The Anti-Buffett: Hot Stocks, Quick Trades
This growth investor likes tech and market momentum
Patience is a virtue that Warren Buffett emphasizes in making his investments, which can linger for years before they take off. Patience is a virtue that Glenn Fogle says he can't afford.
Fogle is the fast-trading comanager of American Century Vista, a mutual fund that rides the momentum of growing, midsize companies with red-hot stocks. He's among the investors who've proved they need not toe the Buffett line to be successful. Fogle, in fact, has done it in just about every way opposite of Buffett's: rapidly buying and selling shares, investing heavily in tech, picking pricey glamour stocks, and then dumping them at the first sign of trouble. If Buffett is the Superman of the markets, Fogle could be his Bizarro, the comic book character whose powers are the complete opposite of the Man of Steel but who is often a hero nonetheless.
Fogle's formula could blow up in the wrong hands, and Vista has had its bad quarters. But over the past decade (Fogle has been lead manager since 1993), the fund's average annual return has beaten the S&P 500 index and the typical midcap growth stock by more than 2 percentage points, according to Morningstar.
Staying ahead. Most striking is Vista's turnover, which typically exceeds 200 percent, meaning the fund is buying and selling, on average, its entire portfolio more than twice a year. Most of the trades reflect Fogle's effort to stay ahead of losers; he rides winners but sells quickly when something sours. "It's basic human nature to want to deny you're wrong," Fogle says. To admit error takes discipline, which Fogle says is a trait of any successful investor. Whether it's Buffett, former Fidelity manager Peter Lynch, or hedge fund manager George Soros, each can first describe a straightforward investment strategyand then stick with it. Fogle says he became a momentum, growth-oriented investor because that's the approach originally employed by James Stowers, founder of American Century Investments, which Fogle joined in 1990.
"But there are multiple ways to beat the market," says Fogle, who avoids no particular sector, unlike Buffett's aversion to tech. Vista, in fact, had about 30 percent of its assets in telecom and tech at the end of March. Fogle will bet heavily on an industry if he finds companies that meet two criteria: accelerating earnings and a stock price rising faster than its peers. "He not only wants good companies; he wants the stock market to like them, too," says Morningstar's Christopher Davis.
Then Fogle and comanagers Brad Eixmann and David Hollond study the fundamentals, looking for companies with stocks they think can keep climbing. Fast-rising shares in two makers of airplane parts, for example, caught their attention a couple of years ago. Precision Castparts and B/E Aerospace shares had already quadrupled or better from lows as investors sensed airlines overseas were growing enough to overcome sluggish U.S. demand. Fogle saw factors that should keep the momentum going, including a race between Boeing and Airbus to build a new airliner. It didn't matter who won, the parts makers would benefit, Fogle says, and he has ridden the shares up 200 percent or more.
Chasing highfliers makes his investments all the more risky. They can swoon as quickly as they soared, so it's always smart to keep the exits in sight to prevent a catastrophic loss. "It isn't offense that's important," Fogle says. "It's how well you play defense." That lesson came home as a young man, when Fogle saw the quick demise of a longtime family business. His dad and granddad ran a shop making parts for oil drillers, but then the bottom fell out along with oil prices in the 1980s. Fogle earned an M.B.A. in finance at Texas Christian University, where he also taught a year. He still brings academic theory to his practical investing.
But don't try rapid trading at home. Vista has access to resources, including data and analysts, that are unavailable to retail investors, Fogle says. The fund also taps American Century's private trading networks to help keep trading costs down. Another risk to rapid trading is higher taxes, says Tom Roseen, an analyst at Lipper, adding that Vista appears to manage those as well. Fogle says selling losers quickly helps generate the losses to offset short-term gains.
Described by colleagues as well grounded and practical, Fogle says he can't think of any vices like Buffett's love for Cherry Cokeexcept maybe adopting kids. Fogle and his wife added four adoptees to their two oldest. "It's really addicting," he says. And there he starts to sound more like Buffett, talking about the importance of family and a sane life in the Midwest-American Century is based in Kansas City. "It's away from the noise and the distractions," Fogle says. That also helps maintain investment focus, he says, and discipline.
This story appears in the August 6, 2007 print edition of U.S. News & World Report.