafone and Sprint, which MCI WorldCom is acquiring, are a way to play the Internet, Thompson said.
"But you're buying companies that have attractive track records and reasonable valuations," Thompson said.
In the energy sector, holdings like Coastal Corp. (CGP) and Texaco (TX) have also weathered the turmoil better than their peers, Goldstein said. The two holdings are down about 10 percent from their highs, compared to other stocks in the sector that are off about 27 percent, he said.
"They've continued to hold their own," Goldstein said. "That's not bad in this kind of market."
While the surge in producer prices has made investors nervous about inflation, Thompson sees interest rates falling in six to eight months. He isn't concerned about inflation because corporate earnings remain strong.
One interesting point is that a few technology names are leading the market, as they did in 1998, Thompson said. Some managers are speculating that the market won't start turning around until technology gets hit.
In the meantime, Goldstein and Thompson will continue to add quality names to their concentrated portfolio of 33 stocks.
"We're long-term investors," Goldstein said.
On a day when most investors had reason to be gloomy, here's some more good news from veteran value fund manager Jean-Marie Eveillard.
French bank Societe Generale is selling its 80 percent stake in Societe General Asset Management, adviser to Eveillard's SoGen Funds, to Arnhold & S. Bleichroeder Inc., a New York investment firm.
SoGen Funds had been for sale for some time before a deal with Boston-based Liberty Financial Cos. fell through.
The terms weren't released, but Eveillard on Friday said the sale will remove the uncertainty caused by having SoGen Funds on the auction block.
Arnhold & S. Bleichroeder doesn't plan on making any changes and won't raise fees. Eveillard has known president John Arnhold about 10 years, as well as his father.
"If I had to go to bed with anybody, it would be with a firm I feel comfortable with," Eveillard said. "I think John and everybody at Arnhold and S. Bleichroeder understand how we operate - that we are value investors. There will be know attempt to change how we operate."
Meanwhile, Eveillard's funds are also rebounding after a long drought. SoGen International Fund, class A shares, are up 11.9 percent year to date as of Sept. 30, while the Overseas Fund is 23 percent and the Gold Fund is up 20.1 percent in the same time, according to Morningstar.
"We finally found a home," Eveillard said simply.
Finally, here are some winners in technology, the sector that has escaped some of the drubbing on Wall Street, according to Lipper Analytical Services.
The top three winners for the week Oct. 7 through Oct. 14 are Van Wagoner Technology Fund, up 1.88 percent for the week and up 119.02 percent year to date; followed by WWW Internet Fund, up 0.12 percent for the week and up 60.72 percent year to date; and Homestate Year 2000 Fund, down 0.31 percent for the week and up 47.93 percent year to date.
At the other end of the spectrum, the biggest loser is Firsthand Technology Value Fund, down 6.03 percent for the week but up 87.10 percent year to date; followed by ICON Technology Fund, down 5.29 percent for the week and up 47.23 percent year to date; and Turner Technology Fund, institutional shares, off 5.16 percent for the week. The year to date figure for the Turner fund wasn't available, Lipper said.
-- Staff Writer Martine Costello covers mutual funds for CNNfn.com. If you have any comments about mutual funds, you can contact her at cnnfn.interact@turner.com
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