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Amazon's plunge this spring and summer hurt Treick's performance, but he still likes the stock. Now, after bailing out of Transamerica, he has an opportunity to buy it all over again as he prepares to open his own firm in San Francisco. What does he plan to put in his brand new portfolio? I asked Treick (rhymes with like) that question and more by phone this week when I caught up with him, just back from a fishing trip in Montana. Edited excerpts follow: Q: When did you leave Transamerica? A: I left, let's see, it's a blur. I left in August. Q: Why? A: I left to start a company with some fellows that I've met along the way that share [my] ideas on how an investment management company should work. Q: How's that? A: Well, I think my biggest frustration from running a mutual fund was not the actual running of the money, it was just the way the business operates. Not knowing who your customers are, so you can't gauge what your cash-flow changes are and why they're occurring. Q: Explain, please. A: For example, if someone comes in with a fair amount of money that stays in for two weeks or a month and then leaves, not only does it create problems for managing the fund, it also creates tax issues and things like that for your other long-term shareholders. It wasn't just [Transamerica]. It's almost all funds in the mutual fund world today have this same problem.... I had the opportunity not to have to do that. Q: In your new firm, will you be the sole person calling the investment shots? A: Yes, at least in the immediate-term. Q: When you get your hands on some new money, what will you do with it? A: It will be run roughly the same way I ran it at Transamerica: A concentrated investment strategy that tries to identify companies that, by virtue of some change, are capitalizing on it at the expense of their competitors. It won't be related to market-cap. Q: You mean you won't limit yourself to stocks of any particular market capitalization? When you say "concentrated," how many stocks does that mean you'd hold in the portfolio? A: I've generally run portfolios with between 20 and 30 names. Q: If you were filling the portfolio today, what stocks would you add? A: The names that I had in the mutual fund most recently, those would be the names that I still feel comfortable with. Q: Some of those you bought long ago. Would you still buy Amazon. com (AMZN, $128.56) or Dell Computer (DELL, $47.94)? A: Yeah. One rarely does get the opportunity to do it over again, but I still believe that Amazon has good fundamentals, and I think that it has a huge opportunity going forward. And, clearly, Dell does, too. Amazon has [sold] off a fair amount, to say the least, and so the valuation just keeps getting better for us. I keep getting more positive as it comes down in price, not less. Q: What other Internet names do you think can attain that same status? A: All of these companies start off as a trade. That doesn't mean they're an investment. An investment occurs when a company reaches that next level and ... cash flow explodes. In the case of Dell, it was when they finally got their arms around their supply chain. And that was the change that turned it into an investment vs. a trade. The difference between the two clearly is the long-term nature of one vs. the other. Q: I see. A: A lot of the companies in the Internet space are trades. You don't know if they'll ever be investments. So, until some kind of change happens within Amazon, where either profits start to show up or cash flow, more importantly, starts to explode, they're always going to be [questionable]. They're leveraging their customers, but they haven't leveraged the business model, in my opinion, because you haven't seen the dramatic increase in cash flow and earnings. That's what we're waiting for. And if they're able to do that, then we will look, we will look, you know, brilliant! If they don't, people will say, "You knucklehead, what were you doing?" Q: What about other industries? A: I like the recreation industries. There's a huge number of teenagers in the world today. Huge number. More teenagers today than there ever has been. So I'm always looking for plays on that type of demographic, and a lot of it is recreation. Speedway Motorsports (TRK, $35) I still like. It's the NASCAR phenomenon. Q: What about the teen garment makers, such as Quiksilver (ZQK, $19.44)? A: I haven't had an interest in them. The reason why I like Speedway is they're able to leverage these fixed assets, the stadiums. They can put up an additional seat and earn a cash-on-cash return generally of around 20%. Plus, as these television contracts roll through, the cost of goods sold on that is nothing. It's pure profit. That's only getting better. The apparel guys don't have any of that stuff. They're just selling more items, so I'm not as interesting in that. Q: I gather you were doing a little recreating on your vacation, fishing up in Montana. How long were you away? A: About a week and a half. Q: Must've been great. A: Well, it was great for about the first week but then after that you know someone put CNBC on the television and I was like oh, gosh, no. And then I started watching it and getting caught up in it again. So I don't know. I was probably ready to get back. Barker covers personal finance in his weekly column, The Barker Portfolio, for Business Week from Melbourne Beach, Fla. And he appears every Friday on Business Week Online
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