When money manager Glen Klecza invests in small-cap stocks, he means small, as in $30 million to $150 million. Stocks with such modest capitalization account for just 5% of all publicly traded stocks. So why does Klecza, a partner at Brinson Partners, go for them? "They have provided us with top returns," he says. Klecza's $600 million Brinson Post-Venture Fund posted a compounded annual gain of 26% in the past five years.
One of Klecza's top picks is Greiner Engineering, a large engineering, architecture, and surveying firm with a market cap of $81 million. The stock, now at 17 a share, traded at 8 when Klecza started buying two years ago. "We got into Greiner as an infrastructure play, and we've done very well," says Klecza. The group has since cooled, but he thinks "there's a lot more upside power in Greiner." Klecza sees the stock hitting 20 in a year.
Here's why: Greiner is in a business that will gain mightily from programs that will be introduced in the Clinton Administration, especially those involving infrastructure, notes Klecza. Chairman and CEO Frank Callahan also has several new projects in the works. One deal is a likely contract with Disney Productions involving a major expansion of Disneyland. Says Klecza: Others buy growth stocks for their current fast-growth momentum, "while we buy future fast-growth [stocks], for which we pay very little."
Klecza makes sure the companies he buys into have strong balance sheets with little debt and lots of cash, and stock prices below or close to the company's tangible book value. That fits Greiner to a tee. Klecza expects a net of $1 this year, $1.25 in 1994, and $1.45 in 1995.