Readers Rise to the Defense of Landis

A 190% return builds loyalty.

My recent column highlighted the poor performance of two stock picks that had been publicly proffered by fund manager Kevin Landis.

His fans didn't like that criticism at all.

Share your investing and mutual fund questions on the Dear Dagen board Landis did deliver a 190% return in his (TVFQX Quote)Firsthand Technology Value fund last year. That portfolio was also the top performer for the five-year period ended Dec. 31 with an annualized return of 58.2%.

However, I pointed out that two of Landis' recent stock recommendations -- Genesis Microchip (GNSS Quote) and Legato Systems (LGTO Quote) -- collapsed during January.

Reader Michael Sharkey thinks my criticism is premature.

"You are looking at the very short term. Landis tries to be way out in front," writes Sharkey. "The unique thing about Firsthand Funds is that the research actually starts from contacts working in the industries. ... Using this type of approach you often get some false starts, but in the long run his record is outstanding -- just because he is so close and so early. In fact in my opinion, the Landis method is about as thorough as research can be, which is evident by his record of picks in truly leading-edge technology."

Landis has indeed held long-time favorites through good and bad times. Chip makers PMC-Sierra (PMCS Quote) and Applied Micro Circuits (AMCC Quote) suffered terribly in the 1998 autumn selloff. Landis remained steadfast, and it paid off. Since the end of 1998, PMC-Sierra is up 595% and Applied Micro Circuits has soared 876%. And the stocks were the top two holdings in Landis' Tech Value fund at the end of December.

However, the purpose of pointing out these two recent stumbles was to warn investors that they shouldn't blindly buy stocks recommended by celebrity managers.

I have to believe that many individual investors don't have the time, patience or insight that Landis does. And these tumbles have got to hurt those who don't have five years to wait.

"Mr. Landis, like the rest of us, is buying a group. A couple go through the roof. A couple hang around. A couple go through the floor," writes Tom Storey. "Managers who tout stocks are just selling their ideas. If you can think for yourself, who cares what Mr. Landis thinks. Mutual funds are for sissies who can't research their own investments and want a Mr. Landis to blame for their problems."

These comments provide a perfect illustration of why you should own a broad portfolio of stocks.

But funds are for sissies?

Come on.

Funds are for individuals who don't claim to know more about tech stocks than every Silicon Valley developer with an online trading account.

Funds are for individuals who don't have enough hours in the day to pore over Wall Street's arguably useless research reports

Funds are also for those of us who can't own stocks because our employers won't allow it.

Thankfully, at least one reader agreed with my take.

"You are absolutely right. Never listen to a fund manager. I have had good tips from Landis, but one has to be careful," writes Betty Huffman.

You can listen -- just go elsewhere for corroboration.

More Funds for Trading

Tuesday's Wall Street Journal featured an article about an upcoming globally traded index fund from Standard & Poor's and three stock exchanges: the New York Stock Exchange, the Tokyo Stock Exchange and the Deutsche Boerse. The new exchange-traded fund would track a new, global 100-stock index.

Barclays Global Investors confirms it is in talks to run the index fund. "We're definitely in discussions to develop an exchange-traded fund that allow investors to invest this index," says spokesman Tom Taggart. But Barclays is already planning to launch more than 30 exchange-traded funds of its own beginning later this year. "At this time, BGI is very focused on launching its new products that are already in registration."

A globally traded index fund would, in theory, attract a broader base of investors. And with people buying and selling this product around the world on a few exchanges, the fund could attract more liquidity.

However, the facts are still sketchy. "We're slated to announce the whole thing next week. We're not in a position to get into details," an S&P spokeswoman said Tuesday.

The NYSE obviously wants to get into the exchange-traded fund business that's currently dominated by the American Stock Exchange. The Big Board's move further validates this burgeoning business, which has attracted more than $30 billion in assets. And as a general rule, more competition can mean lower prices for investors.

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