newjerseynewsroom.com

BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

BOROSON ON MONEY

Good news! Two exciting mutual funds have just opened up, and their lead manager is experienced and knowledgeable.

Beyond that, he's warm, talkative, and unpretentious.

As icing on the cake, the two funds are right here in the Garden State – in Summit, of all places. Meaning: We Jersey journalists now have a good source of copy for years and years to come.

And did I tell you that you can buy the funds without paying a huge sales charge? (There's a yearly 0.25 percent 12b-1 fee for marketing expenses for the A shares if you buy shares through one of the platforms like Fidelity, Schwab, or TDAmeritrade – which is acceptable.) Minimum first investment: $5,000. Phone: (866) 383-7667.

"Value" investors, of course, look for good, cheap stocks. But such investors can differ markedly from one another, which explains why some do wonderfully and some do woefully. Marcus is a deep-value investor. Unlike typical value investors, he searches for bargains not at garage sales or flea markets, but at junkyards. Typical value investors tiptoe in when everyone else seems a bit blue; deep-value investors rush in when (to quote, perhaps, Lord Rothschild) blood is running in the streets.

Marcus learned the ropes from one of the legendary deep-value investors of our time, Michael Price, who learned the ropes from another legendary deep-value investor, Max Heine, who launched the legendary Mutual Series funds, now in Short Hills, back in the 1940s. The Mutual Series funds are to mutual funds what the Yankees are to baseball: perennial winners. And Marcus worked at Mutual Series for almost 14 years. (Marcus seemed as excited as a schoolboy when I promised him a CD of a famous panel discussion, back in 1983, in which Max Heine himself and Phil Carret, another famous investor, had participated.)

He grew up in Long Island, and was to the manner born: His father and uncle had run a small brokerage firm. He himself was mesmerized by the stock market early on, and by the age of 12 was subscribing to Fortune and Forbes.

He went on: "I loved thinking about stocks and reading about stocks, and I even put my bar mitzvah money into stocks. I made a lot of mistakes, but I just loved the stock market. I used to watch PBS every night, and I would go to the library to take out books – who the hell bought books in those days? I would take out books by or about money managers, take them all out, and there weren't that many guys who wrote books."

He went to college at Northeastern – famous for its work-study program. "It's the best thing that ever happened to me," he says now. "I got to work at IBM and at banks in Boston. One bank did back-office work for Mutual Series, and I wanted to do my last internship in New York, and my boss referred me to Michael Price. I had an internship for six months in 1987, and I got to watch him and his team operate before and after the crash of 1987. It was the most fascinating experience I've ever had."

He started working for Price, answering the phones. "I was a customer-service rep, and worked my way up. I worked at the trading desk, went all through the ranks, and when I left I was head of all European investments." He became the sole manager of the European fund – and was co-managing almost all the other funds. In 2000, when he left, he was managing over $14 billion, which was more than half the funds' assets.

He then began running a Europe-focused hedge fund, for a rich Swedish industrialist. The man's daughter eventually started working for Marcus. When the industrialist died unexpectedly, the eldest daughter was 24, and "My junior analyst became my largest investor."

The daughter needed help managing the many companies she now controlled, so Marcus moved to the operating side – hiring and firing CEOs and helping to transform the companies. "Most analysts just pick stocks," he says. "I got to actually help run companies" – an experience, he believes, that gives his Evermore mutual funds an edge.

Those Evermore funds are flexible. They can sell short (bet that stocks will go down), buy the bonds of companies in trouble, do all the things that hedge funds do. But unlike hedge funds, Marcus points out, you can get your money out anytime...you know what the funds have bought...and you don't pay the managers an arm and a leg.

His office is in a small, humdrum brick building in Summit, and Evermore has just one floor. Not the fancy-shmancy modern quarters I expected for an important new player in the mutual fund field.

NJN: What in the world led you to open a Europe fund just when Europe seems to be heading down the toilet? I just learned a new word: PIIGS. For those European countries in deep trouble. Portugal, Italy, Ireland, Greece, Spain.

Marcus: We're crazy.

No, I'll tell you, we want to go where there's panic, distress, concern, and huge uncertainty. That's Europe today.

If you and I had been in this room one year ago, we would have been saying, "It's over for the dollar, the euro is going to become the reserve currency for the world." We would have been talking about how oil would be priced in euros.

The weak dollar was yesterday's news. Now it's a year later, all of a sudden the euro is yesterday's news. "It's over for the euro, the dollar is the magic bullet to cure all."

My point is...things do change. And we want to go where there's the most uncertainty and concern - where the biggest bargains are.

That doesn't mean that we're going to buy Greek stocks.

But it means that we should be focusing on them to understand the valuations. Because investors will figure it out.

We don't believe that the euro is going away. They created the euro to make them more competitive with the U.S. and Asia. And guess what? They need it now more than ever!

And yes, they've exposed the flaws of the euro, and now they have to work on fixing it.

When it gets fixed, it would look a lot like the U.S. in 2008. People who had the gumption to buy stocks at the end of 2008 got unbelievable returns in ‘09.

I don't know whether Greece is late or early 08, but I do know, we need to be looking at it. I've been investing in Portugal and Spain for over 20 years, and some of the best investments I've ever made were in those markets. A few weeks ago, Spain released its official number for unemployment: 19 percent. And you know how governments are. They want everything to look great. If the best the government can do is say we have 19 percent unemployment, you can guess what the real figure is.

NJN: 25 percent.

Marcus: Exactly.

It's a tough environment, but there are real pockets of value.

Still, everyone is probably talking about Asia, Asia, Asia. They all want to be in Asia! There's a huge party going on in Asia; I want to go where they're not having a party.

Besides, there's a huge difference between companies in Europe today. There's Old Europe, those big lumbering conglomerates, and not all of them are going to change. But think of a company like Siemens. Siemens is going through one of the most radical restructurings we'll see in our lifetime. A 150-year-old company, shedding assets, refocusing, they've woken up! They've realized that business as usual means dying – they needed to change. So they're moving production out of Germany, they're saying that if we can't be No. 1 or No. 2 in an industry, we'll sell it or spin it off to shareholders.

A company like Siemens is trying to prepare itself for the next wave of growth. But even in Germany you've got the next company, and their attitude is, "Hey, we're 150 years old and if we just sit back and do absolutely nothing, things will come back to our way of thinking." That company's going to die.

Things have changed. You have to be more aggressive. We're in a low-growth environment, so these companies are buying growth – and they're not taking no for an answer. They're saying, "We're going to own you, no matter what." The way Kraft went after Cadbury.

When you sort of put all those deals in the meatgrinder, what comes out at the other end? Spin-offs – because these companies start refocusing – and that's the sort of the thing we love. Companies that are being spun out, companies coming out of bankruptcy, out of restructurings.