Market Watch : The ‘Conservative Radical’ of Mutual Funds : Investments: By focusing on relatively few companies, Robert Gintel has turned his funds into top performers.
In his role as chief executive of three mutual funds, Robert M. Gintel has peered into an open-pit copper mine in Arizona, strolled the deck of an offshore oil rig in the Gulf of Mexico and driven an air-conditioned tractor around a parking lot in Moline, Ill.
Gintel likes a firsthand look at the merchandise before he buys.
His round-the-country shopping excursions are part of a unique investment strategy that has made his Gintel Fund, Gintel ERISA Fund and Capital Appreciation Fund top performers this year.
According to the conventional wisdom, a mutual fund should invest in a wide variety of securities to hedge against sudden losses in any one company or industry. But Gintel prefers to concentrate on only a few companies, leaving him and his five analysts time to thoroughly research and monitor their portfolio. And that means occasional visits to open-pit mines, oil rigs and tractor factories.
“You’d be amazed at how many institutions that manage a lot of money . . . have hardly any research staff,” Gintel said from his office in Greenwich, Conn. “You don’t want to rely on a third party.”
Gintel, 62, might be called a “conservative radical.” His conservative streak prods him to know everything he can about a company before investing. And he sticks with well-known names and avoids start-ups. But, once he is confident that a company shows particularly good earning potential, his radical side goads him to invest as much as 25% of a single fund in one company.
This approach has led to some blunders--particularly in 1987--and some stunning successes.
In 1988, Gintel’s average return was 28.7%, compared to 14.9% for the average growth fund, according to CDA Investment Technologies Inc. of Rockville, Md. Last year, the three funds had a 20.7% average return compared to a 26% return from the average growth fund.
The average growth fund had a minus-4.8% return on investment during the first four months of this year, while all of the Gintel funds had positive earnings. The Capital Appreciation fund ranked 150 out of 1,566 funds of all types; ERISA was ranked 143rd; the Gintel Fund placed 46th, according to CDA.
(With about 4,300 stockholders, the Gintel portfolios are no-load and open-ended mutual funds. No-load means there is no service charge for entering the fund; open-ended means there is no cap to investment.)
Much of Gintel’s recent success is because of heavy investments in Deere & Co., the Moline, Ill.-based farm equipment manufacturer, and Phelps Dodge Mercantile Co., a copper mining concern headquartered in Phoenix.
As did many other companies involved with farming, Deere appeared to be in deep trouble in the mid-1980s. But Gintel realized that most of its competitors had gone out of business or had been swallowed up by other firms.
As long as the company could continue to make production improvements, Gintel figured that Deere would ultimately turn around. He was right. The company’s stock shot up $50 in the past three years and sold for about $75.50 last week.
Today, the three Gintel funds own 550,000 Deere shares that, if cashed in today, would yield a profit of more than $12 million.
Phelps Dodge, the largest domestic copper producer, was also considered a basket case when Gintel started investing in the company two years ago. After visiting the company’s Morenci mine in Arizona, Gintel realized that a new copper-processing technique and frugal-minded management could turn the company around.
Moreover, Gintel realized that political upheavals in Africa and Chile, where so much of the world’s copper is produced, were creating shortages that would mean more demand for Phelps Dodge copper. At the same time, copper prices started increasing.
The upshot is that the Gintel funds have made more than $25 million on 570,000 shares of Phelps.
(All told, the funds have net assets of about $222 million.)
Despite Gintel’s penchant for research and caution, there have been mistakes--costly ones.
In 1987, the funds took a large position in Los Angeles-based CalFed Inc. and ultimately lost more than $13.5 million. The funds have also lost more than $6 million on preferred stock in Crossland Savings of Brooklyn, N.Y., although Gintel is hoping for a turnaround.
Gintel admits that losses like these--and his off-brand investment approach--have made some customers leery, even though the funds are relatively good performers. “I’m not sure if our strategy attracts people or scares them away.”