Gary Pilgrim of the PBHG Growth fund recently commented as follows in an interview with Edward Silver who writes on financial and cultural topics from Los Angeles:
"We don't weigh price behavior of a stock in any ranking system we use. We feel we should look through that kind of trend and stay with a company as long as it shows superior growth. Our attitude is that it's very difficult to know how to value high-growth companies, and we are generally more interested in owning the company than quibbling over what it is worth. You shouldn't talk about PE in a vacuum. Someone may think 40 times earnings is a high PE, but maybe it's not if the company is growing at 60% and profit margins are four times that of average companies. I find growth companies are often undervalued. Coca-Cola or the S&P itself -- those types of assets sell at outrageously high multiples for their underlying growth rates.
In technology, it's fair to say that fundamentals have eroded in areas. Semiconductors fell apart at a certain point. Now networking fundamentals are in question. Software companies are perceived to be at the mercy of Microsoft. As long as I have been investing in technology, it always seems to be all one way or all another. These stocks run up and collapse on the basis of knowledge that isn't very deep, yet the emotion spills over across the sector. If it's a situation that's being depressed by psychology only, we try to move our money to the company that has strong fundamentals, but is depressed by sentiment."
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I almost never find myself agreeing completely with anyone involved in managing money, but I can't find anything major Gary Pilgrim said that is contrary to my beliefs. We obviously also share a belief in WIND as a superior investment, since his fund(s) own 9.4% of the WIND.
For investors in WIND who were both impressed yet concerned at the size of the PBHG stake, fearing the adverse effects of a quick sell-off if the stake represented a momentum play, take heart in Gary's articulation of sound investment principles. Personally, I feel relieved to have discovered that the PBHG fund seems to be managed by a person with a clear, solid basis for investing in companies.
Although I don't do mutual funds, if I did I think I would choose PBHG Growth.
Allen |
