Up and Down 17th Street: Marsico doubts recession, plans 'measured growth'

Published March 21, 2007 at midnight

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Tom Marsico is finished adding to his mutual fund lineup after rolling out a pair of new products. He isn't stressed about the economy and the stock market, despite the volatile stretch, and he thinks railroad shares are cheap.

Those are a few of the thoughts the Denver-based money manager shared as the 10-year anniversary of his company, Marsico Capital Management, looms on the horizon.

The firm has unveiled plans for the Marsico Global Fund, which is set to debut as early as May 31. The move comes just a few months after the introduction of the Marsico Flexible Capital Fund.

"These will be the last new funds you'll see from us for a long time, maybe forever," Marsico said in a rare interview Tuesday. "We really want to offer what I call all-purpose funds that meet a need for investors."

Now the veteran stock picker has answered that call.

The company has expanded dramatically since Marsico founded it in 1997 after leaving Janus Capital. Assets have risen to about $90 billion from $4 billion at the end of 1998. Once the global fund is launched, the firm will have six portfolios. Marsico Capital, part of Bank of America, also manages products for its parent's fund family and oversees portfolios for other financial companies.

As assets swell, it can make a fund manager less nimble, said Dan Lefkovitz, an analyst with Morningstar. "It's a concern," he said.

But Marsico said "measured growth" remains a top priority. "At every level you get to, you're always well aware of performance," he said. "And we don't feel the size we're at now restricts our capability of being a high-performing company."

Plus, he sees plenty of opportunities overseas. The rise of the middle class in Mexico, Brazil, China and India creates an attractive climate, he said.

The Marsico Global Fund aims to invest at least 40 percent of its assets in stocks outside the United States and to hold between 50 and 100 companies, a document filed with the Securities and Exchange Commission showed. Fund shareholders will pay $160 a year in fees for every $10,000 invested, a charge that seemed pricey to Lefkovitz.

The portfolio will be able to take advantage of the global stock-picking work the team already is doing and is hitting the market in response to demand from clients, Marsico said.

Cory Gilchrist, who runs the Marsico 21st Century Fund, will have the reins.

Turning to the market and the economy, the University of Colorado graduate, who also has an MBA from the University of Denver, said he's upbeat. The growth stock specialist doesn't see a recession. Some slowing in the economy, he said, is OK.

"Wall Street is famous for predicting nine of the last four recessions," he said.

"What's interesting is if you go back several years and look at the amount of times the market would have a 4 to 6 percent correction. . . . Then in 2004, '05 and '06, we've had only three or four occurrences of those sorts of corrections."

Maybe we're returning to a phase that's more in line with what we've seen in the past, he said.

"People are uncomfortable with the economic situation right now, and I think they're concerned about geopolitics, and they're missing the continued growth of corporate earnings," he said.

Among the stocks he likes domestically: Genentech, UnitedHealth Group, Procter & Gamble, Target, Monsanto, Comcast, Burlington Northern Santa Fe, Union Pacific and -FedEx.

"Hopefully we have a few coiled springs in the portfolio," he said.

Not everything pays off for Marsico. Stakes of Texas Instruments and Motorola, to cite a couple of examples, fared poorly at the end of last year before he unloaded them. But he has been known for delivering consistently strong results. His Marsico Focus and Marsico Growth funds are in the top 4 percent of their peer groups over the past five years, Lipper Inc. said.

Will he do anything elaborate to celebrate the 10-year mark?

"No, I don't think so," Marsico said. "We'll probably have a small get-together here at work, a couple of toasts, and then we'll go on with our work."

James Paton and David Milstead take turns writing Up and Down 17th Street. Contact Paton at patonj@RockyMountainNews.com or 303-954-2544.

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