Gordon Crawford rarely confronts top brass at companies in which he invests.
Indeed, the 48-year senior vice president at Capital Research & Management Co. and director of its parent, The Capital Group Cos. Inc., is known for his long-term investment approach. He's also regarded as one of the nicest guys in the business, besides being an incredibly successful media, entertainment and communications stock picker.
So, everyone took notice when, in a roomful of 300 analysts, Mr. Crawford told Tele-Communications Inc. Chief Executive John Malone he was unhappy over the price shareholders would get if TCI ever repurchased its new class of stock for its Liberty Media Holdings.
TCI originally offered to pay Liberty Media shareholders a 15% premium above its average trading price over the prior 30 days. Mr. Crawford's company owns 42.3 million shares, or 7.41%, of TCI.
"You're a shareholder. I'm a shareholder too. If there's anything I can do to make the stock go up, call me and let me know," Arden Armstrong, a media portfolio manager at Miller Anderson & Sherrerd, West Conshohocken, Pa., recalled Mr. Malone telling Mr. Crawford at the meeting.
Mr. Crawford called. He recommended the redemption be at an independently appraised private market value.
Sure enough, "When I got the second proxy a month ago, it was all in there," Ms. Armstrong said. "He's a very powerful investor. When he gets involved, people really listen."
Quintessential patient investor
Mr. Crawford is the quintessential patient investor.
Although the Capital Group, of which he's a director, leans toward being a value investor, Mr. Crawford ignores traditional methods of valuing stocks such as earnings and price/earnings multiples. He prefers to value companies through cash flow analysis, or their ability to generate cash.
Back in 1991, he placed a huge bet on Liberty Media, cut loose by TCI when Congress and regulators were considered tightening regulation of the cable industry. At the time, TCI shareholders could trade in their stock for shares in Liberty Media instead.
Because few other shareholders took advantage of the offer, Mr. Crawford's company ended up owning close to 40% of Liberty. His clients netted several hundred million dollars when the stock rose as much as 25 times within a short period of time. TCI reacquired Liberty Media in August 1994, and just this month created a new class of alphabet stock for its interest.
"Gordon Crawford and Capital Research are exactly the kind of shareholders you want," says Joe Fitzgerald, vice president and head of investor relations at Capital Cities/ABC Inc., another company in which Mr. Crawford holds a large block. "They know what is important. They don't get swept up either by the upside or the downside hysteria that affects the media business."
Mr. Crawford can afford to ignore market trends.
His uncanny ability to predict trends years before they are apparent - and bet huge blocks of money on companies he sees will emerge as long-term winners in those trends - has paid off.
He made a cool $250 million paper profit in just two days this month. First, he scored when The Walt Disney Co. announced plans to buy Capital Cities/ABC; then, the next day Westinghouse Electric Corp. finalized its deal to rescue CBS Inc.
Mr. Crawford's company, the investment management and mutual fund giant with around $200 billion under management, holds about 5% of Capital Cities' 154 million shares and 3% of Walt Disney's 517 million shares. That makes Capital Group the second largest shareholder of the combined entity (the Bass brothers are first).
The Capital Group also controls about 3.8 million shares of CBS, or about 5% of the company's outstanding shares.
And two weeks ago, the Capital Group's 3.4 million shares in the Spelling Entertainment Group Inc. were suddenly worth $6.4 million more the day Viacom Inc. announced plans to sell its 77% stake in the company.
Predicted cell phone tumble
Mr. Crawford also predicted the tumble cellular stocks took in mid-1989 after a huge run-up. In June that year, at the DLJ Cellular Industry Conference, Mr. Crawford was on the last panel to speak. Following round after round of optimistic industry outlooks, Mr. Crawford got up and pronounced stocks in the industry overvalued.
Within days, the cellular telephone industry, also battered by regulatory changes that week, went into a steep slide and didn't recover for another three years, recalls Dennis H. Leibowitz. Mr. Leibowitz, media and telecommunications industry analyst at Donaldson, Lufkin & Jenrette Securities Corp., organized the conference.
"He has had perhaps more influence on the Capital Group than anyone else I can think of other than John Lovelace," controlling shareholder and son of the founder of the company, said Michael Lipper, president of Lipper Analytical Services Inc., the New York-based securities industry research firm.
Apart from Disney and TCI, Mr. Crawford's other long-term holdings include Warner Communications Inc., now part of Time-Warner Inc., in which he has held a roughly 10% stake since 1972, except for a six-month period in the early 1980s when he correctly anticipated its Atari computer games business would hit the rocks.
Mr. Crawford refers to long-term holdings as "cigar-box stocks," says David Shell, portfolio manager at the $5 billion Liberty Investment Management, Tampa, Fla. These are companies Mr. Crawford says "you just want to buy and stick away in a drawer." He calls the new Walt Disney/Capital Cities combo an example.
"He is able to see through the minutiae and get to the heart of the matter when it comes to issues that affect stock price over the long term," says Ken Goldman, principal of the $13 million EnterMedia Growth Partners L.P., a Denver private investment fund, who has known him for years.
Just recently, Mr. Crawford has accumulated the largest outsider position in the Seagram Co. Ltd. (which got into the entertainment business by buying MCA Inc. from Matsushita Electric Industrial Co.). Mr. Crawford declined to discuss how much he had bought in Seagram.
"What really separates him from other institutional investors is he is not swayed by fads or emotions. He is much more willing to be a long-term thinker and go against the majority opinion at the time," says Mr. Leibowitz.
Not surprisingly, the mutual funds that Mr. Gordon manages portions of under Capital Group's unconventional team approach have performed well.
Through Aug. 3, the Capital Group's Growth Fund of America, a giant $6.9 billion mutual fund, had logged a 400% cumulative return since the beginning of 1985, compared with the 322.8% return recorded by the Lipper Growth Fund Index of 30 mutual funds. The fund has risen 27.1% this year, handily beating the Lipper Growth Fund Index by more than four percentage points. Its sibling growth fund, the $3.2 billion AmCap Fund has, however, lagged the benchmark, producing a 309.8% return over the decade, and rising 20.6% this year, compared to a 23% rise in the Lipper index.
Meanwhile, the $3.6 billion Fundamental Investors fund has returned 390.4% since the beginning of 1985, compared to a 309.7% return for the Lipper Growth and Income Fund Index of 30 funds. The fund has outpaced the index this year by more than three percentage points.
Virtually all of the Capital Group's equity funds, even the most conservative funds, include a fair sprinkling of media, entertainment and cellular phone stocks. They usually get a four-star rating (the top rating is five stars), from Morningstar Inc., the Chicago-based mutual fund research company, says Laura Lallos, analyst. And that is despite a steep 5.75% upfront fee, or "load," which makes it that much harder for its funds to compete.
While making such large bets on companies and industries can make a portfolio very volatile, that has not been the case with the Capital Group's mutual funds, Ms. Lallos says.
"They are not fast traders. They are not trying to trade on earnings momentum or use some of the techniques others use. They are long-term investors," she says.
Long term in Mr. Crawford's case usually means 10 or more years, not the usual five or seven.
Mr. Crawford admits he doesn't pay attention to quarterly earnings. He cites Turner Broadcasting Systems Inc., whose stock got roughed up recently because its earnings did not match analysts' expectations. "I have owned it for seven years and will probably own it 10 years from now," says Mr. Gordon, whose company owns 12.3% of Turner.
"I am more interested in the future of Cable News Network, (the company's) vertical integration and its (movie) libraries and none of that has changed when they reported earnings," he noted.
Earlier bets also have paid off.
In the 1970s, Mr. Crawford bet on conventional television, fueled by advertising revenues and the growth of consumer brand names; in the early 1980s, he moved money into cable TV and cellular telephones. Now, of course, he is betting on media and entertainment companies that produce and distribute programs.
"I'm a tailwind investor," he explains. "Entertainment is a worldwide (industry) and there are big tailwinds behind all these industries," he says.
His style is to understand the dynamics of an industry, and then pick companies that emerge as clear winners. Most of all, he looks for well-run companies where the managements know where they want to take the companies long term, and have the ability to execute those strategic plans.
And of the more than 100 companies he may look at any time, he says he probably spends time thoroughly analyzing about half.
"I always try to buy as much as I can of good companies that are attractively priced," he says.
No early clues
There's little in Mr. Crawford's early days that shows his penchant for money management, although his father, Morris "Rusty" Crawford, served on the investment committees of the Russell Sage Foundation, New York, the William T. Grant Foundation and the New York Public Library, among others.
"He was always a smart, very intelligent boy," says his father, chairman of The Bowery Savings Bank in New York from 1965 to 1980.
In fact, "Gordie" as he is known, didn't develop an interest in money management until he went to graduate school at the University of Virginia, where he got an MBA in 1971. He's worked at The Capital Group since then.
"I love doing what I am doing," says Mr. Crawford.
Although his stellar investment skills have made him a star in a business where stars are known for the size of their egos, Mr. Crawford seems to be an exception.
"He is without question one of the nicest and smartest guys in the business," said Edward Antoian, a senior portfolio manager who manages $1.8 billion in the media and entertainment industries at Delaware Management Co., Philadelphia.
Mr. Antoian recalls when he got started in the media and entertainment money management business 12 years ago, he'd would call Mr. Crawford for ideas. "I was a nobody, and he was warm and accessible," he says.
But even Mr. Crawford's legendary skills sometimes produce duds. He winces when he recalls his investment in Carolco Inc., an independent movie producer that bombed. He said he lost several million dollars on a number of failed independent movie producers.
Then there's his continued holding in Time-Warner, which has failed to produce the returns consistent with the rest of his portfolio. He also cites the timing of his move out of Capital Cities/ABC; he bailed out of it after Cap Cities acquired ABC in the mid-1980s; then he rebuilt his holdings.
" I violated one of my own rules - I sold a company that had great management," Mr. Crawford now says.