Thursday June 1, 7:34 pm Eastern Time
worldlyinvestor.com Fund Talk
To B2B, or Not to B2B
By Cheryl Peress, Mutual Funds Editor
Amerindo, a big player in Internet stocks, is taking bets on the volatile B2B sector with
its new
fund.
The B2B bloodbath has sent investors fleeing so-called business-to-business Internet
stocks
as fast as they can find buyers for their fast-falling stock. Except Alberto Vilar; he's
getting in.
And he's bringing some friends with him. In fact, the president of Amerindo Investment
Advisors has got a whole new mutual fund dedicated to investing in stocks of Internet
companies that derive their revenue from selling goods or services to other companies.
The fund is certainly suffering for its association with B2B so far, having attracted only
$300,000 since its launch on Tuesday. Yet the fact that it opened at all in the current
market
environment is a testament to Vilar's attraction as an investment manager.
Not too long ago, it seemed like B2B companies had a license to print money -- or at
least their
stockholders did. From Internet infrastructure builders to Web-based procurement
exchanges,
the breadth and depth of B2B business seemed to equal that of corporate America itself.
But the market shakeout has changed the perspective. Now most B2Bs -- which are still
unprofitable - have seen their stocks fall by half or more from the beginning of the year.
An
exchange-traded fund that Merrill Lynch created consisting of B2B stocks, the B2B
Internet
Holders Trust (AMEX:BHH - news), for example, is off 65% since its inception in late
February
and down 70% from its high in the beginning of March.
The sector looks pretty scary to most investors, but not Vilar. Amerindo, known for a
technology fund that rode the Internet boom as high as any fund and has come crashing
down
harder than most, has just launched a fund dedicated to B2B stocks. Vilar maintains the
timing
couldn't be better.
``The Internet is about B2B, if it's about anything,'' said Vilar in a recent conference call
with
reporters. ``The market is so oversold that it would strike us as extremely likely that
you'd have
a major powerful rally from here. This is a once-in-a-lifetime opportunity.''
That may sound to some like just more dot-com hype. But keep in mind that Vilar has
been
investing in tech for 25 years, and has a reputation for getting in on big trends early. He
was an
early investor, for example, in companies such as Microsoft (Nasdaq:MSFT - news),
Cisco
(Nasdaq:CSCO - news), and Yahoo! (Nasdaq:YHOO - news).
Explosive or Just Volatile?
Still, he's warning investors not to expect a smooth ride. After all, this is a sister fund to
the
Vilar-managed Amerindo Technology (Nasdaq:ATAHX - news) fund, an extremely
volatile
Internet fund that posted gains of 250% last year only to crash by 42% so far this year.
Morningstar calls it ``the most explosive mutual fund around.''
The going could be just as rough on the road ahead. Vilar warns that the Nasdaq could
possibly retest its lows for the year yet again. Yet ultimately, he maintains, further drops
will
only set the foundation for yet higher stock prices that will reflect a technological
revolution
that's just in its infancy.
``You're looking at the largest structural change in the American economy in 50 to 70
years,''
he said. ``I don't see any letting up of the explosion and the adoption of Internet
technology,'' he
says, going on to call it ``the largest business and investment opportunity in history.''
Vilar predicts most of the change will occur over the next five years, and will result in
some
50% of business-to-business transactions taking place electronically. ``We still think
we're at
the bottom of the first inning,'' he says.
Picking Winners
Vilar has primarily targeted two sectors that are driving the growth of the Internet:
infrastructure-software companies, such as Ariba (Nasdaq:ARBA - news), a big
favorite; and
telecom companies that support B2B commerce -- ``the new network that allows B2B to
take
place.''
The new Internet B2B fund will base itself on Amerindo's concentrated investment style
in
which the company takes large initial positions in a limited number of stocks and holds on
to
them. The new fund will have a 60% overlap with Amerindo's Technology fund, but will
focus
on the B2B area.
``We have a long history of doing what I think makes sense in our space, which is find a
stock
and hold onto it and watch its market explode,'' said Vilar. ``We get paid to make big
guesses.''
But picking winners involves a lot more than guesswork. Vilar cites four crucial
elements: the
power of the technology, whether or not money can be made from that technology, the
potential size of the market and management's ability to execute.
``At the end of the day, we know how to think quantitatively, but 85% of what we do is
grunt
work on estimating markets and potential profit margins,'' he says.
B2B Favorites
Because the fund just commenced operations Tuesday, its positions have not yet been
revealed. However, Vilar says the fund will take positions in 20 to 30 companies, many
of
which have been recently listed.
``We have, I think, an excellent lineup of companies,'' said Vilar.
Core holdings will likely include Ariba, Inktomi (Nasdaq:INKT - news) and Akamai
(Nasdaq:AKAM - news), all of which are in the Technology fund and are three of
Vilar's
favorites despite their collapse this year. Inktomi and Ariba are down 48% and 65%
respectively from their highs in March, while Akamai has fallen 77% from its high in
December.
Other possibilities include security firm Verisign (Nasdaq:VRSN - news); optical
networker
Sycamore Networks (Nasdaq:SCMR - news); Commerce One (Nasdaq:CMRC - news),
which
has operations in buyer/seller matching; and Exodus (Nasdaq:EXDS - news), which
hosts
data centers.
The fund is available at many of the fund supermarkets. Minimum initial investment is
$2,500. |
