Tiny Fund Bets Big on Overstock.com

When Overstock.com (OSTK Quote) shares collapsed two years ago and the CEO responded by railing against Wall Street conspiracies, most fund managers bailed out.

That's when Glenn Surowiec started buying.

Surowiec is co-manager at Alsin Capital's (TURNX Quote)Turnaround Fund (TURNX), a tiny mutual fund that looks for scary situations and goes all in.

"The basic strategy is to find companies that we think are being plagued by temporary, or cyclical, factors," Surowiec says. "It's an all-cap fund, and it's concentrated," he says.

I'll say. Surowiec routinely has most of the money invested in a handful of names. "The fund's performance is driven by five or six positions," he says.

Right now just over 10% of the money is in Overstock.com, his second-biggest stake. "It's obviously a controversial name," Surowiec acknowledges.

Don't just look at the online retailer's spectacular plunge from grace. Look too at the unnerving behavior of the founding CEO Patrick Byrne, the "Oliver Stone" of the stock market. His conspiracy theory about market speculators has at times encompassed The Wall Street Journal, the Securities and Exchange Commission, organized crime on two continents, as well as TheStreet.com, publisher of this Web site (see note at end of this article).

No wonder everyone fled. The shareholder register shows that Turnaround is the only fund holding a significant stake.

Yet Surowiec believes the company's problems are nowhere near as bad as Wall Street believes. Management simply lost control of basic stuff such as technology and inventory during the company's meteoric growth, he says. They're now fixing those same problems, and he believes the turnaround is already happening. "The company is in much, much better shape than it was 12 months ago," Surowiec says.