SAN DIEGO - Aggressive growth manager Nicholas-Applegate has gotten a boost this year from what is, for it, an unlikely source - value.
The San Diego-based money manager, poster manager for the growth boom of the late 1990s bull market, has been walloped by the upheaval of the past year. The Nicholas-Applegate Global Technology Fund, which returned a record-setting 494% in 1999, has returned -43.7% in 2001 as of June 30, according to Morningstar Inc. Chicago. Returns for most of the firm's other growth portfolios, both mutual funds and separate accounts, likewise, are posting double-digit negative returns this year, according to Morningstar and Pensions & Investments' Performance Evaluation Reports.
But the firm's little known and much overshadowed large-cap and small-cap value portfolios have registered returns for the first half of 2001 that are among the best in their respective categories, according to PIPER.
In addition, those two value portfolios have won a total of three new mandates in 2001.
The small-cap value portfolio's performance put it in the top decile of its PIPER universe with a return of 18.9% year-to-date through June 30. The large-cap value portfolio is up 3.4% for the same period, placing it in the third decile for its category. The funds bettered their respective benchmarks: the Russell 2000 Value index returned 12.8% year-to-date through June 30 and the Russell 1000 Value index returned -1.3% for the same period.
Mark Stuckelman, who heads the value strategies team at Nicholas-Applegate, is quick to point out that even though the firm's reputation was made as a growth manager, these are not growth funds in value clothing. Mr. Stuckelman said the portfolios have holdings across the value spectrum, including deep value and more traditional value stocks. The winners this year in the large-cap portfolio have included HealthSouth Corp., Cendant Corp. and Citicorp. Winners in the small-cap portfolio include Great Plains Software Inc. and two companies in the trucking industry including Swift Transportation Inc. and Heartland Express Inc.
The small-cap value team found winners in the trucking industry despite a challenging economic environment. Portfolio manager Kelly Ko said that as gas prices and a slowing economy take its toll on the trucking industry and the weak firms go belly up, the strong improve their standing.
Good value is the first and foremost criterion, but stocks also need good balance sheets and a catalyst for change, said Mr. Ko.
The team has been underweight in technology but is beginning to see more values in that area. "It's very difficult to buy a value tech company," said Mr. Ko.
Mr. Stuckelman said the misconceptions held by some consultants - that Nicholas-Applegate's value strategies were getting by on growth elements - can be laid to rest by the team's performance for the past year and a half.