Neal St. Anthony/On Business: New owners enjoy being Frank
Neal St. Anthony
Friday, June 29, 2001
Twenty-four-year-old Al Frank Asset Management, acquired by Twin Cities investors last year who moved marketing and operations to Minneapolis, has grown its
value-oriented mutual fund from $9 million to $30 million since 2000.
John Buckingham, 35, a New Brighton native who succeeded Al Frank, 71, as chief stock picker in 1990 and is now the biggest shareholder, has a coveted five-star
ranking from fund-analyst Morningstar.
The retail fund has posted annualized returns of nearly 20 percent over the past three years.
Over the past 15 years, the Hulbert Financial Digest, a bible in the investment-newsletter industry, says "The Prudent Speculator," the Al Frank newsletter, has
posted a 17 percent annualized appreciation in its composite portfolio from the time it recommends a stock to its recommended sale.
Frank is an irreverant, common-sense type with a simple methodology that Buckingham has continued. Buckingham and three other analysts work with a universe of
about 1,000 stocks that pass their first screen. They look for consistent earnings growth, low debt, and a low price in comparison to sales and earnings. In other words,
growers that are undiscovered or out of favor.
They buy the cheapest stocks relative to price goals they set and sell when the companies get close to the target.
They turn the portfolio over about 15 percent a year, compared with the 50 percent-plus for most mutual fund managers, which makes it tax-efficient.
"We leave going out and meeting a management to the Wall Street guys who seem to always buy and sell at the wrong time," Buckingham said in a bit of
overstatement. "Basically, we buy companies that exhibit these financial fundamentals. Our winners have won more than the losers have lost."
The fund, with a 4.5 percent sales charge, is sold through major and regional brokerages.
Buckingham went to college in California with Jaimie Dlugosch, president of the group that bought majority control from Al Frank. The owners include investment
manager Ken Dawkins, attorney Bert McKasy and others.
A Minnesota stock in the portfolio is Digi, a company that has been unloved for years but is making progress under new management.
"The stock's gone from $5 to $8.75 this year," Buckingham said. "Their mousetrap isn't the best, but they're in a growth industry with good technology. They were
trading under their cash value. We're not recommending it anymore."
The Miller Johnson Steichen Kinnard research department also made a lot of money for Digi buyers and brokers this spring.
Buckingham also likes Analysts International, the rent-a-tech business that's been around for years. The momentum players loved it while everybody was preparing
for Y2K.
"Tech is off, but Analysts is still profitable," Buckingham said. "They have good relationships with lots of companies. The stock has gone from $12 to $4.40 over the last
16 months. We think it should be $8 or $9, maybe more if the environment really picks up. We think it has the potential to earn 60 cents or more [per share] by 2003 or
2004. We're going to hold the stock."
About 30 percent of Buckingham's fund is in tech stocks and 20 percent in industrial cyclical stocks.
Amex adds outsider funds
American Express Financial Advisors is having a rare tough year thanks to the market slowdown, losses in high-yield bonds and some internal matters. To try to
counter the tide, AEFA is putting out some more funds in international and value sectors.
Financial Advisors once sold only its own funds through house financial planners. Now, it's increasingly turning to outside managers.
The Amex sales force now sells only about 50 percent Amex funds, since management took away the financial incentive to sell house funds.
The firm's new offerings include AXP Partners International Aggressive Growth, which will be subadvised by American Century Investment Management and
Liberty Wanger Asset Management. Bernstein Investment Research and Management, a unit of Alliance Capital, will be the subadviser on the new AXP
Partners International Select Value Fund.
Amex has tried with little success in recent years to push its overall-fund performance into the top quartile, recruiting fund managers and analysts to Minneapolis. In
the future, more of the stock picking will be done from elsewhere.
The new AXP Partners Value will be managed by Lord Abbott. AXP Partners Fundamental Value will be handled by Selected American Shares, according to the
firm and Barron's. AXP Partners Small Cap Value will be split btween Royce & Associates and Third Avenue Funds of New York.
The firm said it wants to expose investors to more value funds and international funds that have a low correlation to U.S. equity markets, further diversifying its
portfolio offerings.
American Express Funds, with more than $83 billion under management, represents a big chunk of Minneapolis-based Financial Advisors, which manages more than
$283 billion in retirement, fund and insurance-company assets.
BlueFire on Wall St.
BlueFire Research, the investment-advisory arm of the Minneapolis-based financial communications firm, is opening an office on Wall Street next month.
The office will be staffed by Jay Green, most recently with a Greenwich, Conn., merchant banking and venture capital firm. Green was formerly head of Eastern
operations at the Financial Relations Board, the big financial PR firm. He's a 20-plus year veteran of the investor-relations and financial journalism scene.
Basically, BlueFire selects undercovered and unloved companies and gets its research on those firms into some retail and buy-side investment houses and on First Call.
The firm is paid a fee by the client company. Lee Schafer, managing director of research, and Green say that's a more up-front arrangement than the typical company
relationship with Wall Street analysts. Analysts often cover only firms that their offices can make money on, either through trading or investment banking services.
"We're not driven by fees or deals," Green said. "We don't have to support a bunch of expensive investment bankers."
BlueFire's portfolio of about 15 mostly Minnesota stocks is up 36 percent since the firm began research in March 2000. Some of the names are Shufflemaster,
Daktronics and Nash Finch.
-- Neal St. Anthony can be reached at 612-673-7144 or Nstanthony@startribune.com.
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