A High Wire Act In High Tech
When a blizzard of selling in technology stocks led the market sharply downward in early January, Alberto W. Vilar, president of San Francisco-based Amerindo Investment Advisors Inc., barely flinched.
"It's no fun to see your stocks get clobbered," says Vilar, whose firm, with about $2.5 billion in assets under management, is one of a few major U.S. money-management concerns that invests exclusively in specialized emerging-technology issues. But Vilar, 55, had seen it all before. As Fidelity Investments and other institutional investors were paring their high-tech holdings, Amerindo went shopping--as it has done frequently since its founding in 1980. "Corrections are a way of life," Vilar says. "We were out there with our basket when these things were being tossed out."
EARLY TRACKING. This aggressive strategy is not for the faint of heart. But for Amerindo, it has paid off handsomely: With a return of 91.2% for 1995, based on holdings at the end of the third quarter, Amerindo ranked first among 818 U.S. money managers, according to Thomson Investment Software, a portfolio-performance information service. It also ranked seventh out of 563 managers for the last three years with an annualized return of 42%. "These guys have been outstanding in their research," says Marty B. Tolep, a senior vice-president of Smith Affiliated Capital Corp., a fixed-income management firm, and former pension-fund manager at Woolworth Corp., an Amerindo client.
Amerindo's faith in technology generally and the long-term potential of the Internet in particular is almost religious. Most of Amerindo's portfolio is invested in biotech, telecommunications, and software issues, many of them makers of networking and Internet software. He is the biggest public shareholder of Netscape Communications Corp. and holds large stakes in Cisco Systems, Ascend Communications, Fore Systems, PsiNet, Premisys Communications, and America Online.
Amerindo starts tracking hot technology companies years before they go public. The firm's seven analysts, most of whom have advanced degrees in engineering and science, focus on companies financed by top venture-capital firms such as Institutional Venture Partners, Mayfield Fund, and Sequoia Capital. He also tends to buy initial public offerings underwritten by a select fraternity of investment banks, notably Morgan Stanley, Hambrecht & Quist, and Robertson Stephens. In years of buying newly public companies, he has found that if Wall Street's earnings estimates before a company goes public exceed its performance in its first few public quarters, chances are its share price won't rise any further.
Vilar isn't worried about technology issues plateauing soon. One indicator he watches is the price-earnings ratio of the benchmark T. Rowe Price New Era Fund compared with the p-e of the S&P 500 index. When it hits 2.0, technology stocks tend to be fully valued, Vilar says. At the current 1.5 level, he says, there's still a lot more money to be made.