Roy R. Neuberger is an addict. His compulsion has dominated his life for nigh on seven decades. And at 91, he admits that the situation is hopeless. It is now 55 years since he co-founded the money-management firm of Neuberger & Berman. He has seen crashes and scandals, market fads and fallacies--and more stock market cycles than you can shake a walking stick at.
Yet nearly every day, he comes in and feeds his hunger. He trades. And trades. Confesses Neuberger: "I'm addicted to the fascinations of the market."
Roy Neuberger represents a vanishing breed--the grand old men of Wall Street. Having lived through many market cycles--his first big success was shorting RCA right before the crash of 1929--the ebullient Neuberger has a perspective gn the stock market shared by few people. In an interview with BUSINESS WEEK, Neuberger provided an increasingly rare exposition on his investment philosophy.
"VERY NATURAL." When it comes to playing the market, Roy Neuberger is as quick on the trigger as a sprightly young lad of 65. He is an active short-term trader. It is a philosophy that, his partners take pains to point out, is dramatically different from the long-term credo of the conservative, $30 billion money-management firm that he co-founded. Indeed, Neuberger's relish of a good trade is palpable. A visitor to his office hears him bemoan the fact that he didn't sell a stock that had risen 5% the past day--it was now up only 2.5%. And he still likes short-selling--another trading technique eschewed by his firm.
Most investors can't afford the thrill that Neuberger gets from short-term trading, and Neuberger doesn't recommend the strategy unless "it's very natural for someone." He thinks most individual investors should invest for the long term--but not mindlessly. Sell discipline, often neglected by small investors, is vitally important, he argues.
Neuberger pays close attention to another nuts-and-bolts factor--the strength of a company's management. There is "too much arrogance in management" today, he says. He cites Microsoft Corp. as an example of good management; some recent, unspecified Wall Street scandals as instances of bad. Neuberger wouldn't buy Microsoft at its current valuation but adds that "it's such a fantastic stock that it can't be classed with other technology stocks."
Is Neuberger making money in the market, or is his rapid-fire trading an expensive hobby? When asked if he has made money year-to-date, he dodges the question, claiming that "over the years I've fared well more than 90% of the time. I've been lucky." The best years: The 1950s. The worst? The late 1960s, when the market "refused to value stocks that were persistently strong." Neuberger says 1994 has been more difficult than any other. The stocks of well-managed companies are moving in a narrow range, making trading gains harder to come by. Intel Corp., for instance, "is an extraordinarily well-managed company," he says. "But it hasn't gone up or down much, and it's been tough to do anything but praise it as a good company."
COKE GAFFE. Neuberger seems frustrated by the irrationality in today's market. He blames some of the dislocation on the "undue influence" given to "the host of people at research firms that give reports of upgrades and downgrades." Says Neuberger: "I think it's ridiculous that opinions are taken that seriously." He is also critical of the leverage that has flooded the financial markets. "Certain markets are too influenced by people who call themselves speculators, but they might be called gamblers," he says. The fixed-income markets "have become more gambling mediums than they used to be," with "bonds...pretty much as speculative as stocks."
Neuberger's outspoken views are rarely heard nowadays. That's because his partners prefer it that way. Calls to his secretary of 30 years are routed to a partner who greets a request for an interview with a flat "No." Further calls reach the firm's managing partner, Lawrence Zicklin, and culminate in an hour-long talk about how, while Neuberger is the firm's "conscience," he has not managed any client assets for many years. Eventually, reluctantly, Zicklin relented--but asked that he be present. In the end, a compromise was reached--Neuberger would be accompanied by someone from an outside public relations firm.
Why the nervousness? The apparent reason is what Neuberger describes as "boners" in talking to the press. In 1992, he told a reporter that the stock of Coca-Cola Co. "is so overvalued right now that anybody who owns it is a moron." As it turned out, some of his firm's fund managers owned Coca-Cola. A somewhat chagrined Neuberger now describes the chairman of Coca-Cola as a "brilliant manager."
"LOUSY ARTIST." Neuberger's independence is deeply ingrained. Orphaned at 12, Neuberger inherited money from his father, a successful Wall Street trader. He dropped out of New York University: "I wasn't learning anything," he recalls. For a time, he worked as an upholstery and fabrics buyer for the now-defunct B. Altman. He also studied art, which convinced him that he is a "lousy artist." But he is a longtime patron of the arts.
Neuberger has had to slow down in recent years. A run-in with a bicycle messenger at age 85 resulted in a pin in his hip and put an end to the daily walk from his apartment on 82nd Street and Fifth Avenue to the firm's offices 21/2 miles away. Now, a driver takes him from his apartment in the swank Pierre Hotel to the firm's offices. He still swims and works out with a personal trainer three times a week.
Neuberger enjoys retreating to his home in bucolic Peekskill, N.Y., and spending time with his family. He has been married to his wife, Marie, for about 60 years, and they have three children, eight grandchildren, and four great-grandchildren. But his mistress, the market, will always be beckoning from the big city.