Good as Gould
12/12/2003 12:00 am EST
"In 22 or so years of chronicling the ideas of asset managers, I've come across few whose idea flow and sense of small-cap timing are as good or better than Dick Gould's," says Thom Calandra, editor of StockWatch for CBS MarketWatch and The Calandra Report. Here he profiles the manager and some of Gould's favorite small-cap ideas.
"Richard Gould at Greenville Capital Management manages the $125 million Rockland Small-Cap Growth Fund (RKGRX), which is up more than 80% since Jan. 2. Gould believes the small-cap stock rally is just warming up. Gould's modus operandi is worth observing. He looks for sales-momentum trends with no one-time balance-sheet gimmicks. He spends 80 days or more each year on the road. He is an enormous believer in new technologies. His holdings MUST—repeat MUST— achieve or exceed the asset manager's sales-growth expectations each quarter, or he sells them. His holdings tend to exceed Wall Street profit and sales expectations by wide margins. He buys dirt cheap (based in part on price-earnings to earnings growth, or PEG, ratios). His Rockland fund stays 100% invested at nearly all times.
"Right now, Gould's best ideas came from the AEA trade group's convention that took place in early November in San Diego. About 170 companies presented their electronics-industry stories to more than 800 investors. ‘Ditech Communications (DITC NASDAQ), for instance, had a great presentation, and it appears that the wireless trend is more than amazing. Infrastructure has not kept up,’ he says. ‘You can make a call and get bumped off in seven minutes because there is not enough capacity out there. That indicates that companies like Ditech with voice enhancement technology and systems that double the amount of calls on the US infrastructure are just beginning their sales momentum.’
"Gould is active in other areas as well. He's a big believer in biomedical and technology equipment for consumers. ‘Seeing is believing. At AEA, there were these screens, liquid crystal on silicon, and you cannot beat the contrast ratio. I just bought an LCD-projection TV from Sony and it blew away what was available and it blows my mind.’ Gould's best bet right now in this area is a little company with the ticker HDTV. "Did you see the HDTV stats for October? Plasma units +177%; LCD TVs +635%. I met with the CEO of this great little company at AEA— liquid crystal on silicon for television sets. I think they will lock up the Chinese market. The name of the company with that HDTV ticker: SpatiaLight (HDTV NASDAQ).'"