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The Mountain Man Of Money Management



William M.B. Berger has been running Berger 100 Fund for nearly 20 years, but until last year, few outside of Denver had ever heard of him. In 1991, the 66-year-old money manager hit a bonanza, racking up a humongous 88.8% total return--more than twice the return of the average growth fund and nearly three times the Standard & Poor's 500-stock index.

That performance put Berger on the map. The Berger 100 has ballooned from $15 million at the start of 1991 to $367 million now. Half the new money has come in this year. The number of shareholders has rocketed from 2,500 to 60,000--most of whom expect big things from this 6-foot, 5-inch Coloradan. But so far, 1992 hasn't worked out quite that way. The fund is down 11.6%, while the S&P 500 is about even. True, investors are fickle, and as Kurt Brouwer, a San Francisco investment adviser, says, "hot money can go as fast as it can come." Nevertheless, Berger's shareholders are sticking with the mountain man of money management, and new ones are appearing every day.

"Performance comes in lumps," says Berger, whose fund has been in the red before. The fund slid 6% in 1990 and 20% in 1984. Yet over the long term, Berger has had the right stuff. The fund racked up a 16.5% average annual return for the five years ended June 30--a hefty seven percentage points better than the S&P 500. And BUSINESS WEEK's 1992 Mutual Fund Scoreboard gave the fund its highest rating.

Berger is holding fast to his philosophy of investing: Put money only in stocks with high earnings potential. That's not easy when many of last year's winners--such as T Medical and BMC Software--are getting battered in this year's market, which has taken a fancy to cyclical companies such as General Motors Corp. But he's also faring better than many of last year's top funds because of some fleet-footed moves. For one, he dodged the biotech rout by selling late last year, and he scored points with foreign stocks that many competitors didn't even consider.

Berger sets high standards for choosing a growth stock. The company must have at least three years of 20% annual growth in earnings, and a return on equity twice that of the stock market--or about 20%. Says Berger: "Earnings growth is the only thing that works."

The danger in this strategy is that the stocks are pricey--with high price-earnings ratios and price-book value ratios--and thus vulnerable to bad news. Look at Stac Electronics, a software company. It plunged 37% on July 21, after reporting disappointing profits. Berger sold, too, taking a $1.65 million loss on 300,000 shares. Why? "The cockroach theory," explains Rodney L. Linafelter, Berger's co-manager. "When one bad earnings report shows up, there's another one behind it."

But Berger has been picking winners, too. In early July, he paid $28 for International Game Technology, which makes slot machines. It's now 31 1/2. About the same time, he paid $28 for Synoptics Communications Inc., which makes computer networking hubs. It's now 33.

Berger's Israeli investments--made before the Labor Party's victory set off a rally--are paying off, too. ECI Telecom Ltd., purchased at 21, is now 27. Lannet Data Communications is up 68%. Berger is upbeat on Israel because of its highly educated work force and government-backed research and development.

OXCART PLUTOCRAT. Berger is also bullish on Mexican stocks. "Bush and Clinton favor free trade," says Berger. Besides, Mexico "could live without it. They're doing a fine job, gracias, dealing with the rest of the world." So he's buying Internacional de Ceramica, which makes and exports ceramic tiles, and is adding to holdings in bank stocks Grupo Fin Banamex and Grupo Fin Bancomer.

Berger hails from a long line of money managers. His forebears rode an oxcart to Colorado from Ohio in 1862 and founded what became the Colorado National Bank of Denver, financing much of the state's growth. Five generations later, Berger, who went to Yale University with George Bush, still manages old Denver money in a $68 million private portfolio.

Berger spends weekends at his 100-year-old Estabrook ranch near Bailey, Colo., and lunches frequently with quirky intellectuals at Denver's all-male Cactus Club. Soliciting business there is verboten, but so what? With four dollars coming into the fund for every one going out, Bill Berger doesn't need to beat the bushes for investors. Now that he's on the map, they find him.Sandra D. Atchison in Denver

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