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Vilar on Ariba in this week's Barron's...
One of his favorites, which is also
one of the largest positions in the
fund, is Ariba, which hooks up
buyers and sellers of office
supplies over the Internet.
Besides being the clear leader in
this particular business with the
largest number of customers and
strategic alliances, Ariba is also
one of the best in software and
services. The company has
shown extraordinary revenue
growth, posting $8 million in
sales in 1998, and appears headed for revenues of $95 million in
2000.
However, Ariba is still posting losses, and analysts estimate that it
will continue to do so through 2001. Right now it's trading at $235
per share, or more than 90 times revenue estimates for next year.
That's a bit too rich for some analysts blood. (Bear Stearns points
out that other companies in the "eBusiness space" like Broadvision
or Vignette, trade for a lowly 48 and 38 times, respectively.)
Vilar is still an enthusiastic buyer of the stock at these prices. "This
is a great company with a great business model that allows other
companies to lower their inventory risk," he says. "One of the worst
things that happens in this business is that people don't allow their
winners to run."
That strategy has certainly worked well for him during the past three
years. Anyone who invests in the fund should understand that this is
an extraordinarily volatile investment vehicle. Besides the fact that
Vilar deals primarily in 'Net stocks, he makes concentrated bets and
holds just 20 names in the portfolio. (We should point out that he
emphatically disagrees with the idea that the fund is a risky
investment.) When we noted that a concentrated tech fund makes
some people a bit queasy, he replied, "Those people are clearly not
familiar with my record."
Vilar also flatly rejects the idea that the 'Net stocks will come to a
tragic end. "Anybody that thinks that just doesn't understand what's
going on," he says, adding that he likes to watch his tragedies on
stage, where they belong. |
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