Mario Gabelli didn't waste much time before attempting to lift his asset management firm's sagging stock price.
A little more than a month after going public,
Gabelli Asset Management
announced Monday it would spend up to $3 million in a stock buyback.
Gabelli sold 6 million shares at 17 1/2 each in its Feb. 2 initial public offering. After topping out at a high of 18 3/ 4 in its first day of trading, the firm's stock took a 30% nosedive to a low of 13 1/16 in trading last Wednesday. Shares rose 3.6% after Monday's announcement to close at 15 15/16.
"It is probably a world record in terms of the time it took for a new public company to be buying back stock," says Scott Sipprelle, co-founder of
Midtown Research Group
, a boutique that specializes in new public companies.
Still, the move is "largely symbolic," he says.
"Gabelli is ... saying: 'Well, if you're dumb enough to buy the stock at 17 1/2 and sell at 15, I'm smart enough to sell it at 17 1/2 and buy it at 15,'" says Sipprelle.
The analyst's firm placed a lukewarm consider -- as opposed to a buy or avoid -- in its Feb. 2 report on Gabelli's initial offering.
"If you look at the overall asset management industry, there is concern over competitiveness," he says. "Margins are declining for everybody in a rip-roaring bull market; what happens in a downturn?" says Sipprelle.
Calls to Gabelli Asset Management were not returned.
Two other asset management firms that went public last year are suffering similar fates.
Waddell & Reed
closed Monday at 19 1/8, 17% below its offering price of 23 in early March 1998.
closed at 18 11/16, slightly below its May 1998 offering price of 19.
More Big Numbers at Amerindo
Amerindo Technology fund's numbers are going up again, and not just in the investment returns.
The fund is upping the front-end sales charge for its Class A shares to a whopping 5.75%, according to a
Securities and Exchange Commission
The higher load, up from 4%, applies to investments of $50,000 or less. The fund also charges a 3% redemption fee for all classes of shares sold within a year of purchase. Class A shares were first made available last year for a minimum purchase of $10,000.
Not that the $80 million fund doesn't give investors a bang for their buck. It returned 84.7% in 1998, and already is up 52% in 1999. For the year through March 4, it was the fourth-best performing fund tracked by
. (Fueling that performance was a 43% stake in
reported last week, the size of the fund's investment in that one stock triggered a temporary lapse in its tax status as a mutual fund.)
Because of the load, the fund would have to return 6.1% before an investor broke even on a $10,000 investment. In 1997, before the fund offered A shares, Amerindo Technology's return was a negative 18.1%.
Class D shares, which carry a minimum investment of $150,000, don't have a load, though their total expense ratio is a beefy 2.25%, according to Lipper. Class A shares carry a 2.5% expense ratio. Both are well above the average 1.7% expense ratio for a science and technology fund, according to Lipper.
A silver lining is that the load on the A shares goes down as you buy more. (Thus, the filing about the increased load was actually made under the heading "Volume Discount.") But while the load on A shares was previously waived if an investor purchased $150,000 or more, the fund has now raised the load-waiving amount to $1 million, according to the SEC filing. It appears that high-dollar investors might be better off buying the D shares, which have a $150,000 minimum and no sales load.
Calls to two Amerindo representatives were not returned.
Ex-RS Manager Sets Up Own Shop
Robert Stephens Investment Management
portfolio manager Ron Elijah says he is focusing the stock picking of his new asset management group on four sectors in which he sees high growth potential: technology, financials, health care and consumer stocks.
Elijah and another former RSIM manager, Rod Berry, will co-manage Robbie Stephens' $150 million
Information Age fund under a sub-advisory agreement with Elijah's new firm,
Elijah Asset Management
. In an interview during last week's tech selloff, Elijah said he was looking at adding to some favorite holdings that got pummeled. The fund's heaviest weighting is in software at 20% of assets; semi-conductors is next at 18%.
"We had to decide whether this is a cyclical downturn we're in, or just a correction," said Elijah. "And we've now fully convinced ourselves it's a pricing and new product issue" brought on, in part, by the specter of
new Pentium III processor -- which caused many consumers to postpone new computer purchases and forced down the price of Pentium IIs.
Now that the Pentium III is on store shelves, Elijah said the smoke has cleared, and sales have "kicked right back up." Indeed, the tech-laden Nasdaq was up a healthy 2.6% in Monday trading.
Elijah also is keeping an eye on the prices of Internet stocks. Some direct Internet plays in the fund right now include
Elijah jumped at the chance to strike out on his own after
Bank of America's
sale of Robert Stephens Investment Management to a group of company executives triggered a termination-of-contract clause with RSIM portfolio managers. The sale was finalized last week.
But Elijah's ties to San Francisco-based Robbie Stephens remain tight. In fact, RSIM -- now known as
RS Investment Management
-- is Elijah's first customer. In addition to Information Age, Elijah Asset Management will continue to run RSIM's $680 million
Value + Growth fund. Elijah has run both funds since inception.
At the new firm, Berry and former
NationsBanc Montgomery Securities
analyst, Bill Ong, will focus on technology along with Elijah, who will also cover the financial services industry. Former RSIM analyst Susan Richardson joins Elijah to oversee the health care and consumer industries. The firm plans to add a financial services analyst to round out the core group of stock pickers.
Elijah said he hopes to attract additional sub-advisory agreements, like the one with RSIM, to manage assets for other firms. Adding a lucrative hedge fund also is an option, though there are no current plans to do so, said Elijah.
The Information Age fund is up 47% over the last 12 months through Friday, ranking 29 of 59 tech funds tracked by Lipper. Value + Growth is up 30.0%, ranking 14 of 224 mid-cap funds.
Another Hike in Costs
The cost of owning RS Investment Management's $186 million
Growth & Income fund has gone up, despite the fund's lackluster performance.
The annual expense ratio is rising to 1.5%, up from 1.3%, on the A-class shares; B-class shareholders will pay 2.2%, up from 2.1%. RSIM is removing the cap that kept the fund's expense at their previous levels. The average expense ratio for growth-and-income funds is 1.3%, according to Lipper.
"The removal of the expense cap of the Growth & Income fund is a unique situation and is not currently indicative of any future changes," the firm said in a statement. It would not elaborate.
"The fund's fee change is consistent with its categorization as a mid-cap fund with an aggressive management style, and we are currently in the process of informing our shareholders," the statement added.
Growth & Income is up 6.9% over the last 12 months through Friday, ranking 388 of 601 mid-cap funds, according to Lipper.