THE GRAND PRIX
Race car drivers are accustomed to high speed chases, rapid lane
changes and handling their automobiles under all sorts of road conditions
from the hazardous to the smooth. This performance driven approach is what
counts the most on the speedways. It's also the driving force behind one
fund, in particular.
The Grand Prix Fund isn't for chickens. Or, widows, orphans, conservative
investors or market newcomers. Nope, this fund is for those who have market
experience, want action and don't mind a portfolio that can turnover a few
hundred times in one year to get it. Last year, for example, its turnover
rate was whopping 764 percent. Then again, the fund ended 1999 up 147.76
percent.
Bob Zuccaro is president of The Grand Prix Fund, (800-307-4880). He's a
numbers kind of guy who doesn't buy stocks for the portfolio because he likes
the management or thinks the company's long-term potential looks promising.
Instead, he's looking for companies with strong earnings momentum and price
strength. And, if a company he has invested in doesn't produce it's taken out
of the portfolio toot sweet. In fact, according to his May 2000 Market
Outlook report, only 6 stocks from the March 31st portfolio were still in the
fund's portfolio one month later.
Q: How many stocks are in The Grand Prix Fund's portfolio?
Zuccaro: Twenty-five. It's a non-diversified growth fund.
Q: Don't you see holding that few number of stocks as problematic?
Zuccaro: I see a problem in having 135 stocks in a portfolio, which is what
the typical mutual fund carries, because the more stocks you carry in the
portfolio, the more you're going to look like the market. And if you look
like the market, you're destined to under-perform it. So, by reducing the
number of stocks held, we increase our probability of outperforming the
market.
We're also a little different than the vast majority of mutual funds because
we buy stocks not companies.
Q: What's the difference?
Zuccaro: Well, if you buy a company, you're in there for the long-term.
You're making a subjective judgement about the management, the products and
its stock prices. We seek good stocks now not later. So, for us to be
interested in a stock, its earnings have to be growing very rapidly. And, if
we own a stock and its performance starts to lag the S & P 500, we are quick
to make changes in the portfolio.
Q: Don't all those changes cost the shareholder a lot?
Zuccaro: Last year our turnover was 764 percent but out tax efficiency rating
was 96 percent on a scale of 100 with 100 being the best.
Q: How did you pull that off?
Zuccaro: It came as a surprise to us, too. It's our second year of being very
tax efficient. When a stock goes down we sell it. For example, we bought
Broadcomm a few days ago and sold it immediately because it went down. The
stocks that we're going to sell immediately are the ones that go down so we
are always booking losses that offset our gains.
But if a stock like JDS Uniphase, which was in the portfolio for all of last
year, continues to go up up up, we won't sell it. I don't make any
preconceived notions of what the appropriate price of a stock is but there
are floor prices placed on every stock we buy.
Q: Currently, the fund has a lot of tech names in it. Is that by design?
Zuccaro: No, that's just where our screens have brought us.
One key point is that we only invest in companies that have profitability.
The fact that they happen to be in technology is just a matter of screening.
So, if you held on to this fund for five years, the assets could be invested
into technology now, biotech at some other time and so on. We're not wedded
to any one industry or sector.
Q: What about weightings?
Zuccaro: We keep the positions at purchase evenly weighted because we've got
no idea, nor does anybody else, which are going to be the good stocks or the
bad stocks. If we did, we wouldn't put the bad stocks in the portfolio in the
first place.
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