Since British-born Andrew Cox moved to Denver from New York in 1972, he has, like many of his Colorado neighbors, learned to ski. He has also learned to ride around the bumps in the investment trails without changing course every time a new gust of wind blows his way.
Mr. Cox is vice-president and senior portfolio manager for the Denver-based Founders Fund, a mutual fund that, under his strategy, has consistently moved up on investment performance lists. The firm made these gains, Mr. Cox believes, because it shares a trait with many other money management firms in the West: It doesn't get caught up in the pressure to change direction every few months.
"When you're in an area with a lot of other money managers," he says, remembering the years he spent as a portfolio manager in New York City, "it's hard not to get caught up in what's happening right now and to think in terms of today or two or three months time.
"One of the secrets to consistent management is having conviction to do the work, decide on a position, and stick with it," he said in a recent interview during a visit to the Boston area. "The temptation to change strategy every three months or year is very great. Most people succumb to it and most people have mediocre results."
Perhaps he can be forgiven for seeming a bit smug. His investment performance since being put in charge of two of Founders' mutual funds in 1976 and a third in 1978 has been far from mediocre. One fund, Founders Special, has moved from under 400 on the Lipper Analytical Survey of 600 funds to the top 100 . In 1979 it was in the top 25.
Mr. Cox's slow-on-the-trigger attitude does not mean he never changes the stocks in his portfolio from time to time. It means "you spend a lot of time deciding what investments qualify under your strategy." Thus, while the strategy may change very little, the individual stocks may change a great deal.
"It also means I spend a lot of time on evaluation," he notes.
What Mr. Cox is looking for, in the case of the Founders Special fund, are smaller companies growing at rapid rates. This does not include high-risk "start up" businesses, but firms that are small when compared with industry leaders.
Being located in Denver, Mr. Cox has had plenty of opportunity to find companies that meet these criteria by looking in an area receiving a lot of attention lately: energy. Over 20 percent of the fund's investments are in oil and gas exploration or oil service companies, a far larger share than for any other group.
"There has been a total change in the energy picture," in the Denver area in recent years, he says. (For his purposes, the Denver area includes most all of the Rocky Mountain states, as it is the only major city with a full range of business and investment facilities in that region.) "Four or five years ago, there were only one or two local companies" heavily involved in energy production in the area. But as the potential of several oil and gas basins has grown, so has the number of oil-related enterprises.
For an investment firm interested in rapidly growing companies and in energy, the coincidence of its location and the oil and gas discoveries have worked out nicely.
"There's no question it's been a help to us, having these companies on our back door," Mr. Cox says happily. And if the deregulation of oil prices leads to even more energy development, it would be another boost to the fund.
Since Mr. Cox entered the investment business, many of the rules of the mutual-fund industry have changed considerably. In the early 1970s the industry embraced many salesmen interested in making a sale and thousands of unsophisticated investors wanting to make money quickly. Sometimes, to keep a customer, a fund would purchase shares in a firm the customer had heard about. But if a person is buying shares in a mutual fund today and planning on giving its portfolio manager a few "tips," they should change their plans.
"We don't do that any more," he points out. Though this does mean losing the occasional adamant client, "we believe most of our shareholders would like to know the fund is managed in a consistent way. . . . We don't invest in most of the companies we look into."
Besides oil and gas, the fund has also been buying shares in several high-technology firms. A number of high-tech companies have either moved to or expanded in the Denver area. Firms like Hewlett-Packard, IBM, and Texas Instruments have opened facilities in or near Denver, he notes. Their reasons for moving there include the climate, the scenery, and the fact that real estate prices are "if not low, at least sane."
The Founders Fund itself will be expanding, probably sometime in 1981. It won't be adding an office at the bottom of a ski run: Like a growing number of funds in recent years, it will join the high-interest game of money market funds.