Aggressive approach pays off for fast-shifting stock picker

Andrew Cupps fell in love with the stock market as a kid. Now he manages $140 million in the Strong Enterprise Fund.

The love affair began when he was 13 and living in Kalamazoo, Mich. Back then, "Drew" mowed 12 to 20 lawns a week and plowed his earnings into stocks.

"I became fascinated with the market," Mr. Cupps recalls. He charted stock-price movements, read annual reports, and talked to brokers.

With the $280 he made in his first lawn-mowing summer in 1983, Cupps bought 10 shares of Upjohn Co., a pharmaceutical company. In the next several years, his portfolio grew with his earnings - and it rose in value.

Nowadays, Cupps is making good money for investors.

"I'm investing in change," says the investment prodigy in a kind of sales pitch. "The key is to understand how the world is changing and capitalize on these changes for our shareholders. The world is changing at an accelerating pace. But it's hard for people who are working to figure out where the changes are."

This investment philosophy has been lucrative.

So far this year, money put into his fund's shares has grown about 67 percent. Started just a year ago, Strong Enterprise is too new to get a rating from Morningstar Inc., a Chicago firm that tracks mutual funds. But the no-load fund - no sales fee - ranks in the top few among funds aiming for aggressive growth and willing to take risks to reach that goal.

Cupps saw some of his lawn-mowing portfolio vanish when he got to college - Harvard University, in Cambridge, Mass. Each year Harvard takes one-third of the wealth of students getting financial assistance.

Cupps recalls skipping class to watch the market at times of excitement. He was already managing some $100,000 for family and classmates.

He graduated in 1992 with an economics degree, which, he says, gives him "a decent knowledge base" when trying to figure out the economic environment.

Cupps started his professional career with Driehaus Capital Management in Chicago as a research analyst. In 1994, he joined the Milwaukee-based Strong group, with 30-plus funds managing a total of $30 billion, when Dick Strong offered him a private account of $10 million to manage.

His portfolio performance was good enough that Cupps was made manager of the Enterprise Fund at its inception.

Operating out of Chicago, Cupps and two analysts talk to top corporate brass, attend investors' conferences, and apply some investment software and a routine they have developed.

The routine involves five variables: stock valuation, confidence in management, quality of the industry, stock charts, and the "timeliness" of a company (say it's launching a new product cycle that could boost profits).

With this information programmed, Cupps holds that he can buy or sell quickly in the market as developments merit.

Nor does he hesitate to do so. Portfolio turnover is high - more than 200 percent. That means shareholders could face a substantial capital-gains tax bill.

"Tax sensitivity is not our No. 1 or No. 2 priority," admits Cupps. It is share gains.

"Daring should be this fund's middle name," notes Morning-star. But "such nerve has paid off handsomely thus far."

Cupps admits his fund's aggressive style results in price volatility. This means its shares are appropriate in only varying degrees for investors. Older people might want just 5 percent of their portfolio in his Enterprise Fund, young people maybe 30 percent, he suggests.

And putting shares in a tax-sheltered vehicle, say a 401(k) plan, avoids capital-gains taxes.

Enterprise Fund has some 72 percent of its assets invested in technology stocks.

Top holdings include Applied Materials and PRI Automation. Cupps is counting on the semi-conductor industry and the firms supplying that industry with equipment to bounce back from the financial crisis in Asia.

With the supply of computer chips tight, the industry will be able to raise prices and expand.

Cupps also has put money into firms providing software that businesses use to make their presence felt on the Web.

These include Broadvision and Vignette. "Every major corporation in America has to get on the Web," he says.

(c) Copyright 1999. The Christian Science Publishing Society