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Monday, September 22, 2008
Buy Order
Roge Manager Sees Diageo as a Buy
Christina Scotti
FOXBusiness
With the economy shakier than ever, Steven M. Roge is betting on vacations evaporating--but cocktail hour? Not a chance.
"We don't pay attention to macroeconomic themes or tech analysis. This fund goes anywhere, invests anywhere," said Roge, the portfolio manager of the Roge Partners Fund (ROGEX)--he invests in people that he feels have a knack for making money.
One stock that Roge sees as a good investment in this rough financial climate is Diageo (DEO), the largest spirit owner on the globe with eight out of the 20 top brands.
“These are terrific [brands] that stand the test of time,” he said. “Guinness will be around for the next 100 years. Tanqueray and Johnnie Walker will be here when my grandchildren are around."
Roge explains how Paul Welsh, the company's CEO, has done a good job of spinning off assets and realizing Diageo's strengths.
Diageo "used to own Burger King," said Roge, "and then Welsh came in and said, ‘this is a spirits company, so let's get rid of these side thoughts.’"
"We [also] like companies with healthy balance sheets," he continued, "and now it's finally paying off… We always liked businesses without a lot of debt…We like to see how much cash is in the register at the end of the night".
Roge Partners Fund did sell its stake in Diageo at one point because "the fundamentals of business evaluation got ahead of itself," said Roge. But recently, it has gotten back into the Diageo action, buying the stock while it was at 52- week lows this past July.
"[With] the economy taking a downturn, most shareholders said people wouldn't go for the Smirnoff, that they would pick a store brand instead. They were wrong," said Roge.
Diageo makes up 1.5% of ROGEX.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
