A Hard Lesson To Learn

Paul Viera's picks reinforce the need for diversification

Every once in a while, investors need to be reminded of an important investment rule: diversify, diversify, diversify. Last year, Paul Viera, CEO of Earnest Partners L.L.C., crafted picks for BLACK ENTERPRISE readers that lost 45.26%; but it could have been a more disastrous situation had he not balanced his picks with more traditional sectors. The demise of MarchFirst and the downward spiral of Net2Phone caused the tumble. But the two other options offered–Chiron and Elan–remain “solid plays,” according to the Harvard M.B.A., whose firm is No. 6 on the BE ASSET MANAGERS list with assets of $2.56 billion under management.

Back in his Atlanta-based office, clients are comforted by an 8% year-to-date return tacked on to gains from last year’s small-cap portfolio that yielded 40%. “We were able to take our money and move on,” admits Viera, a 21-year investment veteran.

His advice to today’s investor: “Look at owning companies whose customers have money–sectors like oil, healthcare, and energy are obvious places.”

Although his mood remians upbeat, here’s the lowdown on how Viera’s Private Screening picks actually performed:

Chiron Corp. (Nasdaq: CHIR) is “a good place to put money,” says Viera of this Emeryville, California, company that develops biopharmaceuticals, vaccines, and blood testing devices. Its profitable products target AIDS, hepatitis, cardiovascular disease, and cancer. Its recent sale of a meningitis vaccine to the Canadian province of Quebec for $50 million bodes well for future growth. Recommended at $49.88, it dipped 2.09% to $48.84. “We still own it. It’s a biotech play that we like,” he says. “It’s still a ‘buy.’”

Elan Corp. (NYSE: ELN) rose a decent 5.07% since Viera’s recommendation. The Dublin, Ireland-based firm traded for $57.38 on August 24, 2001, and the outlook is good. Elan’s increased distribution in the United States and its lines of drugs that battle Alzheimer’s disease, Parkinson’s disease, and hypertension may increase profits. “The Alzheimer’s drugs could be a blockbuster for them,” predicts Viera, whose company still holds the stock.

Net2Phone Inc. (Nasdaq: NTOP), the Newark, New Jersey-based firm that allows users to make phone calls and send faxes over the Internet, usually at a lower price than wireless or fixed-line calling, was a good idea that went terribly wrong. Viera explains that pressure from the Baby Bells hampered the company’s ability to forge powerful alliances, ultimately moving Net2Phone into a secondary position in the industry. Soon after, investors lost interest.

When it was recommended, Net2Phone sold for $27 and climbed as high as $34. In September, the firm was selling at an embarrassing $3.93–a painful 85.44% decline from last year.

MarchFirst Inc. (OTC: MRCHQ) is every investor’s nightmare–having the price of a stock you own dwindle down to zero. At the time of recommendation, when it sold for $21.69, Viera believed the firm was “in a fast-growing sector and they’re involved with some very stable clients.” Unfortunately, the Chicago-based Internet consulting firm officially filed for bankruptcy on April 11 when it was trading for a piddling $0.31. (MarchFirst does not have a chart because its shares are no

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