Good defensive cornerback's need to move fast, know how to tackle, plus, have a keen sense of what's going on around them. Take those pro-football skills and turn a cornerback into a mutual fund portfolio manager and you get a fund with a record worth cheering about.
Eugene Profit is accustomed to being watched. In the five years he played for the New England Patriots and the Washington Redskins, it was the spectators who were watching. Now that he's the president of his own investment advisor firm, and portfolio manger of the Profit Value Fund, (888-335-6629), it's his shareholders and the investing public. And they've gotten quite a show.
In the fund's three-year existence, the fund has racked-up pretty impressive returns. According to Lipper, Inc., the Profit Value Fund was up 28.47 percent in 1999, ranking it third in its large cap value peer group; was ranked No. 1, for the two-years ending 1999; and No. 8 in performance over the last three years.
How did he do that? By seeing plays differently and looking at value stocks in a "new value paradigm" kind of way.
That means, during his stock analysis, he doesn't always stick to traditional value guidelines and in the case of, say, the price-to-earnings relationship of a company, may raise the ceiling on it if the industry that stocks is a part of warrants it. "If we're comparing technology companies to technology companies, you can't rely on some of the benchmarks you used before exclusively, " he says.
So, having some latitude in what he considers" value" is one of the reason the Profit Value Fund has been able to get growth-like returns in the value stock arena lately. Another is the screening process used for stock selection.Companies that get drafted for this fund's portfolio have the following characteristics: the stock price has to have sold off for one reason or another; be selling at a price below its historic norm on a price to earnings, price to growth, or in relationship to its peers in an industry group; and, have in place a catalyst that can bring the security back to its normal valuation. Which is how a lot of tech names---including AOL--- got into the fund.
"In the summer of 1998, we were able to pick up a lot of technology names when they sold off aggressively, " says Profit, "And while a lot of value managers have difficult seeing AOL as ever being a value, I think our cost basis on it is about $13 per share."
While AOL paid off for the fund last year, CompUSA was one of its big losers. Even though it had missed some earnings estimates and it's price was off, Profit figured customers would eventually like going into a store that offered hands-on demonstrations on a wide variety of different brand-name computers selling at competitive prices. So he bought the stock for the fund. One of the things he didn't foresee was how competitive computer pricing was going to get. Consequently his position was sold at "a pretty healthy loss".
With around 40 to 45 stocks in the portfolio, Profit's main goal is to provide shareholders with the highest possible return on a risk adjusted basis. And do so in his own style.
"With my background in professional sports, coming out of Yale with an economics degree and not really having the influence of a large financial house (behind me), no one has ever told me what I could or couldn't do," he says."So I'm able to take data from any number of analysts and look at it from our own common sense point of view and ask, does this company make good products; does the public demand this product; and do the numbers make sense."
If so, he'll run with it.
Interested investors of the Profit Value Fund need to keep in mind that value may have various definitions, the spread on whether or not there's a new paradigm of any sort in the market is pretty wide. And, that some investment pros think this year, large-cap companies will be the ones left sitting on the bench. Since we're barely into the first quarter of game, it's too soon to call.
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