Stockpicker picked Palm : "Making money in all kinds of markets
Choice Long-Short Fund manager plays it both ways"
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 1:00 AM ET Feb 28, 2001
NEW YORK (CBS.MW) - If you think you can't make money in a down market,
think again.
Patrick Adams, who manages the $34 million Choice Long-Short Fund, says the
ability to buy stocks and short them is the key to success in any kind of market. His
fund, launched this month, allows him that flexibility -- as well as the ability to focus
on companies without market-cap restraints.
"It's rare among mutual funds to be able to short stocks," Adams said. At any given
time, he can't short more than the fund's current assets. Adams said his fund's
goal is a 20 percent return for the year, or 2 percent a month. It rose 2.3 percent up
to the Feb. 26 close. That compares to a 7.2 percent drop in the Standard & Poor's
Index ($SPX: news, msgs, alerts) during the same time.
Adams' top choice is Tyco International (TYC: news, msgs, alerts) . "I'm comfortable
with the company's earnings estimates. It's an international and diversified firm and
is very reasonably valued. It's also a stock that will be better sheltered on the
earnings front during an economic downturn compared to other companies." The
stock rose 45 cents to $54.65 on Wednesday.
Adams also likes Dow component Citigroup (C: news, msgs, alerts) . "The
company is in a dominant global position" and tends to shine compared to its
peers when the going gets tough, he said. Its shares fell 62 cents to $49.18.
His third pick: Palm (PALM: news, msgs, alerts) . The stock fell $2.44 to $17.38 on
Wednesday and is down a heady 38.6 percent this year, mirroring the tech sector's
woes. But Adams said he expects it to double within 12 months. And while the PC
and cell-phone markets are reaching saturation, the market for handheld devices is
still in its early stages, he said. "Palm has an over 90 percent market share for
these devices and is in an enviable spot within the industry."
On the short side, Adams said he's focused on a number of sectors. He's negative
on food stocks, for instance, as he expects this defensive sector to be a laggard
once the market's focus returns to growth stocks.
Adams also noted that there are plenty of shorting opportunities in the technology
space. "There are still many tech companies with high price-to-earnings ratios that
won't make their numbers." Finally, he said he'd be selling into biotech rallies.
"People haven't really rolled up their sleeves to figure out who the long-term
winners will be."
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