Mutual Funds - General Discussion

http://finance.yahoo.com/q/hl?s=VIVAX

Top 684. Mar 16, 2005 3:21 PM

» bob90245 - Value Fund Holdings

I own VTV (ETF) which is equivalent to VIVAX (mutual fund). The other day, I received the annual report for these funds from Vanguard. I was surprised to read the full listing of companies in these funds and their categories. Financials are the largest group at 35%.

However, the companies in this group include a number of REITs. (One is even a Timber REIT! -- not exactly a financial, I don't think...)

Apparently Morningstar lists REITs as Financials, as well.

http://finance.yahoo.com/q/hl?s=VGSIX

So the lesson here is, don't assume all your financial holdings are actually financials.

-- posted by bob90245

Top 685. Mar 17, 2005 5:46 AM

» axolotl - Re: Value Fund Holdings

REITs are being hit hard - Hi yield bond funds down and GMAC bonds (see investinginbonds.com) are yielding 7% on a less than 3 year bond. Good news on Alaskan oil drilling, but 10 years before any production!!!!???

-- posted by axolotl

http://biz.yahoo.com/bw/050322/225588_1....

Top 686. Mar 23, 2005 5:50 AM

» SteveT - The Managers Funds Honored by Lipper Fund Awards

The Managers Funds Honored by Lipper Fund Awards
Tuesday March 22, 10:51 am ET
Named Best Overall Performer in Fixed Income Funds for Smaller Fund Firms

SAN FRANCISCO--(BUSINESS WIRE)--March 22, 2005--The Managers Funds, which are managed and distributed by Managers Investment Group LLC, a subsidiary of Affiliated Managers Group, Inc. (NYSE: AMG - News), was named Best Fixed Income Group in the smaller fund family category last night by Lipper, the mutual fund research and analysis company. The Lipper Fund Awards 2005 recognize fund families that deliver consistently strong relative performance for their fund shareholders.

Peter Lebovitz, Managing Partner of Managers Investment Group, accepted the award at the Lipper Fund Awards Event in New York. It was Lipper's third annual U.S. awards ceremony.

The Managers Funds was honored for the performance of six of its fixed income funds, including U.S. and foreign corporate, high yield, short- and long-duration, and government bond funds. In the fixed income asset class, The Managers Funds competed with 78 other eligible smaller fund groups to win the award.

The Managers Funds cited by the Lipper Fund Award are: Managers Bond (Long-Term Bond), Managers Fixed Income (Intermediate-Term Bond), Managers Global Bond (World Bond), Managers High Yield (High Yield Bond), Managers Intermediate Duration Government (Short-Term Government Bond), and Managers Short Duration Government (Ultrashort Bond).

Lipper determined the smaller fund group awards by averaging the decile rank of the three-year consistent return scores for all of the firm's funds within the asset class; the group with the lowest average decile rank received the award for that asset class. In addition to a fund group's consistent return score, Lipper evaluates its risk-adjusted returns, adjusted for volatility relative to peers, for the three-year period ended December 31, 2004. In case of a tie, the group with the lower average percentile rank received the award. Smaller fund groups, defined by Lipper as families with less than $21.6 billion in total assets, must have at least three equity, three bond, or three mixed asset portfolios that received consistent return scores as of December 31, 2004 to be eligible for a fund group award in the respective asset class.

Managers Investment Group creates, distributes and services mutual fund and separate account products, including The Managers Funds, through intermediaries, primarily in segments of the retail marketplace. Managers leverages the complementary skills and resources of multiple businesses of AMG to serve as a single point of contact for more than 75 institutional-quality investment products offered to separate account and mutual fund investors through banks, brokerage firms and other sponsored platforms. Managers distributes and services investment products on more than 50 investment platforms.

In choosing a Fund, investors should carefully consider the amount they plan to invest, their investment objectives, the Fund's investment objectives, risks, charges and expenses before investing. For this and other information, please call (800) 835-3879 or visit our website at www.managersinvest.com for a free prospectus. Read it carefully before investing or sending money. Distributed by Managers Distributors, Inc., member NASD.

Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities.

For more information on Managers Investment Group LLC, please visit www.managersinvest.com.
Contact:

Managers Investment Group LLC
Bill Fergusson, 415-278-8522
Senior Vice President
Director of Marketing

-- posted by SteveT

Top 687. Mar 27, 2005 12:10 AM

» GoodGuy - No Load Fund*X

Hi,

I have come across this newsletter No Load Fund*X which is ranked highly by Hulberts Financial Digest. Their approach looks novel to me and also they seem to have 20+ year record.

Any idea if their methodology works in real life. Are there any subscriber who follow their strategy and has found it useful ?

Also, what about trading costs & tax implications of such trading ?

-- posted by GoodGuy

http://online.barrons.com/article/SB1126...

Top 688. Sep 17, 2005 5:54 AM

» SteveT - Q&A with Jim Barrow

An Energized Portfolio

By SANDRA WARD

IN 42 YEARS OF INVESTING, Barrow has kept his strategy simple: Buy stocks cheap. That is, buy them when they trade at below-market-price-earnings multiples and below-market-price-to-book values and sport above-market dividend yields. That's the premise on which he founded and built Barrow Hanley Mewhinney & Strauss, a Dallas-based institutional money manager that now has $55 billion in assets, of which $24 billion resides in the Vanguard Windsor II Fund (ticker: VWNFX) that Barrow has helped steer since its start in 1985. That's the premise he hews to still. Energy and utility stocks continue to comprise 30% of his portfolio. On the promise of a cellphone maker and a printer maker and the perils of an airplane maker and a paper company, please read on.

Barron's: Have you had to reassess your views on the health of the economy because of Hurricane Katrina?
Barrow: I have, a bit, because the cleanup from it is going to have some impact on next year and the following year. I have a connection with the South Carolina coast and have lived through hurricanes, and I've seen what happens after that kind of destruction. There is typically a great amount of building that goes on, generally funded with insurance money. However, in this case, I am not so sure we are going to get as much insurance money because a lot of the infrastructure damage – roads, bridges and low-income housing – is not covered by insurance. Most people didn't have flood-damage insurance, and so I'm afraid it's going to be difficult. But having said that, the federal government will throw huge amounts of money at New Orleans.

But do we have huge amounts to throw at it?
That has not stopped us before. One of the great myths of the world is the Republicans won't spend money. Obviously, the deficits are larger under Republicans than they are under Democrats. But in the process of doing all that spending, we will be faced with a great conundrum. The market, even though multiples are not particularly cheap, has continued to perform well because of low rates of inflation.

Spending to rebuild the dikes and infrastructure of New Orleans will result in increases in commodity prices for things like wood products and lumber, and concrete, and steel, and lord knows what else. Most people who have lost their jobs and their professional practices don't have business-interruption insurance. I was talking to a doctor the other day, and I asked him if he had business-interruption insurance, and he looked at me like I was nuts. Think about the dealer in the casino who probably will get two months worth of pay but, after that, doesn't have any income. All of that is going to be a negative for the economy. The losses are going to be quite large.

Will the Federal Reserve stop raising rates for a while?
I don't think so. Greenspan doesn't have much time left on the job and he wants to get done what he can get done. I'm afraid if we invert the yield curve, this thing we call the housing bubble goes bump in the night and will pop rather than deflate and it could wind up having a pretty negative impact. I don't invest in a top-down fashion, but, having said that, I don't own any real-estate investment trusts, for instance, and investments such as those would scare me. About 60% of the time, when the yield curve inverts, it results in a recession. If nothing else, we'll get disruptions.

There is still great debate about how strong the economy is and how housing will continue to perform well.
The raw numbers would scare you to death because you see the incremental growth in housing is coming from people with credit scores that are way too low to normally qualify for a mortgage. They are all high-risk to begin with and, on top of that, an awful lot of the mortgages are 90%-plus borrowed and interest-only and very short-duration adjustable rates with triggers on them. That could end up nasty. Of course, there'll be some places where house prices never went up much and so they won't go down much. And a place like Baton Rouge probably won't see prices go down. The price of housing there is skyrocketing because people from New Orleans, the ones with money, are moving there.

Are you staying away from financial stocks in general?
We are lighter in financial stocks than the market is. The areas we are heavy in have been areas we have been heavy in for a long time: energy and utilities. They are 30% of the portfolio. We continue to hold them.

Did Katrina bolster the outlook for energy stocks?
The positive outlook was there to begin with, and Katrina just showed how thin the system is, how stretched it is. It's been that way and will continue that way for a long time. The refining industry was operating above 95% of capacity and Katrina disrupted that, and that's why gasoline prices went through the roof.

They came back down pretty quickly.
They did, but there are still dislocations. I was in South Carolina two weekends ago, and there were some stations that didn't have any gasoline except for high-test and that's because that area is served by a pipeline from the Gulf area and so there were some shortages and places are still closed down. But we have probably seen the high in oil and gasoline prices for the next 12 months anyway. Natural gas is a different market. We don't import very much gas and our production has been flat for a good while. So any growth in the economy will result in some demand sources pushing out other demand sources. I call it demand destruction.

Unlike oil, there is plenty of gas around. We just have to work up an infrastructure to get it and pipe it and compress it. What's happened is that all the energy we use now happens to come from places that are very unfriendly or third-world-like or very, very difficult to get to, whether it be in the middle of Siberia or in 20,000 feet of water. Russia controls 75% of the world's gas reserves. Supply is just not coming on strong and fast enough. And the great cushion provided by Saudi oil is probably gone. They say they can produce more, but I don't see any evidence they are. If you just look at the normal demand curve we've got to find 1.3 million extra barrels a year forever to meet demand. That's a lot.

What kind of energy companies do you have in your portfolio?
Our exposure is primarily to North American production companies, and the reason for that is if prices go up in North America you get to keep it. If the prices go up somewhere else, it is the host government that keeps it. Our exposure is to those companies that have some exposure to the refining process because it throws off a lot of cash.

We have a big holding in ConocoPhilips (COP), which we've had for a long time and haven't yet sold any. We have a large amount of Occidental Petroleum (OXY), which we've had for a long time and haven't sold any yet. We don't own the exploration and production companies because we buy low-P/E stocks with yields. That said, we bought some Anadarko Petroleum (APC) recently and that is kind of an oddity for us. We have a big position in British Petroleum (BP). You could say, well, that's an English company, and it is, but it happens to have a big position in the Gulf of Mexico, which means if prices go up, they'll do just fine.

We have believed for several years we were going to have a permanently higher price structure for petroleum products. We didn't know it was going to be $60 a barrel, that was not in our forecast at all, but we knew the direction was up. We are sticking with that outlook until some fundamental changes occur. I know a lot of people don't believe that, and I know when I look at mutual funds I can't find a big mutual fund that is overweight the oil stocks.

What kind of fundamental changes need to occur before you change your thinking about oil prices?
A big move to bring natural gas off the North Slope to Chicago, for instance. Or more exploration off the West Coast of Africa. But these things take a lot of time and a lot of money and there is not a great movement toward finding more energy that I can see. Day rates are up, but in 1979-80 we had something on the order of 5,000 rigs working and now we have 1,500. Granted, the average rig is better-equipped than it was, and we probably don't need as many. But it shows there's not a lot of effort to find more supply.

Why utilities?
Well, utilities and energy are somewhat related. The operators of nuclear plants are going to do a lot better and the utilities we own are the three best nuclear operators in the country. That would be Exelon (EXC), Entergy (ETR) and Duke (DUK). They happen all to be well-managed companies. We think that the old multiples of the past won't quite hold and they still have some upside in them. They have low multiples and high yields. We have exposure to other companies too but those are our three pretty good size positions.

Rising rates scare some people away from utilities. What are your thoughts on that?
They are not borrowing any money, so why would you care? They are net cash generators, and so rising rates technically would help them. The ones that are regulated will get better treatment in a rising-rate environment and some of them aren't regulated.

Are you expecting a revival of nuclear energy?
Yes. Somebody will try to site a new plant. I don't know where, but somebody is going to do it in the next couple of years. Of the utilities, nuclear has a high fixed cost but a low variable cost. That's the problem with gas generation: It has low fixed costs and is easy to site but it has terribly high variable costs.

Outside of energy, what do you like?
Everybody laughs when I say this but we bought a technology company. We bought some Hewlett-Packard (HPQ) right after it had a change in management.

Is that what had kept you away?
Yes. It was substance versus salesmanship and what we have now is substance.

So you are not averse to technology?
If it is cheap enough, no.

What are the prospects there?
Their earnings can be a lot better if they can figure out a way to quit throwing money away competing with Dell and basically operate the businesses they do well in, like servers and printers.

What else do you own?
We own a lot of Philip Morris or Altria (MO), as it is now called. We have a big position also in Imperial Tobacco (ITY), a British company. It has no sales in the United States and so it has no liabilities in all this.

Explain your interest in Altria.
It is cheap. The domestic side is what everybody worries about because of the liabilities or the perceived liabilities. If it hadn't been for them giving in to the state attorneys general, the industry would never have paid any damages because most of the cases against them have been overturned. The interesting part about Altria is its international business, which is growing, and it is growing because they are displacing state-owned tobacco companies. They are gaining market share because they make a better product and know how to advertise it better. Although, how you have a better product that kills you I'm not sure. Altria will be spinning off Kraft by the end of this year, and then, my guess is, they split off Altria's international business from its domestic.

What else have you been buying?
Nokia (NOK). It is an unusual name for me, but it was cheap. It has the biggest market share in the cellphone industry, and it was the cheapest. We bought some Lyondell (LYO) when it broke down. Lyondell is a chemical company primarily. It got hit real hard on some bad earnings and the stock went from 35 to as low as 22. Earnings will be fine. It is going to earn $2.50 to $3 this year and $3.50 to $4 next year and it sells for $29 and that's pretty cheap. It has a 3.2% yield.

What have you been selling?
Boeing (BA). It got to be too expensive. It got over 20 times earnings and that's pretty high for us. I sold some International Paper (IP) because that was a "gonna" stock that never happened. It was "gonna" earn more money, and it never did. We saw an opportunity for price improvement, but that price improvement was so small it didn't help very much. The boom wasn't very much of a boom.

But you haven't sold any energy companies despite their runup?
No. Earnings are going up faster than stock prices.

You like cellphone companies, but do you also like any of the phone companies?
I own a tiny bit of Verizon (VZ). It used to be a larger bit, but the excess capacity in the industry is beginning to take earnings down. Those stocks have not been good stocks for a long time. Other than their dividend yields, I'm not that fascinated with the industry, because it has got too much capacity.

You've had a history when it comes to energy and real estate of seeing boom times and then the bust.

I've been doing this a long time. We've owned oil stocks and when the last bust occurred, we sold them all because they just scared us to death. We sold way too early, we usually do sell too early, but at that time, you know, everybody and his brother owned the things. At one time, the energy section of the S&P 500 was about 30%. It got down as low as 4. All of that wasn't because the stocks went down that much but because, in the S&P's wisdom, they decided they weren't going to have any more international companies in the S&P. They took out Royal Dutch, which had been in the S&P since probably the 'Thirties and they wouldn't put British Petroleum in because it wasn't a U.S. company, though it had bought four companies in the S&P over the years. They made the assumption that ExxonMobil (XOM) was a domestic company, though I'll tell you none of the big oil companies are domestic. They are big and diverse and multinational. In other words, they kept taking stocks out and putting none in. My guess is, in the next six months, they'll start putting some energy stocks in the S&P 500 again, because they always chase performance. They put JDS Uniphase (JDSU) in when it traded at 137 times revenues. It went from about $150 to $2 and had one of the biggest write downs ever.

Any other industries you're buying?
We own a lot of drug stocks right now. Five and 10 years ago, we didn't own any. I haven't bought Merck (MRK)because I'm afraid of the liability. But I own Wyeth (WYE) because it is at the end of a lawsuit over its diet pill Phen-Phen. Merck's troubles are just beginning.

How long do you expect the market to go sideways?
The multiple will get lower and lower if the market stays here long enough, and then it will be cheap enough to move again. Or, maybe the earnings will go up a lot and the market will follow and that's what we would hope for. It did this sideways thing all through the 'Sixties and 'Seventies. The market bottomed in 1974 at 580, and it's now at 10,500. That is a pretty good-size move. Periods of overachievement in market returns could be corrected by periods of underachievement in market returns. In that kind of environment, value stocks will do OK.

Are you concerned that bonds will start giving stocks a run for their money?
Depends on what kind of bonds you are talking about. The spread between low-quality bonds and high-quality bonds is very, very tight. If the economy muddles along as it has been, I wouldn't want to be in the junk-bond area because I don't think there is much return in there versus the risks you are taking. In terms of corporate and government bonds, they are kind of appealing in the intermediate term but not the long term. It's important to remember the income generated from bonds is taxable and at a different rate than the income you generate on dividends.

Jim, thanks very much.

Barrow's Picks…
Company Ticker Recent Price
Altria MO $71.63
Anadarko Petroleum APC 92.93
British Petroleum (ADR) BP 69.20
Duke Energy DUK 29.00
Entergy ETR 73.69
Exelon EXC 54.99
Hewlett-Packard HPQ 27.50
Imperial Tobacco (ADR) ITY 56.60
Lyondell Chemical LYO 28.36
Nokia (ADR) NOK 16.78
Wyeth WYE 45.20
…And Pans
Boeing BA 64.18
International Paper IP 31.70

-- posted by SteveT

Top 689. Oct 22, 2005 6:05 AM

» SteveT - A Harvest of Value

By SUZANNE MCGEE

RICHARD BERNSTEIN AND DAN LYSIK caught the peak of the value-stock boom after they launched their mutual fund nearly three years ago. What do they see now?

Barron's: Did the tech bubble teach you anything?

Bernstein: Dan and I were seeing quality stocks hit 20-, 30-year lows -- below their private-market value. It was pretty depressing, but it taught us how unpredictable the market could be and how we needed to take emotion out of our decision-making.

Q: Have value stocks had their day in the sun?

A: It's certainly harder to find value in industrial or energy stocks today; we could not continue to fish successfully in those waters. But it's still possible to find value in some real high-class businesses like pharmaceuticals, insurance and parts of technology.

Q: How do you avoid getting caught up in emotion?

A: Stocks trade around an essential value, and emotions are what drive them to extremes on either end. We do a scenario analysis on every company we own or are interested in, calculating the best- and worst-case outlooks for 24 or 36 months. Once the best case is achieved, we redeploy our money.

Q: Is that why you've sold energy stocks other value managers still own and have done well with?

A: We began building a big position in energy in 2002 and early 2003 when [oil supposedly was heading to $10 a barrel]. As stock prices rose, we rechecked our original assumptions and found that valuations are close to their postwar highs. We asked ourselves: Is this no longer a cyclical industry? We don't want to take that risk.
Fertile Ideas

LIFE AS A WEEKEND FARMER, producing a wide variety of crops on his 40-acre farm for food banks and homeless shelters in the Baltimore area, helps Richard Bernstein cope with the vagaries of life as a large-cap value investor.

"In both farming and picking value stocks, there are some things you can control, and others that you have no control over but just have to react to," says Bernstein, a partner and head of value investing at Brown Advisory, a Baltimore area money-management firm. "We can control how much fertilizer we use and when we plant and the caliber of the seed we use, but all that can be for naught if we don't get enough sunlight or rain, or [we get] an early frost." Similarly, while he and co-manager Daniel Lysik can control how much they pay for a business, their ultimate returns can hinge on unexpected good or bad news. "Remembering that keeps us focused."

The summer saw Bernstein harvest a bumper crop of beans, corn, potatoes and other vegetables for the network of food banks he helps supply, as well as some healthy returns for investors in the Brown Advisory Value Equity Fund (ticker: BIAVX), the nearly three-year-old mutual fund that is managed according to the same discipline as the firm's five-year-old large-cap value funds for institutional investors. The reluctance of Bernstein and Lysik to own big energy holdings at what they believe is the peak of a pricing and valuation cycle has meant that they have lagged the Russell 1000 Value Index's 5.7% gain as of Sept. 30, although their 2.8% return matched the S&P 500's. The fund has generated an annualized 18.12% since its inception in January 2003, beating the S&P's 16.43% in that span but trailing the benchmark Russell 1000 Value's 20.48%. However, during the five years that Bernstein and Lysik have been running institutional portfolios, they've averaged an annualized return of 9.6% on all assets managed, beating the S&P (down 1.5%) and the Russell (up 5.8%).

Back in 1998, when Bernstein and Lysik, along with other employees and directors of Brown Advisory, purchased the five-year-old asset-management firm in the wake of the acquisition of its parent, Alex. Brown & Sons, by Bankers Trust, the market was infatuated with growth stocks and "there was no price that was low enough for the 'old economy' stocks to hit," Bernstein recalls. "It just looked as if all the rules of investing were flying out the window. It was so bad that I thought about leaving and going to a [Methodist]seminary or pursuing farming, full-time."

But Bernstein and Lysik found two big institutions willing to commit $25 million to a new large-cap value fund, which made its debut in June 2000, just as the tide began to turn. It was a once-in-a-lifetime opportunity, Bernstein recalls. "It was like throwing darts; stocks in the value arena were so cheap that you almost couldn't go wrong." Success attracted investors, and the duo now oversees nearly $925 million in large-cap value assets, including $133 million in the Brown Advisory Value Equity Fund. Fishing in those same waters is no longer quite as easy. However, "whenever a company gets into so much trouble that it is featured on the front pages of the Wall Street Journal or the New York Times, then we spot an investment opportunity in the making," Bernstein says.

Nearly all the stocks in the fund's relatively concentrated portfolio -- typically, it holds only 40 or so positions -- have hit big bumps in recent years. Time Warner (TWX) has struggled to deal with the aftershocks of an aggressive acquisition strategy and sluggish advertising revenues. "But," crows Bernstein, "we bought the stock at a price where AOL was thrown in for free!"

Indeed, the quest to acquire potentially valuable corporate assets "for free" is the reason behind the duo's recent aggressive purchases of pharmaceutical stocks like Merck (MRK), Pfizer (PFE) and Forest Laboratories (FRX). Collectively, big pharma stocks now make up more than 10% of the fund's portfolio. Lysik and Bernstein are unruffled by the problems that have dogged products like Merck's arthritis drug, Vioxx, and other broader issues, such as the rapid clip at which the companies' patents are expiring and the logjam in new drug approvals at the FDA.

"We believe the risks associated with this business are being over-discounted by the market," Lysik says. He expects new-product pipelines to improve, with the help of contract research organizations, and sees an opportunity for the pharmaceutical makers to cut overhead. "At the end of the day, what you've got are great balance sheets; immense amounts of free cash generation; dividend payments near an all-time high," Lysik adds. Moreover, R&D spending as a percentage of sales is climbing -- a good sign of future growth, he says.

Taking big bets like this is characteristic of Bernstein and Lysik's strategy, says Bud Pellecchia, a senior investment consultant with Callan Associates, who advises pension funds, endowments and other institutions on selecting money managers. "They are willing to move into areas that may not be traditional value-investment hunting grounds based on their research, and then to show they are confident about that decision."

Most money managers limit holdings of individual stocks to 5% of their portfolios; at Brown Advisory, the value team can keep up to 7% of the fund in a single name. "That can lead to greater volatility in principle, although it hasn't hurt their returns yet," Pellecchia says. While he would hesitate to recommend a concentrated fund as the sole value holding to a client, he says the duo's consistently strong returns "have put the funds on our radar screen."

Bernstein and Lysik aren't shaken by the pharmaceutical sector's problems. Indeed, they are increasing their exposure to the industry and to the insurance business, hard hit by natural disasters, such as Hurricane Katrina, and by New York Attorney General Eliot Spitzer's probes.

They are convinced that companies like AIG and Marsh McLennan have solid long-term prospects. "Regulatory problems will all be resolved and pricing will improve," predicts Bernstein. He and Lysik are even starting to accumulate small positions in a handful of Bermuda-based reinsurers. "The quickening pace at which disasters are striking ought to ensure that the reinsurers can firm up their pricing," Bernstein says.

Although financial stocks make up 29.5% of the portfolio, versus 13.5% in mid-2001, the co-managers are only just starting to become bullish about the banking industry. So far, their holdings are limited to large global players like Citigroup (C) and Bank of America (BAC). They're eyeing top-quality regional bank stocks, but are waiting for reports showing a decline in lending quality. "When that happens, all the bad news will be public, and the yellow light will become a green light," Bernstein says.

Bernstein and Lysik still find a few attractive companies in the industrial sector. One is Dover Corp. (DOV), an industrial conglomerate that is trying to decide what to do with its underperforming technology business, which accounts for about 25% of its operating income. Another is DuPont (DD), which Bernstein describes as "probably the least cyclical industrial company out there," with a strong balance sheet and low valuation.

He and Lysik believe they've made only two major bad bets in recent years: on Elan (ELN) and Allegheny Energy (AYE). They had to dump their Elan holdings after undisclosed off-balance sheet liabilities were uncovered, and they forgot that Allegheny "might not be able to sell their merchant-energy business if times got tough; that potential buyers might be even worse off," recalls Bernstein, ruefully.

When setbacks occur, Bernstein likes to head back to his fields, where, aboard a tractor, he ponders his decision-making and strategy. "It's the best way I know to get a quick dose of reality and clear my head," he says with a laugh.

E-mail comments to editors@barrons.com
URL for this article:
http://online.barrons.com/article/SB1129...

-- posted by SteveT

http://www.marketwatch.com/news/story.as...

Top 690. Oct 28, 2005 4:30 PM

» SteveT - Abigail Johnson trims Fidelity stake

Spurs questions about her succession odds, WSJ says
By Kathie O'Donnell, MarketWatch
Last Update: 10:24 AM ET Oct. 28, 2005

BOSTON (MarketWatch) -- Abigail Johnson has pared her voting stake in Fidelity Investments, prompting fresh questions about her odds of succeeding her father as head of the mutual-fund giant, the Wall Street Journal reported Friday.

Abigail Johnson has for a decade been Fidelity's biggest shareholder, with 24.5% of its voting stock, more than twice the 12% stake of her father, Fidelity Chairman and Chief Executive Edward Johnson III. Holdings of other relatives brought the Johnson family's total stake to 49%, the paper said.

Now, however, Fidelity says Abigail Johnson, 43, has sold a portion of her shares to trusts benefiting "current and future generations" of the Johnson family, the Journal said. Edward Johnson, 75, the trusts' trustee, has the power to vote the shares, affording him even greater control over the organization, the paper said.

In recent filings with the Securities and Exchange Commission, Fidelity, also known as FMR Corp., provides the first glimpse of the ownership shift, the paper said. Previously, the filings provided both Johnsons' individual holdings, but now just say that the Johnson family holds 49%, the Journal said.

Fidelity declined to say how many voting shares Abigail Johnson sold, though it called both her stake and that of her father "significant," the paper said.

A 1995 SEC filing that showed Abigail Johnson as the main shareholder has long been deemed as evidence that she was being prepared to run Fidelity, the Journal said. Her position as "presumptive heir" increased as she climbed the ranks, eventually being named president of Fidelity's money-management unit, the paper said.

In May, however, Abigail Johnson was transferred from that high-profile job. The unit had been plagued with weak sales, "lackluster" investment performance and a scandal on the trading desk, the Journal said. She was named president of Fidelity Employer Services Co., a swiftly growing unit that handles administrative work for clients such as corporate-retirement plans.

Based in Marlborough, Mass., the new position is outside the company's headquarters in Boston. The Journal reported that people close to Fidelity say the transfer sparked conflict between Abigail Johnson and her father.

In a statement to the paper, the elder Johnson said his own father, Fidelity's founder, encouraged "spirited differences of opinion," that helped Fidelity grow. Johnson said he hopes the family will never end "this type of constructive discourse."

In a statement, Abigail Johnson told the Journal "I wholeheartedly agree with what my father said." She added that the family continues to work closely together. As for her new role and the possibility of succeeding her father, she said: "This is a huge job that requires my complete attention, so that is what I am giving it."

Fidelity spokeswoman Anne Crowley told the Journal that the ownership change was an estate-planning decision not related to any change in Abigail Johnson's job. Crowley added that Abigail Johnson's transfer was unrelated to her job performance.

The spokeswoman said Fidelity has a plan for when Edward Johnson is no longer CEO. She added that he is in "excellent health" and has no current plans to retire.

Kathie O'Donnell is a reporter for MarketWatch in Boston.

-- posted by SteveT

Top 691. Oct 28, 2005 10:51 PM

» Happy_2 - Re: Abigail Johnson trims Fidelity stake

In response to Abigail Johnson trims Fidelity stake posted by SteveT:
It's amazing how these dynasties hang on to their money and avoid inheritance tax. In Fidelity's case the daughter has twice the shares of the father. These shares came probably from gifts? I wonder how they avoid the gift tax? Generation skipping trusts?

Martha Stewarts daughter Alexis is the real owner of MSO. How did they avoid gift taxs?

By the time Sam Walton died, his children already owned most of his shares. How did they avoid gift tax?

One trick they use is to state that voting shares in a closely held corporation are worth far less than ordinary shares. Sounds like high priced lawyer talk to me.

-- posted by Happy_2

Top 692. Oct 29, 2005 4:15 AM

» BrianMcG - Re: Re: Abigail Johnson trims Fidelity stake

In response to Re: Abigail Johnson trims Fidelity stake posted by Happy_2:

You wrote:

It's amazing how these dynasties hang on to their money and avoid inheritance tax. In Fidelity's case the daughter has twice the shares of the father. These shares came probably from gifts? I wonder how they avoid the gift tax? Generation skipping trusts?

This is part of the ugly truth of the estate (not inheritance) tax. The very rich can afford to hire the most expensive laywers, buy the most expensive insurance policies, and create the most expensive trusts to avoid or minimize the tax. There is a huge, multi-billion-dollar estate tax avoidance industry in this country, and it is doing very well, thank you.

The poor have nothing that is subject to the tax. The middle class, as usual, pays the piper.

-- posted by BrianMcG