O/T Look at the good side...
New Jersey's Pension Fund Hits A Jackpot Worth Envying
Jul. 14 (The Star-Ledger/KRTBN)--Steven Kornrumpf has given away New
Jersey's big little secret.
The state's Division of Investment director, described variously as
cautious, conservative and understated, says New Jersey's pensioners
have hit upon a hot Internet stock and probably don't even know it.
It's CMGI.
Managers of the state's $87.1 billion investment portfolio put down
$18 million to buy 2 million shares of the Andover, Mass., company
three years ago. Now, that $18 million is worth $330 million. The stock
split. It soared.
The price is now about $113 a share. Year-to-date return: 328 percent.
But alas, the state sold some of its holdings, into the highs, of
course, rather than the lows of last September, when it skidded to
about $8.62 a share. This is a volatile stock.
"If we held on to all 2 million shares, it would be worth $460 million,
" he said. That means that if you invested $1,000 in CMGI three years
ago, it would be worth $230,000 today.
As it is, he said, the state sold off some of its holdings in June,
when the stock was selling for 94-15/16. That made for a profit of $45
million.
Still, New Jersey is the third-largest institutional investor in CMGI,
behind only Fidelity Investments and Intel Corp.
"It's almost like a venture capital company," Kornrumpf said in trying
to explain what CMGI, founded in 1986, does, namely providing financing
for the high-flyers of the business world.
In 1996, CMGI sold an early version of an Internet browser to America
Online, but for the most part it was unknown. Except maybe to Brian
Arena.
He's the division's portfolio manager and the architect of the buy. In
a classic understatement, he said he "saw the potential" in CMGI. The
38-year-old Arena has a technical background, and he follows the
small-cap technical stocks for the division.
CMGI wasn't the division's only Internet buy.
At the time, Kornrumpf said in an interview, there were some 60
Internet companies that met their criteria. "We own 30 of them," he
said, including AOL.
New Jersey's Internet holdings consist of about 35 stocks, worth
roughly $1.2 billion, a small percentage of the $87.1 billion pie. But
the bulk of the Internet holdings are in CMGI and in AOL, in which the
state holds 4.7 million shares worth more than $540 million.
It was Kornrumpf who three years ago directed the buying operations
for the division as portfolio manager. "It could have been any one of
35 Internet companies we own," he now says of the decision to go with
CMGI. "I'm happy one of the ones we picked was CMGI."
In the past, the investment division, which controls the pension funds
of some 600,000 state and local retirees, limited itself to the safest
of safe investments -- Treasury notes, and the like. Within the past
decade, it's made riskier investments. So, Kornrumpf says, about 3
percent of the holdings are in Internet stocks. Just one of them is
CMGI.
"The point is, we're broadly diversified," he said.
Kornrumpf, a laid-back sort of guy who doesn't bring attention to
himself and puts his personal investments into balanced mutual funds,
runs an operation that would be called high-flying if it were a mutual
fund company. A year ago, the fund, which includes pension dollars and
a variety of state and local funds, was worth $76.2 billion. This year,
it's worth $87.1 billion. That's a return of about 14 percent.
For his work, Kornrumpf, hired about a year ago, earns $125,000 a
year, plus a "performance" bonus of up to 25 percent of his salary.
That's a far cry from the $10 million some of his counterparts on Wall
Street collect in a year.
The Internet stocks in the state's portfolio represent a risk factor,
said Roland Machold, the former director of the division.
"Those companies can make it big or not at all," said Machold, who
retired last year. "Often, they have only one product or their
technology becomes obsolete. We can brag about those that did well, but
there are others, the third that go belly up."
CMGI likes to do some of the bragging, too.
"The best-performing IPO in the past five years," is what Catherine
Taylor, CMGI's director of investor relations, says of the company's
reputation at Nasdaq.
Kornrumpf insists the basic philosophy of the state's investments has
not changed. It's still basically buy and hold for the long-term gains.
"We own a basket of these, and we hope to have one or two hits," he
said. "Because we own so many securities, we're always involved in the
market. We always buy and sell. But we're long-term holders. We're not
in and out."
By Dan Weissman
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Visit New Jersey Online, the World Wide Web site of The Star-Ledger,
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(c) 1999, The Star-Ledger, Newark, N.J. Distributed by Knight
Ridder/Tribune Business News. CMGI, END!A$2?NW-PENSION
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