BARON iOPPORTUNITY FUND
No matter how you slice it, technology and the Internet are here to stay. So, if you like funds that are new to the market place and invest in those high-risk arenas. here's one that-- thus far-- is sporting above average returns.
The lower-case "i" in the Baron iOpportunity Fund,(800-992-2766), stands for three things; the Internet, information technology, and interactive communications. Each represents the kinds of companies that Mitch Rubin, the fund's portfolio manager, likes to keep his portfolio full of. "Technology, the Internet or information technology stocks are some of the most exciting stocks out there. And they are not all going out of business, " says Rubin, who has been managing Baron's iOpportunity Fund since its inception in Feb. 2000.
What this value-discipline manager looks for from the companies he invests in are those that he hopes will double in price over the next three or four years. Even though he's found plenty of companies that have the potential to meet that criteria, investing in this sector is, and probably always will be volatile. As of May 21, however, the fund has managed to beat the averages with a year-to-date total return of over 12 percent. Through May 17, the average tech fund was down over 16 percent, according to Lipper.
Here's more about the fund:
Q: When you first started the fund, did you have any idea of rocky investment climate you were getting into?
Rubin: We had a sense that the market was totally over valued and we had a sense that the euphoria the market was perceiving wasn't research based. We thought that bringing a research and fundamental value approach to this sector could have relevance.
Every company goes through business cycles and every company goes through its own internal corporate cycle. How they deal with those cycles and evolve is what makes a great company. Since nothing (stock prices) ever goes linearly up and to the right, and a good time to buy stocks is when other people are freaked out by them, we were able to be forward thinking and tried to position the fund to take advantage of the market.
Q:Tell me about your investment style.
Rubin: It's very much a fundamental research driven and long-term investment approach. We do both top-down analysis to try to find important trends, and then, bottoms-up analysis to find the best companies with the best management teams.
Q: What are some of the trends you're seeing now?
Rubin: We're very bullish on the opportunities for the cable companies. Comcast is one of our top holdings. Then we also own Insight Communications, AOL, and NTL, which is the largest U. K's cable company.
Another trend that we think is a no-brainer is that wireless voice and data traffic will continue to expand geometrically. We're playing that through companies like American Tower and SBA Communications.
But our top holding is a company called Hotel Reservations Network (HRN) and travel on the Internet has also been a big theme of ours.
We think travel is one of the great commerce categories that really does make sense to do on the Internet as opposed to something like selling furniture. HRN has one of the best business models around and they basically wholesale hotel rooms at discounted prices. We bought it as an IPO during the first quarter of 2000 and it's one of the first stocks that we bought for the fund.
Q: What about a name that you've been disappointed in.
Rubin: We're bullish on EMC, have lost of fair bit of money on it, but are continuing to buy it because we think it's a great long-term idea.
The growth of data is expanding and more data was created in the last two years than was created in all of time. That data needs to be stored. EMC has been a storage-focused company for 20 years and were at the forefront of creating the thought of networking and of managing your storage centrally. Managing information is one of the most critical components of strategic planning and even though the stock has fallen, we'll continue to add to our position.
Q: What about risk?
Rubin:What has happened over the past year or so is that people had forgotten that stocks actually are risky assets and can go down in price. People need to extend their (investment) time horizons. You shouldn't buy a fund in hopes of buying a bigger house in six months. Funds are really a long-term investment.
This fund is going to be volatile because the sector is more volatile than say bonds or drug stocks. And, this isn't a fund for all of your assets or for every investor. It's for people who have a high-risk tolerance. It is a fund for the riskier portion of your assets that you want dedicated to technology- and Internet-oriented businesses with the realization that within some periods of time you can lose money.
Baron iOpportunity Fund:
|TOP HOLDINGS||Hotel Reservations; SBA Comm: American Tower; TMP Worldwide; and America Online.|
|PERFORMANCE||The inception date on this fund is Feb. 29, 2000. It's 2000 performance was down 38.98 percent. And, through May 21, the fund was up 12.1. percent.|
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