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When Familiarity Breeds Impressive Returns


Cover Story

WHEN FAMILIARITY BREEDS IMPRESSIVE RETURNS

Mark C. Pope III, the cigar-chomping chairman and founder of Atlanta-based printing company Graphic Industries Inc., has a simple rule when it comes to investing: "Know the product and the people." The 68-year-old Pope draws most of his investment ideas from his contacts in the printing industry. He is a prime example of the virtues of buying stocks in companies you know personally.

Pope's stock portfolio, now $10 million, has enjoyed glorious performance--an annual return that has averaged 15% to 20% over the past 30 years. One reason is dogged research. Pope spends two hours a night reading analysts' reports, newsletters, and the financial press. Above all, Pope follows his instincts. "I'm a seat-of-the-pants kind of investor," he says.

Consider his recent decision to load up on Southwestern Bell Corp. The seed was planted when he went to Mexico in 1991 to finalize a joint venture with a Monterrey printing company. Since then, Pope has became increasingly bullish on Mexico's growth prospects, and he figured Southwestern Bell's deal to upgrade the nation's phone system would be a home run. So he bought 5,000 shares of the Baby Bell's stock in February at 65 per share. In weeks, the stock zoomed above 80.

"A GOOD FEEL." Surviving in a competitive industry such as printing has taught Pope the importance of state-of-the-art technology. That's what led him to Scitex America Corp., a Bedford (Mass.) maker of printing systems. Graphic Industries uses Scitex products to touch up photographs and enhance color images. "They're the best at what they do, and I know they're the best," says Pope, who started buying Scitex stock in 1991 when the stock was just under $30 a share. He increased his holdings to 5,000 shares in 1992, when the stock rose 20%.

Another recent Pope stock buy is Eastman Kodak Co., a big supplier of film products to his company. Despite the recent noisy departure of Kodak's chief financial officer, Pope sees a turnaround afoot. "Their management used to be old and stodgy like IBM and the U.S. government, but now they're changing the way they look at things," he says. He also likes Westinghouse Electric Corp., which owns a printing unit that competes with Graphic Industries. "I have a good feel for what they're doing," he says.

As a sideline, Pope keeps tabs on a broad range of companies through a small Atlanta-based investment club that meets monthly. Pope's club has done well by purchasing local stocks such as carpetmaker Shaw Industries Inc. But Pope doesn't slavishly follow the club's lead. In mid-April, when Intel Corp.'s stock dived, the club sold its stake, but Pope held steady in his personal portfolio. Pope's reason for not selling: He buys lots of computers and knows how well-positioned Intel is. And besides, his "instincts" say the company is still a winner.

Pope's biggest recent winner is the company he knows best--his own. Graphic Industries' share price has doubled over the past 10 months.William Smith in Atlanta


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