Hey this elephant quoted me.
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North Babylon, New York, March 4 (Bloomberg) -- Ryan Jacob, 29, started managing the Internet Fund with $200,000 in a one- bedroom apartment on Long Island 14 months ago. This year, it ranks first among 9,005 U.S. mutual funds tracked by Bloomberg Fund Performance.
Even in the face of some recent rocky days among the stocks Jacob favors, the fund has still managed to return 47.2 percent this year. That's ahead of No. 2-ranked Amerindo Technology Fund, with a 40.7 percent return.
Not surprisingly, customers, excited about the potential of the Internet, have poured money into the fund whose assets have ballooned to $156 million.
''A lot of people thought the Internet was a fad, like the hula hoop,'' said Jacob. ''The problem with the way Wall Street is geared, it is very difficult for them to value these companies properly.''
That's been Jacob's goal -- not only to invest in Internet companies but to pick the right Internet companies.
The fund invests in companies that make money in a variety of ways on the Internet. Some sell ads that appear on their Web sites and charge a markup on products they sell. Others can charge subscription fees for entry to their sites or licensing fees on their Internet-related software.
The fund's biggest holding, At Home Corp., which has 331,000 subscribers for its service of providing high-speed Internet access, is up 54 percent so far this year, while the Standard & Poor's 500 Index has risen 1 percent.
Most stocks in the fund are among the most volatile shares traded today. And some Internet stocks have been falling lately, especially since reaching their highs on Jan. 11. Amazon.com Inc., which sells books over the Internet, has dropped to 119 from 184 5/8. Infoseek Corp. has dropped to 68 5/8 from 87 3/4. Earthlink Network Inc. has fallen to 59 1/4 from 89 1/4.
To be sure, many investment industry executives shudder over the notion of an Internet fund.
''A fund specializing in Internet stocks doesn't seem like a good bet over the long term because a lot of these companies won't be survivors,'' said Patrick Adams, who manages $1.5 billion at Berger Associates in Denver.
Other analysts dismiss the fund as frivolous.
''It's fine for your 'mad money,' '' said Kurt Brouwer, partner at Brouwer & Janachowski, a Tiburon, California, investment adviser.
Working Model
Jacobs dismisses all such criticism and says he's confident he has an investment model that works.
''Just because a company isn't profitable, it doesn't mean it's worthless,'' he said. ''Companies are coming public much earlier in their life cycles than what we've been accustomed to seeing.''
The fund has 30 to 35 stocks in it. ''I am looking for companies that have a demonstrated record and a management team that is quick to adapt to the changes in technology,'' Jacob said. ''You have to approach them as venture capital companies.'' That means the traditional investing formula of measuring a company's strength by its earnings doesn't apply. The investing appeal of Internet companies lies in their potential for profits.
Still, Jacob concedes an investment in any company's future potential is a big gamble for the ordinary investor.
''There are much higher risks in investing in Internet companies,'' Jacob said.
Old-Fashioned Analysis
Jacob, who grew up in Philadelphia using a personal computer and graduated from Drexel University, worked for Bankers Trust and Horizon Asset Management. He then became research director for IPO Value Monitor, which rates initial public offerings for an institutional audience. Then, last year he started managing the Internet Fund.
Jacob said he has an old-fashioned approach to analyzing Internet companies.
''Believe it or not, I'm fundamentally driven and a long- term investor,'' he said. ''I had turnover of under 20 percent last year.''
The ideal company for the fund has the potential to gain a dominant position in its industry, the ability to expand without having to spend hundreds of millions of dollars in marketing.
As an example, he cited GeoCities, a Santa Monica, California-based company which offers personal Web sites on the Internet and has more than 3 million users, who call themselves ''homesteaders.''
''GeoCities had grown to its reach before its IPO on the strength of word of mouth,'' he said.
Jacob remains upbeat about the Internet stocks.
''People always ask me when the bubble is going to burst,'' he said. ''But I don't see it because the macro-economic trends are favorable. The industry should keep getting larger.''
Some veteran fund managers aren't as optimistic.
''Remember biotech funds a few years back?'' said Berger's Adams. ''They were hot one year but got cold the next year.'' Ten of the Holdings in the Fund (as of Jan. 1)
At Home Corp. Allou Health & Beauty Care Inc. Amazon.Com Inc. America Online Inc. Broadcom Corp. CMG Information Services CNET Inc. Data Broadcasting Corp. DoubleClick Inc. Egghead.Com Inc.
17:22:01 03/05/1999 |
