Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Fowler who wrote (47227)	3/24/1999 6:29:00 PM
From: H James Morris	Respond to of 164687

Another baby elephant. >>San Francisco, March 24 (Bloomberg) -- Christopher Bonavico, co-manager of the successful Transamerica Premier Small Company Fund is riding investments that returned 80 percent last year when investors rushed to own safe U.S. large-company stocks. Still with that kind of record, Bonavico, 33, has a hard time understanding why investors have pulled about $50 million out of his fund over the past few months, lowering its assets to $260 million. He recognizes the desire to own stocks that represent security. At the same time, he's confident he can provide hefty returns, too. ''Think how misguided that is,'' Bonavico said, referring to his jittery investors. ''I can't speak to people's motivations. We have great businesses in the fund, and we are going to be rewarded. All we can do is offer good returns.'' A report from Morningstar Inc., which rates mutual funds, called the fund's 1998 performance ''nothing short of astounding.'' For the past 12 months, it has ranked second among 462 small- cap funds tracked by Bloomberg Fund Performance, with a return of 46 percent. One reason for investor concern could be that the fund, which was founded on July 1, 1997, has lost about 3 percent of its value so far this year -- a tribute to its niche and its big bet on one stock. That stock, Internet retailer Amazon.com Inc., represents 6 percent of the fund's holdings. Amazon's 33 percent drop since its high on Jan. 11 explains much of the fund's mediocre performance this year, just as its eye-popping 966 percent rise last year accounts for much of the fund's success in 1998. Following are six criteria to help investors decide whether this fund is appropriate for their needs. Contents Bonavico said his strategy is to ''find businesses which have competitive advantages and face significant opportunities, and management that has incentives to create shareholder values.'' He seeks companies that are likely to benefit from changes in an industry. ''Capitalizing on change has always been a focus of the fund,'' he said. ''We have to be right and we have to be early.'' The current top holding in the fund, Midas Inc., the automotive services company once known primarily as a muffler repair shop, was spun off by Whitman Corp. in 1998 and a former Pep Boys executive was installed as its new chief executive. ''It was under-managed,'' he said. Midas has had a 64 percent return in the past 12 months. Bonavico first bought Midas stock for the fund at about $18 a share last year. He was encouraged when Midas sold off company- owned stores to people who wanted to own Midas franchises and shed its disappointing European operations. He has built his stake in Midas to 275,000 shares. Bonavico sees the stock market as ''a market of stocks'' and looks for companies that have strong cash flow or a big competitive advantage. ''Investing is a question of how long and how much, meaning: how long do you hold on to a stock and how much do you want to own,'' he said. ''If you believe in a management, you have to take a significant position in your portfolio. A lot of funds own 200 stocks and 1 percent of each stock. That shows no conviction. We don't sell a stock as long as we have faith in the management.'' Risks ''The overall market risk is the biggest risk,'' he said. ''We have done our research.'' He said small companies do pose more risks to investors than large equities, though. ''Small companies are typically less mature'' and more subject to fall because of movements in interest rates. ''Small companies often don't have the same kinds of cash flows as large companies,'' he said. Performance The fund turned in a robust return of 80 percent in 1998 and has recorded a 46 percent rise in the past 12 months. It has ranked second among 462 small-cap funds in the past year, according to Bloomberg Fund Performance. Leadership Bonavico and Philip Treick manage the fund together. Bonavico graduated from the University of Delaware in 1987. He has worked for Chase Manhattan Bank in internal consulting and was a research analyst at Salomon Brothers Inc. for four years before joining Transamerica. He was a research analyst at Transamerica before he began managing money, first for private clients and now for the small-cap fund. Costs and Taxes The fund's expense ratio is 1.40 percent, which compares to the average of 1.68 for small growth funds, according to Morningstar. The fund paid out capital gains of 40 cents a share last year, according to Transamerica. Personal Fit The fund tries to achieve long-term growth by investing in stocks of U.S. small companies. Fund facts: Transamerica Premier Small Company Fund P.O. Box 9232 Boston, Massachusetts 02205 (800) 892-7587 Here is a list of the fund's 10 largest holdings, according to Bonavico: 1) Midas Inc. 2) Level One Communications Inc. 3) Cymer Inc. 4) Minerals Technologies Inc. 5) Envoy Corp. 6) Exodus Communications inc. 7) Amazon.com Inc. 8) Chirex Inc. 9) ProBusiness Services Inc. 10) Speedway Motorsports Inc. 17:14:39 03/24/1999