Here's One Way To Use $10 Million
NEW YORK — G. HEWLETT BALDWIN is willing to invest your money. There are just a few conditions: It helps to have a yearning for equities (stocks), his particular specialty. It's best that you invest for the long haul. And, oh yes, you've got to have a minimum of $10 million. You don't have $10 million? Well, frankly, Mr. Baldwin doesn't either, but he manages the money of people who do. Baldwin is vice president and director of research for Pitcairn Financial Management Group, based in Jenkintown, Pa.
Pitcairn Financial is an investment management group that invests assets of the Pitcairn family - the 300 or so decendents of Scottish-born John Pitcairn, co-founder of the Pittsburgh Plate Glass Company back in 1883. That company is now PPG Industries. Over the past five- and 10-year periods the management group, which handles everything from investing to legal matters and family trusts, has realized annual gains of close to 20 percent.
About a year ago Pitcairn Financial decided to broaden its asset pool by seeking outside individual or family investors. But not too many. Just a few contributors - a factor certainly encouraged by the $10 million limitation. Today, Pitcairn Financial manages some $1.5 billion in assets, about $100 million from outside the Pitcairn family.
Where do the wealthy put their financial assets? And to what end?
The Pitcairn family selects stocks on the basis of informal guidelines, while thinking long-term. In part, that stems from the family's deepest beliefs. Most are members of the Swedenborgian Church; while there is no religious orientation to the management group's strategy, it is important, says Mr. Baldwin, that the companies selected for his portfolio have a genuine moral undergirding. Thus, the management group holds no tobacco stocks. And enhancing assets is seen as a legitimate biblical goal.
Baldwin believes in value investing - though he quickly puts his own spin on ``value.'' He likes companies that show potential earnings growth over time. He weighs the relative strength of the company and stock in a particular market segment. Baldwin also likes earnings surprises - a company that can now and then turn in an unexpected jump in profit. He also likes to buy stocks that are towards the bottom end of their long-term price range.
Case in point: The Great Atlantic & Pacific Tea Company.
Baldwin very much likes the long-term potential of A & P, which is currently trading at around $55, but has traded as high as $68 in the last year. In an industry where profit margins are tight, A & P continues to post growth, Baldwin says; the supermarket chain is showing muscle in such parts of the US as the East Coast, the upper Midwest, and Ontario, Canada. A & P also has a number of impressive local chains, including Waldbaum's and Food Emporium in the New York area.
Another example of careful stock selectivity would be May Department Stores. May, Baldwin says, has both national and local successes, including Lord & Taylor, Filene's in New England, and Hecht Company in the Washington, D.C., area.
Baldwin also likes the natural gas component of the energy sector.
But should the rich - that is, the very rich, let alone the not-so-very-rich - even be in equities at a time of economic uncertainty and possible recession? Not all financial consultants are as enthused about stock holdings right now. What about fixed investments - corporate bonds, safe US Treasury issues, or just cash holdings, such as money market funds?
Baldwin doesn't disdain alternative investments. He believes that decisions must be based on the unique needs of each individual. Still, he is convinced that dollar for dollar, equities outperform virtually all other traditional investments over time.
In fact, he sees nothing on the current economic landscape that shakes his bent for common stocks. The only real long-term threat, he believes, would be a significant run-up in inflation. But he doesn't see that for now, given the scrutiny of the Federal Reserve Board. Nor does he see a recession looming.