Gains Climb at Scrappy Small-Cap Rockland Growth

These days, it's much cooler to boast about how little you work than how much. (Just ask Amazon.com (AMZN) chief Jeff Bezos, who is proud to proclaim his ability to get at least eight hours of shut-eye a night.)

But money manager Dick Gould hasn't bought into that trend. Asked about a recent vacation, he is quick to say that he took, not golf clubs, but a laptop so he could download stock information each night to check on the status of his stocks.

When he says his stocks, he means those of the Rockland Growth fund. Because, unlike many fund managers, he actually puts his money where his mouth is -- investing all his personal savings (both taxable and tax-deferred) in this nearly three-year-old small-cap fund. "It's my money," says Gould. In fact, most employees of Rockland's parent company, Greenville Capital Management, invest in the fund, just one reason this little-known portfolio is worth watching.

The numbers are another. In a market where bigger has definitely been better, when it comes to stock size, Rockland Growth can boast returns that not only easily outpace its peers and the index, but can even go up against many respectable large-cap funds. Gaining 20% in 1997, up 25% in 1998, and delivering 32% in the year to date, Rockland Growth is among the top performers in its category. According to Lipper, it ranks third among 439 small-cap funds since its inception in December 1996.

An aggressive trading and investing strategy helped propel the $24 million fund to the top of the charts. Slow and steady is definitely not the motto at Rockland's Delaware headquarters. Gould picks companies with growing earnings, and he's not shy about trading quickly. With more than half its assets in the tech sector, that can mean chasing high-flyers and often taking gains after only a matter of days.

"You could sit on your hands and do nothing. But the only game in town has been trading Internet names," he admits.

A tricky game, to be sure, but one that Rockland has so far managed successfully. Gould sold most of his sizable Internet holdings when they spiked in April, then bought them back in early August. Some, such as China.com (CHINA), which he bought at 52 and sold in the 80s a few days later, are very swift trades. "I could have held onto it, but if the market gives you trading opportunities, you have to take them," he says.

That means shareholders better be prepared to take a high turnover ratio. (This year's, as of Aug. 31, is a whopping 538%!) But despite a tendency to trade, Gould has managed to keep taxes fairly low by strategically using losses. Here, investors benefit from his big personal stake in the fund. "I have all my taxable money in there, and I just don't want to pay taxes. Last year, there were no taxes paid at all," he says.

And that's not to say that he always trades on a dime. Core positions have been around for a while. Among them, TranSwitch (TXCC), which he bought two years ago for six bucks. It's now in the low 60s, but is still a buy, insists Gould. "As Intel's microprocessor is to the PC, TranSwitch's transmission processor is to telecom. This is one of those names you could get a five-bagger out of still."

Another favorite: Amkor Technology (AMKR), which packages and tests semiconductors. "There is a huge trend toward outsourcing this service. If you're gonna buy semis, buy a company that will grow faster than the market because of an outsourcing trend." Even though Amkor's stock has already made quite a move, trading near 20, Gould predicts it deserves to be well in the 30s. "It's a really great play that has been ignored."

So has Rockland Growth fund, for that matter. It doesn't have much of an ad budget and is still $1 million in assets short of making the newspaper mutual fund listings.

Shareholders won't likely want to share the secret of this top performer. Small size is critical for a small-cap fund. "It takes me five seconds to buy or sell a stock. For some of the big funds, it might take five weeks," Gould says. "If you start buying a stock at 18 and buy a million shares, you finish at 26. If I start buying at 18, I'm done at 18. Maybe 18 1/8."

Of course, with the kind of returns it's managed to post of late, Rockland Growth may not go unnoticed for long.

But impatient investors might want to think twice before getting in. This fund really only makes sense for the long-term shareholder. Volatility goes hand in hand with this sector and with Gould's trading practices.

Still, although it sounds as if the 39-year-old Gould, laptop always in hand, wouldn't make a great vacation partner, you know that when you lose money, he does too. Luckily, that's been rare so far -- something that can't often be said for a small-cap fund in the last few years.

Let the Sun Shine In

More on the push for openness in the industry: Good move by Standard & Poor's to kick two Putnam Investments mutual funds off its "select" list. (See our recent story.) The problem isn't performance, but disclosure. Seems funds can only get a spot on the list if they disclose their holdings frequently. And Putnam's standard of twice a year (the bare minimum mandated by the Securities and Exchange Commission) just doesn't cut it.

The defense by most fund companies that refuse to reveal their holdings more often is that they don't want investors to trade on this info. That's bull. Even for a market mover like (FMAGX)Fidelity Magellan, it doesn't hurt to have a more open policy. Right now, stocks trade on rumors that a fund is buying or selling. Better to have the facts out there, so we as fund holders can better judge our investments, and all investors can get the truth instead of just the scuttlebutt.

Not true, says Reader J.T. Boss, who takes me to task a bit for last week's column applauding the moves by the OpenFund to post its portfolio holdings and changes in real time on the Web. He writes: "Okay, that's it, now Brenda has gone completely insane! After all, would she want her husband to suspiciously question the doctor's every move during their daughter's birth? Or how about pestering a mechanic with an unending stream of whys during a motorcycle tune-up?"

What do you think?

Should mutual fund companies release portfolio holdings more often? Yes. More is more. Give us real-time holdings info. No. This is too close to meddling. Leave the details to the manager.

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