Treick-less Transamerica Funds Still Worth Owning

Their returns have slipped a bit, but new manager Chris Bonavico is staying the course.
Author:
Publish date:

SAN FRANCISCO -- The conventional wisdom goes like this: When a star manager walks, shareholders should follow.

Since chart-topper Phil Treick walked from

Transamerica Funds

last summer to start his own money management shop, many of you have written wondering whether you should get out as well. Concern is especially high on days like this, as

Amazon.com

(AMZN) - Get Report

, one of his former funds' top holdings, tanks.

Yes, the thirtysomething Treick is one of the brightest minds in the business and has racked up a record that is the envy of the industry. In 1998, when few managers could even match the market, both of his high-octane Transamerica growth funds zoomed past peers and the index alike, soaring better than 80% in a year, more than 50% higher than the

S&P 500

. (Particularly noteworthy was the hard-driving

(TPSCX)

Premier Small Company fund, which boasted those numbers while most other small-caps really suffered.)

Treick's signature stock-picking deserves a lot of the credit. Not afraid to take risks, he makes big bets in his concentrated portfolios with sector leaders and up-and-comers after identifying key economic themes. And though Treick isn't as famous as Transamerica's namesake headquarters building, one of the most distinctive on the San Francisco skyline, his young funds' stellar performances quickly became money magnets and he became the manager to watch.

Keep watching, but don't sell your shares just yet.

Treick's former funds, which also include

(TPAGX)

Premier Aggressive Growth, aren't in rookie hands. His sidekick Chris Bonavico, who has been with the firm since 1993 and with these funds for nearly a year and a half, is now in charge, and the former

Salomon Brothers

researcher had a lot to do with some of Transamerica's best picks. Among them:

Exodus Communications

(EXDS)

, the Small Company fund's biggest investment, up almost 400% this year alone. Ask him where the fund's headed and, not surprisingly, you hear that change is not the name of this new game. "The way I look for companies is the same. The way the fund is run -- a philosophy of leaders and scale businesses and concentration is the same."

So far, Bonavico does sound a lot like his former boss. Both remain big fans of Amazon.com, the largest single holding in the Aggressive Growth fund, a stock that Bonavico has long compared with another of his favorites,

Dell

(DELL) - Get Report

. "Amazon's business is so similar to Dell, which had me salivating from day one." And what about the argument that Jeff Bezos & Co. has yet to turn a profit and plans to ramp up its spending even more? Good move, says Bonavico. "It takes a billion dollars to build a brand. They're spending to broaden their opportunity and broaden their barriers around the business. I'm happy about that. Would they be profitable if they didn't spend? Yes. Is that the right thing to do? No."

Though he says he's committed to keeping many of the big winners that fueled these hard-driving funds, Bonavico also seems anxious to make his own mark. He can't talk enough about wireless, especially what he sees as the next phase: data.

"There's a real paradigm shift here, and that's what gets me interested. I look for big change and how can I capitalize on this." Recent bets: mobile phone giant

Vodafone AirTouch

(VOD) - Get Report

and the smaller and lesser-known

RF Micro Devices

(RFMD)

.

"We really are in the next phase of rapid growth in wireless, and that's data. It's gonna take a couple of years in the U.S. for this to happen in a big way. But the winners are visible before then. You have to do your work, you have to be right and you have to be early, because if you wait until it happens, you will have missed the move."

Of course, the willingness to make big bets in these highly concentrated funds will mean that they are not for the fainthearted. Although turnover has been relatively low, especially for growth funds, and Bonavico insists he's no trader, there's not much of a cash cushion here. The emphasis on tech stocks -- more than 40% of each fund, by far the largest sector stake -- also spells volatility. Another red flag to investors anxious to chase hot numbers: Returns so far in 1999 are nowhere near as strong as they were last year. Both funds have dropped out of the top third of their categories year to date, and Aggressive Growth is just a few points ahead of the S&P 500.

Bonavico says fund flows nonetheless have been steady throughout the transition. And those investors thinking of getting out might consider one thing -- namely, Phil Treick. Yep, he kept a fair amount of money in his old Transamerica funds. And that says a lot, coming from a hotshot manager who bolted Transamerica to put his own name on a new venture.

Brenda Buttner's column, Under the Hood, appears Thursdays. At time of publication, Buttner held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds. While she cannot provide investment advice or recommendations, Buttner appreciates your feedback at

TSCBrenda@aol.com.