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August 04, 2003 at 08:00 PM
Full Speed Ahead
Quick Take: After soaring 109.3% in 1999, the Rockland Small Cap Growth Fund (RKGRX) returned a modest 4.9% in 2000 and then posted consecutive annual losses of 22.7% and 36.9%.
“I wouldn’t say that there were problems” with the fund over the last two years, says Richard Gould, who manages the portfolio. “Other than that we went through the worst bear market since the 1930s for growth stocks.”
As bulls have returned to Wall Street in recent months, the fund, which invests in rapidly growing small companies, has turned around. Rockland Small Cap Growth was up 37.7% this year through June. That put it ahead of its small-cap growth fund peers, which returned 17.1%, and its benchmark, the Russell 2000 Growth Index, which gained 19.3%.
The Full Interview:
To call money manager Richard Gould a growth-oriented investor may be a bit of an understatement.
Gould, who has overseen the Rockland Small Cap Growth Fund since it started operations in December 1996, wants to own companies whose bottom lines are increasing faster than their top lines and expanding by at least 30% per year.
Over the life of the portfolio, its companies have sported median earnings per share growth of 40%-75%, and that figure rose to a record high of 89% in the last quarter, he says.
In addition, Gould, who focuses on companies with market caps of $100 million to $2 billion, prizes those whose quarterly results top analysts’ estimates because, he notes, this can serve as a catalyst to lift their stocks.
Moreover, Gould says he almost always buys stocks when their prices reach heights they’ve never attained before. “In a brutal bear market, if stocks are still able to break out to new all-time highs, that means” a company’s financial fundamentals are “overwhelmingly good,” he reasons. Gould adds that studies he’s done show that when down markets start heading up again these stocks can move higher still within 12-18 months.
In picking stocks, Gould also favors companies with what he terms “significant” insider ownership. As a rule, managements control 10%-20% of the shares of the small companies he invests in, according to Gould, who maintains that having a stake in a business gives executives an incentive to improve its performance.
Just as he seeks companies whose executives are also shareholders, Gould owns a piece of Rockland Small Cap Growth. “I invest, personally, 100% of all the money I’ve ever saved” in the $103 million fund, he says.
Using his and other people’s money, Gould recently bought more shares of Align Technology (ALGN), which makes transparent dental braces, a product “that I really think is going to take over the market,” he says.
