Monday, April 30, 2001

When Bears Go Long

As portfolio manager of the Prudent Bear Fund, David Tice has made a name for himself with bearish calls. Forbes gives his $165 million fund an A+ in down markets and an F in up markets. But Tice does more than short stocks, for even now 14% of his stock portfolio consists of long positions. What stocks is this bear buying now?

Gold and silver shares—because they tend to be countercyclical. Tice says the U.S. economy's slowdown means trouble for the dollar and that's good for dollar hedges like gold. He owns Harmony Gold (nasdaq: HGMCY - news - people ), a South African firm with sales of $491 million in its latest fiscal year. Tice describes Harmony as a well-managed and efficient integrator of acquisitions and notes that the stock trades at just nine times trailing profits. It yields 3%.

More speculative is Tice's holding in Avigen, an Alameda, Calif.-based developer of gene-therapy products. He likes the science, not the bottom line—the company's deep in the red. The attraction is Avigen's "AAV Vector" gene therapy; this technology allows a modified virus to carry a therapeutic gene into a target cell and could cure hereditary emphysema and other diseases.

Henry Van der Eb is another chronic bear who is finally having his day. He is the manager of the Gabelli Mathers fund, which blends a large fixed-income portfolio with long and short equity positions. This earned his fund a Forbes grade of A in down markets and F in up ones. Last year the fund made 5%, putting it 14 points ahead of the S&P 500. He's still bearish, figuring the market's price/earnings multiple should fall from a recent 21 to 16. But for the moment he has closed out his short positions and has found a few stocks to like. Example: OfficeMax.

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