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Billionaire money manager Alberto Vilar often correctly predicts the direction of the market. So, when he says e-commerce stocks still have huge untapped potential, some observers might think he's spending too much time at the opera, his favorite pastime.
But, if anything, Vilar is probably watching the market even more closely than usual. A star institutional investor for 30 years, Vilar has managed a single mutual fund -- the top-rated Amerindo Technology Fund -- since 1996. Now, Vilar is in the midst of launching two new funds -- the Health & Biotechnology Fund and the Internet B2B Fund.
Given Vilar's record, either of these funds has the potential to really take off. But the one to watch may be his Internet B2B Fund, launched May 30. Focusing the fund on business-to-business Net stocks is a daring move because B2B stocks fell off a cliff last year and still haven't recovered. Vilar isn't fazed. "We think the Internet will be the largest business and investment opportunity in history -- larger than the Industrial Revolution," he said at a conference a few days ago. "This sector is so explosive. It looks to us as though we're still very, very early. What we see in five years will make the present seem like a quaint anachronism."
"TOP OF THE LINE."
If Vilar is right, the Internet B2B Fund could turn out to be a very hot investment. Even now, only a few dozen pure Net funds exist, plus a handful more under registration. And few fund managers have done a better job of picking Net stocks than Vilar. He made a fortune for investors by getting into Cisco, Microsoft, Yahoo!, and Amazon during their infancy. After a rocky start (the fund was down 18% in 1997), the Technology Fund was up 85% in 1998 and a phenomenal 248% last year. "His track record is definitely top of the line," says Ramy Shaalan, mutual-fund analyst for Wiesenberger Thomson Financial.
Vilar, 60, also has a long history of calling key turning points in the market. Born in Cuba, he fled to Puerto Rico with his family when Castro came to power in 1959. He eventually landed in the U.S and started Amerindo in 1980. He has always been a top fund manager, but he really came into his own with the rise of the Internet. One of the first managers to invest heavily in Net stocks, he now divides his time among the company's New York, San Francisco, and London offices.
Among his key market calls, he predicted the correction in the tech sector in the spring of 1999. In April, 1999, he reduced his stock holdings and raised the cash portion of his portfolio for several months. As a result, according to mutual-fund researcher Morningstar, Amerindo Technology Fund only lost 2% from May through July of that year, while other hot Net funds tanked big-time. Then, in a December interview with Business Week Online, Vilar correctly predicted this year's correction in Net stocks (see Street Wise, 12/15/99, "This Internet Bull Is Preparing for a (Temporary) Bust"). His tech fund has taken a beating anyway: It was down 42% as of the beginning of June, according to Morningstar.
TOO CONCENTRATED?
Vilar's new fund may be even riskier, given that it'll be focused solely on volatile e-commerce stocks. Vilar buys only 20 to 30 stocks for his funds, making them highly concentrated and more sensitive to risk and return on individual holdings. Analyst Scott Cooley of Morningstar says Vilar's B2B fund seems unnecessarily concentrated. "I don't think focusing on a sub-sector of the Internet makes sense. It just becomes riskier," he says. But he's not willing to rule it out altogether: "If anybody deserves the benefit of the doubt, Vilar does. The guy has been right so many times before."
Clearly, this isn't a fund for the faint-of-heart. But if you want to take a flier on Internet B2B, you won't find many better pilots than Alberto Vilar.
By David Shook in New York
EDITED BY THANE PETERSON
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