NEW YORK (CNNfn) - Some people wonder how Frank Gannon wound up on Wall Street managing a fleet of top-performing mutual funds when he started out in grad school at Boston College studying English literature.|
He likes to joke that he decided against the Ph.D. program because he didn't want to teach his little brother, an incoming freshman, introductory English. But the truth is that Gannon's passion is a good story -- whether it's a novella or a stock.
"When you hear a person give a presentation about a stock, he's telling you a story," Gannon said. "What fascinates me about the equity world is (that) when you're looking at a stock, you're trying to tell a story about a company."
Gannon, a senior vice president of SunAmerica Asset Management, has reason to wax a little poetic.
SunAmerica Growth & Income Fund, Blue Chip Growth Fund and Balanced Assets Fund are within the top 12 percent of their categories over one, three and five years, according to fund-tracker Morningstar. Growth & Income also has a coveted five-star rating at Morningstar.
Growth & Income earned 33.2 percent in 1999, while Blue Chip Growth gained 44.7 percent, and Balanced Assets rose 21.68 percent in the same time. For 2000, the funds are breaking even or slightly lower as of Feb. 28 -- but they're ahead of the S&P 500, which is off about 9 percent this year.
And Gannon co-manages SunAmerica Focused Growth & Income Fund with star portfolio manager Tom Marsico, propelling him into the league of fund managers who speak at investing conferences and wind up on the covers of magazines. The fund, a focused investment with about 60 stocks, earned 58.15 percent in 1999 and is up 1.3 percent this year through Feb. 28.
'Teach me how to think'
Francis Doyle Gannon, 32, looks like the nice Irish boy who lives down the block. A marathon runner and a newlywed, he grew up in New Jersey. He was one of four boys, which taught him to appreciate competition at an early age. He was recently named Young Irishman of the Year in New Jersey.
"My dad was a big believer in a liberal arts education where you say, 'Teach me how to think,'" he said. "When I graduated from college, everybody was going to law school. Now it's an MBA. I love the fact that I don't have an MBA. It's taught me to think differently."
While Gannon declined to name any favorite authors -- perhaps suspicious of too many stock market/literature metaphors -- he said his investing approach starts with emerging trends. But he will look at how a new trend affects many sectors, not just one industry.
For example, he saw potential in the cellular handset revolution and started building positions in telecom stocks such as Motorola (MOT: Research, Estimates) and Nokia (NOK: Research, Estimates). Gannon figured both stocks would benefit as cell phones hit the mainstream.
But he also looked at telecom equipment names such as Cisco Systems (CSCO: Research, Estimates) and Lucent Technologies (LU: Research, Estimates). Likewise, he invested in semiconductors such as Texas Instruments (TXN: Research, Estimates), which makes digital signal processors used in handsets.
He started buying Motorola when it was trading at 40 and Wall Street hated the stock. Now, it's trading around 150.
"Investing to me is all about common sense," Gannon said. "When you hear about one trend, you see how it applies to many sectors."
Likewise, he remains upbeat about Microsoft (MSFT: Research, Estimates) and thinks it's a good bargain trading at 90. Microsoft recently unveiled Windows 2000, and Gannon thinks it will help earnings later this year.
"You want to own a stock at the beginning of a product cycle," Gannon said.
An 'enthusiastic' manager who knows his stocks
Kelli Stebel, an analyst at Morningstar who has followed the Balanced Asset Fund, said Gannon is a good stock picker. The balanced fund has been a top performer because Gannon has been willing to make a heavier bet in equities. While most balanced funds are split evenly among stocks and bonds, Gannon's balanced fund is about 72 percent equities, she said.
"He's really proven himself during his tenure," she said. "From talking to him, he's very enthusiastic, and he knows his stocks like the back of his hand."
But investors need to realize that Gannon's balanced fund is among the most aggressive, she said.
Gannon, who had returned from a West Coast investment conference the night before, arriving in New York at 4 a.m., was gracious and upbeat in a recent morning interview. But like many of those tragic characters he studied in school, he carries around some demons -- stocks that didn't have a happy ending for him.
"I tend to remember the ones that hurt me," Gannon said. "This is a humbling business. The ones that hurt are the ones I remember...You sleep with your portfolio at night. It's wandering around your head at night."
For example, he's had some angst over Cendant (CD: Research, Estimates), which he owned in the Balanced Assets and Blue Chip funds. Cendant recently agreed to pay $2.83 billion to settle a shareholder lawsuit over accounting problems.
Likewise, he struggled over battered tobacco stock Philip Morris (MO: Research, Estimates), a holding in the Growth & Income fund. The cigarette companies have gotten hammered on Wall Street as they've faced courtroom battles and a multi-billion-dollar settlement with states over costs to treat sick smokers.
As far as the outlook for the market, Gannon remains upbeat. He thinks Federal Reserve Chairman Alan Greenspan will be finished raising rates by June. He sees an environment of moderate growth, low inflation and strong earnings.
"The earnings picture is one that people will be able to hang their hats on," Gannon said.
In the meantime, Gannon will continue to nose around Wall Street, looking for more good stock stories.
"A good story has things that draw you in, like great management and great fundamentals," Gannon said. "A good investment has many of the same characteristics."