IPS'S MILLENNIUM FUND
Drive through the Everglades or down to the Florida Keys and along with being surrounded by some incredible natural beauty, without digging very deep, you can see ecosystems at work.
But what do ecosystems have to do with mutual funds and investing? Plenty, if you're Bob Loest, portfolio manager on both the IPS Millennium Fund and IPS New Frontier Fund, (800-249-6927).
Loest, who got his Phd. in Biology from Florida State University, is a Renaissance man. And, has a take on traditional economic models that's different than the ones most Wall Street types subscribe to. Maybe that's because his career path has been so colorful---he was an officer in the Navy, did research and taught biology at FSU, and was a blacksmith before becoming a money manager. Or, maybe it's because he is and always will be a biologist first.
Whatever, when he is looking for companies to invest in and researching the value of a company, Loest is more likely to think "connectedness" rather than "price/earnings" ratios. That's because he thinks historic economic models are based on a flawed model of Newtonian mechanics that assumes even though things may be complicated they are predictable.
"But today, " says the 56-year old Loest who's been in the money management business since 1987." With the connectivity being created by the Internet, we are far more like an ecosystem than we are like a Newtonian machine."
Here's how he explains it: "Take a company like Yahoo. It's just barely making money and there are no assets. So, if you use conventional thinking and are used to looking at the value ( of a company) in terms of its physical assets like earnings, etc. you might not see much value. But, if you looked at a biological ecosystem for something similar to Yahoo, your assessment might be different."
"Let's say you go into an oak forest and take a spider, put it in a specimen vile, take it back to your lab, dump it out on a lab bench and then ask yourself this question: What is that spider worth?"
I'm thinking, "Not much."
Then Loest says, "It's a meaningless question because it's outside of its ecosystem. The spider may have enormous value. It might be in control of critical insect populations and the system may not be able to survive in its present state without it. But you don't value it by weighing it."
From his perspective, a better way to look at things for New Era companies, such as Yahoo, would be to analyze their value as a function of their connectivity within the ecosystem. Of course, this new kind of connectiveness hasn't existed before in human history. Sure the printing press, radio and telephones all connected us in ways never experienced before their creations, but today's connections are different.
"The Internet is connecting us like a forest ecosystem is connected ----where all the pieces are all aware of one another. And the whole system tends to react as an individual organism. Because of the rapidity of feedback, it (the feedback) is virtually instantaneous,." says Loest, who received his Financial Analyst Charter designation in 1992.
What all this means is, when this guy is out looking for companies to invest in for either the IPO New Frontier Fund--- a non-diversified, and suited for wild cowboy risk-taker types--- or the IPO Millennium Fund--- a growth and income-type fund that invests in Internet securities and dividend paying utility stocks to soften volatile blows--- he's not just looking at company fundamentals. He's looking at a bigger picture.
....At the fund family's website, www.ipsfunds.com, you can get more of a sense of how management thinks, some of what it's buying and selling and why, and the risks involved in investing. Regarding the risks for wannabee shareholders in the IPS New Frontier Fund, you'll read: "We buy scary stuff. You know, Internet stocks, small companies. These things go up and down like pogo sticks on steroids."
The IPS Millennium Fund, on the other hand, currently has 100 stocks in its portfolio with utilities making up over 31 percent of it. That growth and income combo could make the fund less volatile. Neither funds are for jumpy investors. Understand that before investing.
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