New Orange County Growth Fund Posts Credible Performance in First 6 Months

When Jeff Kilpatrick, president of Newport Securities, launched the Orange County Growth Fund in April, it seemed that he couldn’t have picked a worse year to put his brainchild to work.

Since the stock market crash last Oct. 19, sales of stock mutual funds nationwide have run at their lowest level in three years as investors shy away from the market in favor of more conservative investments.

But Kilpatrick’s mutual fund of Orange County stocks, while still in its infancy, has gotten off to a good start. In the first 6 months, the fund has posted a credible performance, returning an annualized yield of 8.4%.

Since opening the fund, Kilpatrick has persuaded 19 brokerage houses in the county to sell it, including Paine Webber Inc., Bateman Eichler, Hill Richards and Sutro & Co.

Goal of $50 Million

That sponsorship has enabled the fund to raise $970,000 so far, a far cry from Kilpatrick’s eventual goal of $50 million, but not bad considering the slump in stock sales generally.

Most of that money is invested in a diversified portfolio of 26 Orange County companies, both large and small. The largest is American Stores, with $14 billion in sales, while the smallest is the $6-million-in-sales Rainbow Technologies, a Costa Mesa company that makes a device that prevents illegal copying of software.

Kilpatrick limits investments in a single company to about 5% of the fund.

Generally, companies must have at least $10 million in sales, proven products and profitable track records.

There are about 250 publicly traded companies in the county, he said.

By focusing on a relatively narrow universe of companies within one geographic area, Kilpatrick said his firm is able to conduct more detailed research than is usually available through a mutual fund.

The minimum investment is $2,000, and investors can cash out at anytime without a penalty.

Kilpatrick credits the initial success of the fund to the strength of a good idea. The Orange County Growth Fund cashes in on the county’s good name and strong economy by investing no less than 65% of its assets in corporations with local headquarters.

It is not that Orange County stocks have done anything noteworthy since the crash. But Kilpatrick is counting on the reputation of the county and its many healthy companies to bring in investors.

“The concept is to capture the growth of Orange County for investors. If I gave you the opportunity to invest in the best real estate in the county, you’d probably jump at the chance. Unfortunately that kind of investment isn’t available to most people,” Kilpatrick said.

“Yet, this fund provides an opportunity to invest money with the finest and best entrepreneurial minds in the county. If you could own a piece of the future of Orange County, do you really think you would lose money?”

Kilpatrick, even wrote a catchy advertising slogan for the fund: “The Orange County Growth Fund: Investing Today in Orange County’s Tomorrow for Your Future.”

And while Orange County does not function as an independent country, Kilpatrick makes it sounds as if it is almost a civic duty for Orange County residents to invest in the fund, sort of the Orange County version of a “Buy America” campaign.

“It’s a community concept,” Kilpatrick said. “In a philosophical sense, we’d like to think that some day the fund will be a catalyst to help Orange County grow. If we reach our target of $50 million, which I think we will, we could buy shares in initial public offerings of young companies. Why should investment money go out of the county?”

ORANGE COUNTY GROWTH FUND AST Research* American Stores Archive Bergen Brunswig* Bridgford Foods CMS Enhancements Carl Karcher Enterprises Datum Diceon Electronics* Eldorado Bancorp Emulex FHP International FileNet Fluor Fluorocarbon* Kasler Corp.* Micro D Microsemi Newport Corp. PDA Engineering Printronix Rainbow Technologies Ropak Safeguard Silicon Systems* TransTechnology Trimedyne Western Digital * Convertible bonds Stocks and convertible bonds