This fund actually BOUGHT LSI recently (from SmartMoney) :
March 19, 1998
"FUND INSIGHT THE RESOUNDING THUD AT WWW INTERNET"
YAHOO (YHOO) up 25% this year. America Online
(AOL) up 40%. Who better to reap these awesome gains
than a fund called WWW Internet, right?
Well, if that's what you thought, think again. When we
checked in with the manager of this Lexington, Ky.-based
upstart, we discovered just the opposite. While Internet
stocks keep booming, poor WWW Internet has been
anything but explosive.
Over the past year, the tiny no-load fund has placed 36th
out of the 58 science and technology funds tracked by
Lipper Analytical Services. Its 12-month trailing return as of
Wednesday was 30.2%, which sounds pretty good until you
realize that the S&P 500 has soared 38% over the same
period. More to the point is that WWW Internet's most
direct competitor, another Internet fund called Munder
NetNet, has roared ahead a stunning 86.4%. That's the kind
of return to expect when you take all that risk. (Sorry.
Because both funds are so small, SMI fund snapshots are
unavailable.)
Since its launch in August of 1996, WWW Internet hasn't
done much better. It has gained just 16.7% on an annualized
basis, which badly trails both the S&P 500's 41% annualized
return and Munder NetNet's 57.2%. Not surprisingly,
investors aren't clamoring to get in. Fund assets have
increased to just $3 million from the fund's original $2
million. Munder NetNet, which was launched the same
month by Birmingham, Mich.-based Munder Capital
Management, has been slightly more successful, reaching
$5.5 million in assets.
What's wrong with WWW Internet? It appears to be
managed by the wrong guy. There's nothing wrong with the
fact that Lawrence York, the fund's 47-year-old manager,
was a stockbroker before he started Capital Advisors
Group in 1988. The real trouble is that he is a value
investor. York's motto: growth at a reasonable price, or
"GARP." Trouble is, that doesn't fly on the wild frontier of
technology, where cooler heads are often stampeded by
euphoria. After all, what price is "reasonable" in a landscape
where multiples can soar to 2000 times projected earnings,
as Netscape's (NSCP) once did? How can you really place
a value on firms like Amazon.com (AMZN) and
CheckFree Holdings (CKFR) that have never made
money?
York admits that evaluating these stocks is "an inexact
science." And he demonstrated how inexact it is when he
sold America Online in January at 89 3/4, Microsoft
(MSFT) last June for 125 and Yahoo in February 1997 for
34 1/4. Sure those trades were profitable. But look what he
left on the table. AOL is up another 40% since then,
Microsoft has jumped 25%, and Yahoo has quadrupled.
"Hindsight being 20/20, it would have been better to hold
them," York says.
"There's a certain amount of reason that has to be factored
into the equation," York explains. "You can't just buy and
hold something simply because you think it's going up when
your valuation models tell you it's ridiculous. We are not
going to invest into thin air."
But that stance is clearly costing WWW Internet
shareholders money. By avoiding Dell (DELL) and
Amazon.com for the same reasons he dumped AOL,
Microsoft and Yahoo, York missed another huge windfall.
Dell has leapt nine-fold since WWW Internet was launched.
Amazon.com has quadrupled since going public last May.
Aren't those exactly the kind of stocks York should be
buying? WWW Internet's prospectus says it will invest in
companies whose businesses benefit from the Internet's
growth, plain and simple. If that's not Dell and Amazon.com,
what is it? "Value investing is a tough thing to do with
Internet names," says Paul Cook, York's rival at Munder
NetNet.
What's more, WWW Internet currently has 10% of its
assets in cash because of York's concern about lofty market
prices. It's doubtful, though, that WWW Internet investors
are paying a 2% expense ratio to sit on the sidelines while
the fast-paced tech game carries on.
York says he's confident his approach will pay off in the
long run. In recent months, WWW Internet has traded its
exposure to AOL, Microsoft, Netscape and Yahoo for
computer makers such as Compaq (CPQ), chip makers
such as Texas Instruments (TXN) and LSI Logic (LSI),
networkers such as Cisco Systems (CSCO) and
Newbridge Networks (NN) and electronic commerce
companies like e-Trade (EGRP).
The results are mixed. WWW Internet is up 13.2% this
year, topping the S&P 500's 11.3% gain but still trailing
Munder NetNet, which is up 19.6%. "Yes, we are a little
disappointed," says York, who has 20% of his retirement
savings invested in the fund. But if he doesn't retire until 65,
he still has plenty of time to catch up.
-- By Robinson Clark |
