There Is More to Investing Success Than Tech Stocks

By TOM PETRUNO

Sept. 13, 1995 12 AM PT

In 1995, it’s been almost impossible to earn spectacular stock market returns without a big stake in zooming technology issues.

Almost.

With the help of mutual fund-tracker Morningstar Inc., we identified a handful of stock funds that have outpaced the industry averages this year even though their tech holdings are minor--less than 10% of assets, compared to the 30%-plus tech stakes of many other funds.

Within that low-tech group of ’95 stars we looked for funds whose results also were above-average in the five years ended June 30, to weed out potential flashes in the pan.

What follows are mini-profiles of three funds whose managers have proven to be adept stock-pickers while ignoring Wall Street’s scary herd move into technology this year. For investors who are eager to put money into the market today--but are fearful of buying many tech issues at these heights, or at all--these funds may offer a lower-risk, alternative route:

* Baron Asset Fund, New York. Manager Ron Baron, who founded this $200-million fund in 1987, has nothing against technology. In fact, he believes that corporate and personal investment in high-tech equipment “is in an early stage” worldwide and will continue to boom.

But in a fund that seeks to hold stocks for years rather than months, Baron doesn’t want to own technology equipment makers or software firms, whose individual shelf lives often turn out to be painfully short. “I’ve always preferred investing in companies using technology rather than the ones making it,” he says.

Discount brokerage Charles Schwab is a classic example of a firm that consistently makes the most of technology to expand its reach and offer customers new and better investment services, Baron says. Although Schwab stock has more than doubled this year, Baron says “I could see tripling my money in Schwab over the next four to five years” as more Americans join the ranks of investors.

Baron’s holdings also include personnel-placement firm Robert Half International, temporary help agency Olsten and technical training company DeVry Inc.--all of which are involved in placing and/or training workers for companies that increasingly need a technology-proficient labor force.

* Quest for Value Fund, New York. Almost by definition, a “value” fund avoids high-flying issues like tech stocks. Yet manager Eileen Rominger’s favorite stocks--financial services issues--have been almost as explosive as tech shares this year.

Credit goes in part to falling interest rates, which have enhanced earnings prospects for Rominger’s bank and insurance stocks. But she has focused on firms that have intriguing niche stories rather than just make a blanket bet on lower rates, she says.

Exel Limited, for example, is a product-liability insurance firm that runs “a great business” in an industry with high barriers to entry, Rominger says. American International Group sells extremely popular life insurance/investment products in booming Far East economies. Banking giant Citicorp also is a play on foreign markets, where the firm is “almost coining money” on credit-card operations in developing nations, Rominger says.

Outside the financial industry she owns such names as McDonnell Douglas, May Department Stores and Avon Products. A common thread in her $350-million fund, besides relatively low stock price-to-earnings ratios: “I’m always looking for the low-cost producer. They tend to be the winners [in their industries] in the long-term.”

* Weitz Value Fund, Omaha, Neb. A Warren Buffett disciple, Wallace Weitz has in recent years found some of the best Buffett-type “hidden-value” companies in two industries: Cable television and financial services.

Many of those stocks have scored for him this year after slumping in 1994. Mortgage banker Countrywide Credit, for example, has nearly doubled this year, but Weitz notes the stock still is priced at just nine times estimated 1996 earnings. He also remains enamored of BankAmerica and Student Loan Marketing Assn., and has followed Buffett into Wells Fargo and Salomon Inc.

The $140-million fund’s cable TV holdings, including Tele-Communications and Comcast, may be more controversial from some shareholders’ viewpoints, given the stocks’ gyrations in recent years. But Weitz continues to be attracted by the firms’ strong cash flows and the intrinsic long-term worth of their franchises, he says.

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Low-Tech Funds

These three stock funds have achieved above-average gains this year with very little or no exposure to popular technology stocks.

Fund: Baron Asset

5-year return thru June 30: +98.0%

Year-to-date return: +30.1%

Phone: 800-992-2766

Major holdings: Charles Schwab, Robert Half Intl., DeVry Inc., Smart & Final

Fund: Quest for Value Fund

5-year return thru June 30: +87.9%

Year-to-date return: +32.0%

Phone: 800-232-3863