The Wall Street Journal -- April 4, 1997
Heard on the Street:
Amerindo Is Hit Hard by Technology Slump,
But Its Chief Sees Some Great Buys Out There
----
By John R. Dorfman
Staff Reporter of The Wall Street Journal
Amerindo Investment Advisors of San Francisco has been one of the top money managers in the country for the past few years. But lately, it's fallen to earth -- hard.
Buffeted by a downdraft in the small technology stocks it loves, the firm has posted investment losses for two quarters in a row, while the overall stock market advanced. The losses are estimated at about 29% since Sept. 30; in the same period, the Dow Jones Industrial Average is up about 10%, despite recent weakness.
Defiantly defending his favorite sector, Alberto W. Vilar, Amerindo's founder and president, says the recent bad results are a temporary setback, and that many technology stocks are a great buy right now.
"If you're bearish on technology, you ought to have your head examined!" he exclaims. "A smart person would be getting in." Yesterday many hi-tech stocks rallied, lending some support to Mr. Vilar's view.
Amerindo had $3.4 billion under management as of Sept. 30. Its clients, for the most part, are big pension funds. According to the 1996 edition of Nelson's Directory of Investment Managers, clients included Federal Express, Johnson & Johnson, Whirlpool, Woolworth, Cornell University and police unions in Chicago and Los Angeles.
Big, long-time clients have the consolation of having booked some king-sized gains before the recent unpleasantness began. But mutual-fund investors who hopped onto Amerindo's fledgling Amerindo Technology Fund in October, when it was launched, have suffered losses of about 33%.
Mr. Vilar says that Amerindo's institutional clients are familiar with his firm's approach, pleased with its long-term results, and willing to ride out the storm. He adds that Amerindo has experienced no net withdrawals from institutional clients. The mutual fund, with assets of only about $32 million as of Feb. 28, has seen net withdrawals but minor ones, he says.
"Clients here are pretty sophisticated and they understand the nature of the beast," Mr. Vilar says. "We are best described as an intermediate-term investor, investing in post-venture capital, the first three to five years of [a company's] public life. We just don't cater to hot money that says you have a down quarter and gee, I'm out of here."
Mr. Vilar believes that computer and networking technology stocks in general, and Internet stocks in particular, are in a major long-term uptrend. "Our sector is just as cheap as it gets, and it's just going to roar out of here," he declares. "In six to 12 months, prices could be 50% higher."
Amerindo was the top-performing stock picker out of 409 money managers evaluated by Thomson Investment Software for the five years through December 1995. It has attracted favorable notice several times in quarterly reviews of money managers' performance published by The Wall Street Journal.
But lately, the sporadic but brutal downturn in tech stocks has marred performance. Many small technology stocks hit a peak in May 1996, and are down about 30% since then.
Amerindo's bruising first-quarter decline follows a milder loss in the fourth quarter of 1996. Thomson Investment Software, based in Boston, estimates the fourth-quarter loss at 8.7%.
For the full year 1996, Amerindo's return, as estimated by Thomson, was a mere 6.9%. That pales in comparison to the 23% gain for the Standard & Poor's 500stock index, a gauge used by many money managers.
According to Thomson, Amerindo ranked only 783rd out of 810 money managers in stock-picking results for 1996. However, it was still among the top 20 managers in performance for the threeyear and five-year periods ended Dec. 31, 1996, with a 22% annualized return for the five-year period.
Among Amerindo's biggest holdings, as of Dec. 31, were Cascade Communications, Fore Systems, Netscape Communications, Parametric Technology, Pairgain Technologies and Remedy Corp. Since June 30, 1996, Cascade has plunged to 28 3/8 from 68, Fore has fallen to 13 9/16 from 36 1/8, and Netscape has dropped to 29 5/8 from 62 1/4.
However, Parametric Technology and Remedy Corp. have risen slightly, and Pairgain Technologies has dipped only a tad. Amerindo's health-care holdings, about 20% of the portfolio, have also held up well.
A bad quarter or two for technology stocks is nothing to fret about, Mr. Vilar says. He adds that the group experienced similar declines in 1992 and 1994, only to bounce back.
Mr. Vilar declined on Monday to estimate Amerindo's first-quarter loss. Since then, he hasn't responded to phone messages seeking the firm's performance numbers. However, he stated that the losses were approximately in line with those sustained by the Hambrecht & Quist Growth Index. That index is down about 22% so far this year.
---
Amerindo's Tumble
Estimated performance of Amerindo Investment Advisors.
COMPOUND
ANNUAL RETURN*
5 years 22.0%
3 years 26.8
1 year 6.9
Year-to-date 1997 -21.7
*Through Dec. 31, 1996 except for year-to-date figure
Source: Thomson Investment Software, Wall Street Journal estimates |
