Magazine article Black Enterprise

Staying Ahead of the Pack

Magazine article Black Enterprise

Staying Ahead of the Pack

Article excerpt

Black-managed mutual funds outpace overall sinking domestic stock funds

After a miserable fourth quarter, last year ended with a whimper for many mutual funds. According to Morningstar Inc. in Chicago, the average domestic stock fund lost almost 8% in the last three months of 2000, dragging down returns for the second half (-4.73%) and for the entire year (-0.23%).

Nevertheless, several funds owned and operated by African Americans bucked this trend, with strong second-half and full-year returns. Ariel Appreciation (CAAPX) and Ariel (ARGFX) funds, for example, gained more than 9% and 12%, respectively, in the fourth quarter, en route to outstanding 18.82% and 28.77% returns for the year.

"We stuck to our knitting" says Eric T. McKissack, portfolio manager of Ariel Appreciation Fund. "We avoided companies selling at unreasonably high prices, which were the ones hit the hardest last year. At the same time, we gained from renewed interest in financial stocks."

As evidence that Chicago-based Ariel Capital Management has a knack for picking well-valued companies, McKissack points out that several holdings of both funds were acquired in takeovers last year. "We mainly own small- and medium-sized companies," he says. "Such companies are relatively inexpensive so larger companies are buying them. With some of the stocks we owned, the takeover price was more than double the trading price."

Going forward, McKissack expects the housing market to strengthen, which could bode well for such holdings as Fortune Brands (NYSE: FO) and Newell Rubbermaid (NYSE: NWL). Other favorites: Energizer Holdings (NYSE: ENR), the battery company; Cendant (NYSE: CD), which has franchise operations such as Avis and Century 21; and Apogent Technologies (NYSE: AOT), which makes laboratory products used in the booming biotechnology business.

Participation in biotechnology paid off last year for Brown Capital Management Small Company Fund (BCSIX). …

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