Does the marriage of Harry Dent and the
fund family create a unique alchemy of investment ideas?
The best-selling author is lending his name and theories to the
AIM Dent Demographic Trends
fund. (See a previous
story for more details.) Maybe a sub-adviser agreement doesn't exactly make a marriage, but it is pretty flirtatious. Dent has enjoyed a favored status with AIM for a number of years as a speaker and consultant.
Here is some quick background: AIM is a true momentum-earnings-driven, bottom-up-growth company. You won't find any style drift here. The word "value" in AIM
Value fund means the firm looks for good value, but in growth companies with positive earnings momentum. AIM is probably better known for its $2.5 billion
Aggressive Growth fund.
In 1993, Harry Dent wrote a book,
The Great Boom Ahead
. In it, he predicted the Dow would "streak to around 8500 between 2006 and 2010." At the time, that was a very bullish scenario, and some people accused him of sensationalism to market himself. It obviously turned out to be conservative.
What is not remembered by many is the discomforting other prediction he made in his book: "The burst that follows the boom will be every bit as devastating as the upturn will be salutary ... starting around 2010 ... I predict the onset of the Mother of All Depressions." Ouch! Here is a
MBA thoroughbred economic demographer who is telling us when to sell short. Shades of the now-discredited Ravi Batra, when he predicted "The Great Depression of 1990" in 1988. How many books did he sell riding the fear wave?
I don't mean to suggest Dent will be discredited. To the contrary, he is a highly credible guy with hands-on entrepreneurial experience as well as academic research. In his 1998 book,
The Roaring 2000s
, subtitled, "Building the Wealth and Life Style You Desire in the Greatest Boom in History," he predicts a Dow "of at least 21,500 and as high as 35,000 as the baby boomers and recent wave of immigrants move into their peak spending years around the year 2009." I do find it a bit of a paradox that Dent has great admiration for
, who, as we all know, is one ingenious value investor, and yet Dent ends up linked to an avid growth fund company.
Since the publication of his book, he is even talking about the possibility of Dow 40,000. Some of Dent's forecasts:
- "If the 45 to 54 age range is the peak for earnings, spending, savings rates and stock investments, you would expect the stock market to perform the best as
baby boomers move into this age range."
"The sudden emergence of information technologies along with the peak spending years of the baby boom generation will usher in a new era of prosperity and sweeping changes."
"As we approach 2009 ... you should be increasing caution and conservatism as our economy enters a deflationary period of decline ... Bonds will be the biggest beneficiary of a long deflationary spiral."
Dent also suggests in his book an allocation of 30% to 35% in large-cap stocks. Perhaps this is where he would suggest investing in the AIM Dent Demographic Trends fund. Is this new fund an attention-getting marketing strategy? Of course! There are two powerful marketing forces at work here. AIM has a very strong distribution system through brokers, financial planners and investment advisers. AIM funds have a 5.5% load on their A Shares (see my column
The ABCs of Mutual Fund Share Classes). Several securities companies offer fee-only programs in which participants can access AIM funds without the load. That said, AIM has a very enviable track record for many of its funds.
Dent won't be picking the stocks in this new fund. He brings a top-down perspective to the fund. His job includes pre-empting the rest of the crowd by picking the hot sectors as early as possible. The hot sectors now are technology, health care, telecommunications, financial services and consumer stocks.
He identifies sectors as they relate to his S curve. The curve starts with innovation, moves to growth and then to maturity. He tries to identify sectors in the innovation stage. Once he does that, it is up to AIM to identify the stocks within the sector.
AIM's Ivy McLemore told me that a portion of the fund will be invested in Asia. "One country Harry is high on is Korea," McLemore says. While a maximum of 25% of the fund can be invested overseas, McLemore expects it to be in single digits for now.
The fund will invest primarily in large-cap growth stocks, with Lanny Sachnowitz, 35, as the lead manager. Sachnowitz has managed the AIM
Charter fund since 1991. Charter has a decent, though not outstanding, track record. It has returned 24.5% for one year, 21.9% for five years and 17.2% for 10 years. The management team also includes Ed Larsen, 58, who earned his stars primarily at
Small Cap Growth, from 1991 to 1996, and Derek Webb, 38.
From the standpoint of a pure-growth earnings-momentum investment philosophy, I like the idea of this fund.
You may find the following quote interesting:
Demography is destiny. A nation's future depends to a great extent on the people who inhabit it -- their numbers, their ages, their education, their health, their ambition to achieve. All forecasting must start with demography, because the changing composition of a people -- especially by age segments -- drives almost everything else.
Dent? No, it's from Knight Kiplinger's 1998 book,
World Boom Ahead: Why Business and Consumers Will Prosper
I'm beginning to think there is something going on here.
Vern Hayden is a certified financial planner in Westport, Conn. He is a financial consultant and advisory associate of Financial Network Investment Corp. He also is an owner of Hayden Financial Group. His column is not a recommendation to buy or sell stocks or to solicit transactions or clients. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While he cannot provide investment advice or recommendations, Hayden welcomes your feedback at
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