More info on White Oak/Oak Associates and ASND...
thestreet.com
Excerpt: "Ascend (ASND:Nasdaq)
"Probably the most attractive thing it has going for it is that its
stock is decimated. We think people make the mistake of
bailing out of decimated stocks. If you think they are going to
rise from the ashes and you think the valuation is cheap
enough, you want to be adding to a stock like that.""
Under The Hood: White Oak Growth for
the Steel-Nerved Investor
By Brenda Buttner
Special to TheStreet.com
3/26/98 9:09 AM ET
Jim Oelschlager isn't one for the in-betweens. When the
president of Akron, Ohio-based Oak Associates likes
something, he likes it a lot. And since he created his
concentrated large-cap growth fund nearly six years ago, he's
liked tech.
So much so that more than 50% of his White Oak Growth
fund is devoted to the sector. "I know of no other area that
has the consistent opportunity for growth -- along with
reasonable pricing ability."
That aggressive style of taking big stakes in his very favorite
large-cap names (the portfolio is usually composed of fewer
than two dozen stocks) has little room for in-betweens. The
concentrated approach always means higher volatility than
your plain-vanilla diversified fund. Add to that a big weighting
in turbulent tech and you're just asking for a wilder ride than
on my hometown wooden rollercoaster in Santa Cruz, Calif.
But even though he trailed the S&P last year after taking a hit
in the fourth quarter, Oelschlager manages to see a lot more
highs than lows. He's one of the few active managers who has
beaten the market over the long term. Since inception in
August 1992, White Oak Growth returned 25.0% a year on
average, far outdistancing both his category average (18.5%)
and even exceeding the S&P (21.4%). His five-, three- and
one-year track records are just as impressive. In each case,
he is ahead of both his peers and the index, according to
Lipper Analytical Services.
MANAGER
Jim Oelschlager
CONTACT NUMBER
1-800-932-7781
FUND
White Oak
Growth Stock
ASSETS
$526.3 million
EXPENSE RATIO
1.0%
LOAD
No
YTD RETURN AS OF
3/25/98
17.6%
5-YR ANNUAL RETURN
26.9%
FUND
Pin Oak
Aggressive Stock
ASSETS
$39.1 million
EXPENSE RATIO
1.0%
LOAD
No
YTD RETURN AS OF
3/25/98
16.0%
5-YR ANNUAL RETURN
15.5%
Data from Lipper Analytical Services
Oelschlager credits his success to a buy-and-hold discipline
that gives his fund a low turnover rate (8%), even during the
last part of last year when many tech-heavy managers were
running for the hills. Oelschlager says that's when his 29
years of investing experience come in handy. (He was
formerly a pension fund manager for Firestone before opening
his own money management firm.)
"Sometimes it's less fun than other times. But when I was
losing a percent a day against the S&P, I just hunkered down
and kept reminding myself that I'm gonna see the flip side of
this."
And indeed he has. Year-to-date, White Oak is off to a strong
start, up 14% already. He's the first to tell you that rate is
unsustainable, but Oelschlager is very bullish about 1998. "I
think it's gonna be a lot better than most people think. There
are a lot of things out there that are extremely positive."
Inflation and interest rates mainly. And Oelschlager, who
takes a top-down approach to investing, predicts they'll head
even lower. "Interest rates are the biggest thing determining
what happens in the stock market. If productivity continues as
it is and inflation keeps going down, that will give us multiple
expansion in the stock market. And multiple expansion in the
growth stocks will be the greatest."
With that optimistic outlook for the economy, he says he'll
keep buying the tech stocks that have been first choice in his
portfolio for years.
On his buy list:
Cisco (CSCO:Nasdaq)
"It can go a lot higher; it's just a function of time," says
Oelschalger of his top holding in White Oak Growth and its
small-cap sister, Pin Oak Aggressive Growth. I'd say up 30%
a year for the next three years, which may be significantly
less than Cisco has done in the past, but I'm very confident it
will be achieved."
Applied Materials (AMAT:Nasdaq)
"The semiconductor market is here to stay and is probably
going to grow. Applied Materials is going to build the plants
for them. Of course, they were beat up dramatically 18
months ago, and again in the fourth quarter, when everybody
thought no one would build another fabrication plant. We
knew that was silly. We just held it and continued to add
where we could."
Ascend (ASND:Nasdaq)
"Probably the most attractive thing it has going for it is that its
stock is decimated. We think people make the mistake of
bailing out of decimated stocks. If you think they are going to
rise from the ashes and you think the valuation is cheap
enough, you want to be adding to a stock like that."
The turmoil in Asian markets that provided a rough ride to
tech stocks last year doesn't worry Oelschlager much. "I
don't think it's gonna be a significant impact on tech
companies -- really more of a speedbump." But, although a
big tech fan, he does not buy the sector indiscriminately.
Case in point: Microsoft (MSFT:Nasdaq). He hasn't been
adding to the small percentage he owns because he thinks
it's overvalued. (That was before the stock jumped this week
on its upside earnings surprise!)
It doesn't hurt that, in addition to the tech heavyweights he
does like, White Oak Growth fund is also chock full of
pharmaceuticals that can act as buffers when the Asian
markets roil. He's a big fan of Pfizer (PFE:NYSE) and Merck
(MRK:NYSE), both of which he's held for some time. "The
pharmaceutical play is a bit like the tech play. Most of the
major companies are in the U.S. and more and more people
should be and will be taking these drugs. As people get
smarter and people get older, there's going to be an increased
demand for prescription drugs."
There certainly has been increased demand for his product.
White Oak's numbers have not gone unnoticed although the
small two-fund company does no advertising. But
Oelschlager, still far from a household name, says he has no
plans to close the $526.3 million fund anytime soon. "The
fund could easily double from here and we wouldn't have any
trouble adding to these names."
Shareholders who do jump in find that, unlike many
tech-intense funds, White Oak has low expenses in addition
to low turnover. But they should keep in mind that one
potential mark against its manager is that White Oak's sister
small-cap fund, $39.1 million Pin Oak Aggressive Stock,
which Oelschlager also shepherds, has been performing quite
poorly.
Pin Oak's poor performance can in part be attributed to the
troubles small-caps have suffered. For the past five years
through March 19, it's returned just 14.2% a year on average,
compared with the 18.2% average delivered by other
small-cap funds, and the 22.1% offered by the S&P during
that period.
Pin Oak is catching up a bit lately. In the last 12 months, it
returned a respectable 33%, just squeaking by the category
average, but still behind the S&P. Oelschlager makes no
apologies and says it may take some time for the market to
realize the value of some of his lesser-known small-cap
techs.
Oelschlager has no plans to change his concentrated,
tech-passionate strategy for either fund. And he's not afraid to
take risks with his shareholders: He, as well as his kids and
grandkids, is invested in the funds.
But he's careful to warn potential investors: "Be prepared for
some tough times. We're gonna have some down periods,
and you oughta assume we're gonna start on a down the
initial day you get in."
Brenda Buttner's column, Under the Hood, appears every
Thursday on TheStreet.com. At the time of publication
Buttner own shares of Microsoft and White Oak Growth,
though positions can change at any time. Under no
circumstances does the information in this column represent
a recommendation to buy or sell stocks or funds.
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