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October 19, 2003
Dear Mr. Michael,
We look forward to once again being accepted into ABC Funds.
The past few years have been a revealing journey through the
morass of greed with countless occasions to ponder and appreciate
both the clarity of the words "fundamental value" and the
inherent wisdom in your approach to managing money.
There is no substitute for patience and value is the best
friend an investor can have.
Sincerely,
K.H.
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Occasionally a client will leave the
ABC Funds and decide to return several years later. While
some of our redeeming clients may go on to bigger and better
things, most do not and subsequently lose a good portion of
their hard-earned capital. This, I believe, was the case
during the 1998-2000 period.
The mid 1998 to mid 2000 interval
represented a most difficult time for value managers and the
ABC Funds. The high technology sector was the rage as stocks
like Nortel, JDS, 724 and 360 Networks soared in value.
Initial public offerings with little more than a
"tech" suffix literally doubled on the first day
of trading. Investors became greedy. Many felt little need
for professional money managers and rationalized that they
could do far better on their own.
At the beginning, some did quite well
as the tech mania gathered momentum. But alas, as with most
"feeding frenzies" good things eventually come to
an end. In retrospect, the technology craze was no different
from the 17th century Dutch tulip bulb mania, previous boom
and bust real estate cycles and the 1979-1980 run up of gold
to $800. Unfortunately for many, history had repeated as
trillions of dollars were erased from portfolios.
When I received the above letter I was
truly moved on several counts. I would like to share my
thoughts:
1) I was particularly touched by the
sincerity and erudite commentary of this individual. Many
people would be too embarrassed and full of ego to return to
ABC Funds, let alone to submit a straight from the heart
letter of this sort.
2) The writer's description of this
period as "a revealing journey through the morass of
greed" quite eloquently described the investment
scenario of the time. Moreover, "with countless
occasions to ponder and appreciate both the clarity of the
words fundamental value and the inherent wisdom in your
approach to managing money" the writer offered a real
world reflection on the subsequent decline of high
technology and the huge financial losses that befell many
investors.
and lastly
3) "There is no substitute for
patience and value is the best friend an investor can
have" perfectly sums up our ABC Funds investment
philosophy.
Irwin A. Michael, CFA
