Dumping the stock -- at the wrong time (off topic)
Fund Gets New Manager, Loses Energy
Wall Street Journal (June 17, 1999)
By Patrick McGeehan
Somebody was shaking up the oil patch by unloading energy stocks, so Apache Corp. wasn't totally surprised when 11 million shares of the oil and gas producer changed hands on Feb. 1. The selling, more than 15 times normal volume, drove Apache's stock to its lowest level in several years.
The main seller, while Apache executives don't know for certain, they make the same educated guess a lot of other oil-industry executives, traders and mutual fund managers make: Stephen Silverman, the new manager of Merrill Lynch Growth Fund. He had been installed in January to overhaul the long-lagging portfolio and decided to dump virtually all oil stocks.
His timing couldn't have been worse. His housecleaning took place jus as the oil sector was about to rebound. Indeed, if he had simply held onto the stocks the fund owned on Oct. 31, the fund would be up more than 25% -- rather than down 8%, which is its performance year-to-date.
The apparent rapid selling of those oil stocks looks to many fund watchers like a prime example of little-known fund-industry practice: when a manager is handed the reins of a wayward fund, he often has a period of several weeks or months to restructure the portfolio before his superiors start judging his investment performance.
...
In the past six months, the report shows, the fund realized investment losses of $448 million. Much of that was incurred in selling the energy stocks that were its biggest holdings last year, including 18.4 million shares of Ensco Intentional Inc., 16.3 million shares of Global Marine corp. and nine million shares of Apache.
Other fund managers and oil-company executive remember the sell-off vividdly.
"We had a very motivated seller, and there weren't many natural buyers," recalls Charles Freeman, manager of the Vanguard Windsor fund. "In a situation like that, you can pretty much name your price."
Mr. Freeman bought one million shares of Apache at $18 apiece on Feb. 1 as part of a huge block trade handled by Goldman Sachs Group. ...
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