Comstock Partners, Inc.June 27, 2002
How low can it go? Comstock Capital Value's Minter and Weiner
By Justin Wiser, CBS.MarketWatch.com
Through one of the greatest bull markets in history, Comstock's Charlie Minter and Marty Weiner sat dumfounded while the rest of the world basked in the sweet glow of seeming success.--YARDLEY, Pa. (CBS.MW)
The pair correctly called the bubble in the go-go market of the late '90s and started shorting stocks immediately -- the only problem was that it was three years too soon.
Now, two years into a bear market, Minter and Weiner's Comstock Capital Value Fund is finally scoring some fantastic gains with an eclectic portfolio net short on stocks by more than 100 percent. The pair is also knee-deep in bonds and placing bets on the euro.
The $83 million fund is bare of even one long stock position.
Such pessimism proved prescient during the second quarter, when the Comstock Capital Value Fund (DRCVX: news, chart, profile) proved to be one of few mutual funds to pull out a double-digit gain -- up a stunning 26 percent amidst the market's swift decline, according to Lipper.
The bad news is, they see no immediate let up in the market's downward spiral.
As of Tuesday, Comstock Capital Value is up roughly 20 percent since the beginning of the year and scored a 21 percent gain for calendar year 2001.
The Comstock fund has not fared well over the long term, however, posting an annualized loss of 6.3 percent over the past 10 years.
CBS.MarketWatch.com recently spoke with Minter and Weiner about past woes, current success, and their outlook for the stock market's future.
Q. Comstock was early with its bearish call on stocks and actually suffered through the final years of the greatest bull market in history. What was that experience like?
Minter: The bubble was an excruciatingly painful period for Comstock, because we did fight it. As the years went on, we got more and more bearish as the bubble took place. We started shorting stocks on a net basis in about 1997, and that continued in 1998 and 1999. We lost about 25 percent a year back then. It was a disastrous situation for us and our fund. I had to wind up selling out to the Gabelli (GBL: news, chart, profile) organization. When the fund got down to under $100 million, we had to do something. At its peak, the fund's assets were probably about $700 million.
When it made sense to sell the fund, a lot of people wanted to buy the fund but most of them wanted us to turn over the management, too. When you know you're right on something, something that's as clear as the nose in front of your face, you just can't possibly give up management of the fund at a time like that. We've very pleased that we went with Gabelli because it gave us the chance to at least see our vision through.
Q. What made you so negative on stocks then, and today?
Minter: There were quite a few concerns. The biggest thing was valuation. The market got tremendously overvalued in 1997, and more overvalued in 1998 and 1999. And valuation is still probably the primary issue. At market troughs, the average price to sales ratio is about 0.59, and it's 1.6 now. Price to cash flow averages 5.6 at market troughs and it's 14 now. And the price to book averages about 1.20 at troughs and it's 5 now.