A Strategy For A Turbulent Market

Rob Lamb's new fund sticks to themes and wins big

We’ve heard you loud and clear! After our recent feature on Black Mutual Funds (“The Feeling is Mutual,” October 1997), you asked that we cover the industry more closely. Starting this month, we’ll do so quarterly in a new Moneywise column, “Black Fund Watch.” To lead off; we chose the Highland Growth Fund, managed by Rob Lamb.

Admit it. We’ve all had the same bittersweet experience. Some new gadget or trend takes the market by storm, and we’re left wondering just who’s making money thanks to that innovation.

Rob Lamb says his Highland Growth Fund (888-557-3200), launched in 1997, is just the trend-spotter designed for those of us who want to get in on the changes taking place all around. He will tell you his philosophy is much like that of any growth fund manager: he likes companies that are growing earnings per share 15% or more a year, but with a twist. “We think a stock portfolio is only as good as its engine for growth,” says Lamb. “That’s why we first look at changes in the world around us and then try to pinpoint the forces behind them.”

Lamb says he’s come across 10 “mega-trends” that serve as the cornerstone to his investment strategy. He calls them “delta forces” (after the letter of the Greek alphabet used to symbolize any sweeping change in calculus equations). The list includes many of the societal changes we’ve seen in the paper or even at the office: computer networking, leisure and retirement living (especially as the U.S. population ages and has more free time on its hands), global trade, managed healthcare and industry deregulation.

That’s not to say that trends alone” guide Lamb’s choices. Take Bay Networks (NYSE: BAY). While Lamb is impressed with the company’s computer networking equipment, it doesn’t hurt that Bay could well double current earnings per share to $1.20 in 1998. Another example is Physician Sales & Services (NASDAQ: PSSI), which distributes medical supplies, equipment and pharmaceuticals to office-based doctors nationwide. Lamb says the company is on the cutting edge after spending two years setting up an Internet-based information source for professionals, which should help PS&S double earnings next year. Another of Highland’s current favorites is International Telecommunication Data Systems (NASDAQ: ITDS), which ties into Lamb’s belief that companies are leaning on outsourcing to handle many tasks that were previously done in-house. ITDS currently provides billing and compiles data for long-distance, satellite and cellular telecom companies, a business Lamb says should fuel a 50% earnings growth.

THE MANAGER’S RESUME
In a little less than nine months, Rob Lamb’s Highland Growth Fund has already seen enough thrills and chills to fill a decade or so of investing. Once Lamb finished cutting the ribbons on opening day and started taking in new accounts, his fund raced off to post a 15% total return in a little less than a quarter — a figure most portfolio managers would die to reach in a year. No sooner had Highland Growth passed its first six-month mark, when the turmoil

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