THE GRAND PRIX
Race car drivers are accustomed to high speed chases, rapid lane changes and handling their automobiles under all sorts of road conditions from the hazardous to the smooth. This performance driven approach is what counts the most on the speedways. It's also the driving force behind one fund, in particular.
The Grand Prix Fund isn't for chickens. Or, widows, orphans, conservative investors or market newcomers. Nope, this fund is for those who have market experience, want action and don't mind a portfolio that can turnover a few hundred times in one year to get it. Last year, for example, its turnover rate was whopping 764 percent. Then again, the fund ended 1999 up 147.76 percent.
Bob Zuccaro is president of The Grand Prix Fund, (800-307-4880). He's a numbers kind of guy who doesn't buy stocks for the portfolio because he likes the management or thinks the company's long-term potential looks promising. Instead, he's looking for companies with strong earnings momentum and price strength. And, if a company he has invested in doesn't produce it's taken out of the portfolio toot sweet. In fact, according to his May 2000 Market Outlook report, only 6 stocks from the March 31st portfolio were still in the fund's portfolio one month later.
Q: How many stocks are in The Grand Prix Fund's portfolio?
Zuccaro: Twenty-five. It's a non-diversified growth fund.
Q: Don't you see holding that few number of stocks as problematic?
Zuccaro: I see a problem in having 135 stocks in a portfolio, which is what the typical mutual fund carries, because the more stocks you carry in the portfolio, the more you're going to look like the market. And if you look like the market, you're destined to under-perform it. So, by reducing the number of stocks held, we increase our probability of outperforming the market.
We're also a little different than the vast majority of mutual funds because we buy stocks not companies.
Q: What's the difference?
Zuccaro: Well, if you buy a company, you're in there for the long-term. You're making a subjective judgement about the management, the products and its stock prices. We seek good stocks now not later. So, for us to be interested in a stock, its earnings have to be growing very rapidly. And, if we own a stock and its performance starts to lag the S & P 500, we are quick to make changes in the portfolio.
Q: Don't all those changes cost the shareholder a lot?
Zuccaro: Last year our turnover was 764 percent but out tax efficiency rating was 96 percent on a scale of 100 with 100 being the best.
Q: How did you pull that off?
Zuccaro: It came as a surprise to us, too. It's our second year of being very tax efficient. When a stock goes down we sell it. For example, we bought Broadcomm a few days ago and sold it immediately because it went down. The stocks that we're going to sell immediately are the ones that go down so we are always booking losses that offset our gains.
But if a stock like JDS Uniphase, which was in the portfolio for all of last year, continues to go up up up, we won't sell it. I don't make any preconceived notions of what the appropriate price of a stock is but there are floor prices placed on every stock we buy.
Q: Currently, the fund has a lot of tech names in it. Is that by design?
Zuccaro: No, that's just where our screens have brought us.
One key point is that we only invest in companies that have profitability. The fact that they happen to be in technology is just a matter of screening. So, if you held on to this fund for five years, the assets could be invested into technology now, biotech at some other time and so on. We're not wedded to any one industry or sector.
Q: What about weightings?
Zuccaro: We keep the positions at purchase evenly weighted because we've got no idea, nor does anybody else, which are going to be the good stocks or the bad stocks. If we did, we wouldn't put the bad stocks in the portfolio in the first place.
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