A couple months back in this space, Dan Rubin of the Rubin Investment Group in Century City’s Fox Plaza, made the call that the Nasdaq tech wreck wasn’t over. He was right. As of early last week, the Nasdaq had slumped by about another 25 percent.
Back then, Rubin based his prediction on the number of jumbo blocks of stock as in $3 million to $5 million boulders that were up for sale at discounts of 15 percent to even 50 percent off their trading price. The blocks were usually being sold by management or early investors in a stock in other words, smart money. Rubin’s stock in trade is to buy the big blocks “off price,” and then sell in smaller chunks at market prices, hopefully making money on the spread (which may be shrinking as he sells).
Now comes again Rubin, this time very confidently calling for a rise in the Nasdaq to 2850, or about 35 percent up from its recent bottom around 2100, and the move will be complete before the pennant stretch of baseball’s upcoming season.
Rubin says, “In January, we saw big blocks for sale of up to 50 percent discount off of market. Now, it is down to 15 percent, and that’s on better, more liquid companies. The selling pressure is off.”
Additionally, Rubin says that while the total market capitalization of the Nasdaq is down almost 70 percent from its peak (the market cap has declined even more than the index), investing flows in Nasdaq stocks are down only by 40 percent to 50 percent. Therefore, relative to total Nasdaq market cap, inflows are creeping up again.
“This market has been oversold. I am seeing an increase in equity financing, and I think this summer there will be another hot IPO (initial public offering) market,” predicts Rubin.
He expects many larger companies will split off divisions this summer, through IPOs.
So what stocks does Rubin like? “I think a great bet is the QQQ,” he answers, referring to the ticker symbol of the security that mirrors the Nasdaq Composite Index. “A 35 percent gain in less than a year isn’t bad.”
Mutual Mash
For sheer reading pleasure and information, San Fernando Valley resident Ken Weitz’s fundalarm.com Web site, is a scathingly sardonic review of the mutual fund world.
In this month’s review, he ridicules Robert Mohn, who runs the Chicago-based Liberty Acorn USA Fund. It turns out, Mohn recently told CBS Marketwatch.com that he liked “finding that special stock before it’s discovered by the rest of the crowd,” and identified three “sleepers” Indianapolis-based ITT Educational Services Inc., Chicago-based Telephone and Data Systems Inc. and Atlanta-based National Data Corp.
Weitz did a little homework, which any investor can do quickly and online today, and discovered that ITT Educational is owned by 221 institutional shareholders, and that institutions hold 95 percent of the shares outstanding. Telephone and Data Systems is owned by 500 institutions that own 70 percent of the shares. National Data Corp. is owned by 295 institutions, which hold 83 percent of shares.
Weitz snorted, “If there’s a sleeper stock in here, we must be missing it. We don’t mean to single out Mohn (OK, we do), but this kind of routine manager B.S. never ceases to amaze us. Does Mohn really think that he’s found three undiscovered stocks? In that case, he’s just scary. Or, does he think that we’re all morons, and no one will be able to verify what he says? Does he have so little respect for his investors (and potential investors) that he doesn’t care what comes out of his mouth? Or, does he figure that any mention in the media is better than nothing at all, and nobody pays attention to this stuff anyway?”
Weitz is correct in his latter speculation: Most reporters, on the air or in print, do not have the time and resources to challenge every assertion made in interviews.
Mohn was not immediately available for comment last week.
Free Lunch
That it is hard to charge for anything on the Web seems to be a lesson being learned every day by financial America, as was seen in TheStreet.com, which went free last year. And recently iExchange (originally of Pasadena), envisioned as an online marketplace for stock tips, changed its plans to charge for advice and instead has all analysts give out their “buy” signals or other advice for free.
IExchange, which has moved to Dallas, is opening up a mutual fund based on the “community intelligence” of the investing public that frequents the site, and post their ideas. In that regard, it will be something like the Mid-Wilshire-based Stockjungle.com, which already has a “community intelligence” fund up and running.
It’s still too soon to tell whether a community intelligence fund can beat the market or predict trends, perhaps by tapping into investor sentiment early, said Michael Witz, founder and CEO of Stockjungle.com.
In 2000, the Stockjungle community intelligence fund (which buys stocks based on selections of best-performing analysts) lost 1.7 percent, vs. a 9.1 percent tumble on the S & P; 500 index. Of course, one year does not a proven winner make.
So far, Witz’s fund is tiny, at $3 million. But he recently inked deals to distribute the fund through San Francisco-based brokerage Charles Schwab & Co. and the Boston-based Fidelity Group of mutual funds.
“We are a nice product to add to an investor’s mix,” said Witz.
Jump Not
Jump Investors, a venture capital group formed by Randy Kaplan, has pulled in its horns. Kaplan, who made a mint by working for Cambridge, Mass.-based Akamai Technologies Inc. early and taking lots of stock, started Jump Investors in 1999 to make tech investments, and so far has made 30 bets.
Kaplan said last week that the investments were going well only one true clunker but no new companies are being funded. Kaplan said he is bowing out for awhile due to pressing family concerns and a desire to work on philanthropic efforts.
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
