| BUSINESSWEEK ONLINE : APRIL 12, 1999 ISSUE | ||||||||
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| FINANCE
Van Wagoner: Saved by the Internet? When Garrett R. Van Wagoner chats, investors listen...or they're listening again, anyway. After crashing his five-fund complex in 1997 and dusting it off last year, the high-flying San Francisco money manager is back in the jet stream with a giddy first quarter, including a 54.74% zip upward in his flagship Van Wagoner Emerging Growth Fund. The comeback has such amateur investors as Stan Levy, a retired salesman in Massapequa, N.Y., jamming America Online Inc. chat rooms each Monday at noon, where Van Wagoner talks stocks and investing. On Mar. 29, for example, Levy leapt to note three stocks Van Wagoner likes, saying: ''I'm well aware of his high returns.'' ERRATIC PERFORMANCE. Yet for all of Van Wagoner's reignited star power, the trouble for fundholders is that his high returns are inconsistent. In the three years ended Mar. 29, Van Wagoner (VWGEX) Emerging Growth returned an annual average of 9.2%--nearly 19 percentage points behind the Standard & Poor's 500-stock index, according to Morningstar Inc., which grants the fund just a single star in its rating system. Says Morningstar analyst Christopher Traulsen: ''This is not for the faint of heart.'' Van Wagoner blames himself for investing in fewer companies in 1997. He figured that year would be unkind to small- and midcap stocks, so he bet on those he knew best. At one point, more than 8% of his main fund was in Avant! Corp. (AVNT), a maker of engineering software that had been beaten down by litigation. ''I thought by concentrating the portfolio on lower-multiple names I would prevent getting my butt kicked,'' he says. ''It absolutely didn't work.'' Last year, as assets in his five funds shrank to $350 million from $1 billion, Van Wagoner set out to rebuild. By yearend, he had spread his flagship fund over 113 stocks--nearly twice the June, 1997, number. Along with such signature tech picks as Exodus Communications (EXDS) and Com21 (CMTO), he rode some biggies, relying on Microsoft (MSFT), Dell Computer (DELL), and AOL (AOL)for a boost. The tactic surprised some fund watchers. ''That's not quite 'emerging growth,''' notes Tony Sagami, editor of the Mutual Fund Alert newsletter. ''He's just riding the Internet wave.'' In fact, fund names don't mean much to Van Wagoner, whose strategy is similar across his five funds. Even his Post-Venture Fund held shares at yearend in such established names as Sun Microsystems Inc. He makes no apology, saying he goes where the growth is. Van Wagoner's winning bet on the Net this year owes less to big names. ''We've played everything from semiconductor companies, like PMC-Sierra and Vitesse [Semiconductor] and TranSwitch,'' he says, ''to companies providing systems-solutions products, like Aware.'' He has 26.4% of OnHealth Network Co. (ONHN), an Internet publisher whose shares have tripled in 1999. Van Wagoner also scored big with shares in iVillage Inc. that he picked up in the private market last December for $8.55 each. In March, the producer of Internet sites for women came public at $24 and since has topped $104. Others he sees soaring are QLogic Corp. (QLGC), in data networking, and Apex PC Solutions Inc. (APEX), a maker of server gear. Van Wagoner thinks we could witness ''one whale of a correction, which could start any minute or month.'' His biggest worry is how to boost his consistency--impossible, perhaps, given the risk in funds with price-to-earnings ratios of 50, Traulsen notes. Van Wagoner will take that challenge: ''It's a much nicer problem to figure out how to stay on top than it is how to get off the bottom.'' By Robert Barker _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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