Looking for Trouble
A value investor who seeks cheap controversy
Wall Street Jounal online
online.wsj.com
An Interview With Robert Marcin -- The outspoken Robert Marcin took on Wall Street analysts, corporate executives and fellow investment managers while co-managing the MAS Value fund for Miller Anderson and Sherrerd from 1990 through early 2001. Marcin, 42, amassed a solid record with the fund, which roughly matched the returns on the S&P during his tenure. He also has made some excellent calls in Barron's over the past decade. He slammed pricey Coca-Cola, Gillette and other consumer darlings in late 1996, before their troubles became apparent and their stock-market performance began to lag.
Marcin blasted technology stock valuations in 1999 and 2000, backing up his then-iconoclastic views with long-term data on revenue and earnings trends ("Strange Market," Feb. 21, 2000).
When Street analysts did shoddy or intellectually dishonest work, Marcin wasn't shy in confronting them. In early 2000, he argued that a leading semiconductor bull was making ridiculous predictions for Micron Technology. So when the analyst made a presentation at Miller Anderson, Marcin offered to bet the analyst $10,000 that his published revenue prediction for Micron was too high. When the analyst balked, Marcin offered to give him 10-1 odds. Even then, the analyst wouldn't take the wager. Not surprisingly, Marcin was right.
Marcin retired from Miller Anderson, a part of Morgan Stanley Asset Management, in January 2001. He now focuses on managing his own money through Marcin Asset Management, while writing a lively investment column roughly once a month for The Street.com. In early October, Marcin wrote presciently that "it's time to start speculating again."
Like most value investors, Marcin is on the prowl for cheap stocks, favoring companies with low price/earnings ratios and low price/sales ratios. But he's atypical in what he buys.
Marcin now favors a handful of controversial stocks, including EDS and Cendant. He also identifies a few "tech specs," depressed technology stocks with solid balance sheets and significant appreciation potential.
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My strategy is to rifle-shoot at niche technology companies that are small businesses with small market caps. They need to have a competitive advantage in their marketplace, a decent balance sheet, and look like long-term survivors.
If they start to make significant profits, they could trade at a multiple of their current stock prices. I don't like companies that have a lot of cash and no business.
Q: Mention a few of your tech specs.
A: There's OpenWave Systems. It trades around 1.15 and has a market value of $200 million. Artesyn Technologies is about $2.50 and has a market cap of about $100 million. Quantum trades for 3 and has a $500 million market cap.
Q: What's the OpenWave story?
A: OpenWave has more than $1.25 in net cash on its balance sheet. It trades for about 70% of revenues, which is very cheap for a wireless software company. OpenWave makes the browser software and applications for you to receive and manipulate data on your cellphone. The investment story is that there is an upgrade cycle coming in cellphone handsets because of all the new data services, like e-mail, wireless instant messaging, games and pornography.
So if the stock were to trade up to one times sales plus one times cash, it would hit $3 a share. That's a modest valuation for a software company. This is a stock that traded above 200 in the tech bubble. |
