Mutual fund eyeballs hands-on entrepreneurs

Monday, May 5, 1997 | 11:59 a.m.

Of the thousands of publicly traded companies on the financial exchanges, which one will be the next Microsoft?

The analysts who have the answer may have crossed paths with investors ready to jump aboard with their capital last week at Bally's.

The Money Show, an all-star gathering of financial gurus, featured analysts who offered their own theories of what it takes for a company to make the leap from garage start-up to global market leader.

Among the presenters at the Money Show was a co-manager of a mutual fund who rides the roller coaster of a volatile group that strives to stay ahead of the Russell 2000 index.

David Lettenberger, co-manager of the Marshall Small-Cap Stock Fund, focuses on high-growth companies with market capitalizations as high as $1 billion and as low as $100 million. The fund concentrates on companies with manufacturing and operations facilities in the United States.

A mutual fund is a collection of stocks, bonds, commodities and other securities. By virtue of their numbers, a variety of securities gives the investor more prospect for success: While one stock within the fund is down, another would be up.

When searching for the next Microsoft, Lettenberger actually seeks the next Bill Gates. He likes companies that are operated by entrepreneurs still closely involved in the day-to-day operations.

"I'm also looking for what we call ego investment," said Lettenberger. "These are the types of CEOs that have that special drive to succeed."

When evaluating a company for potential investment, Lettenberger and his associate, Steve Hayward, make on-site visits to the companies.

"We do a lot of relationship building," Lettenberger explained. "We try to get to the point that feel we really know the CEO. And, we do a lot of talking to the entire management team."

To balance the process, Lettenberger also makes contact with a variety of Wall Street analysts. Since Marshall Funds is based in Milwaukee, he doesn't have daily contact with Wall Street. However, he has built a list of analysts covering different industries on which he relies for inside information.

Also among the 10 largest holdings of the fund is Heftel Broadcasting Corp., a company with which Nevadans may be familiar. Heftel operates 38 radio stations in 11 markets, including Las Vegas. It now has stations in the top 10 Hispanic markets, one of the fastest growing demographics in the nation.

Lettenberger also likes Transaction Systems Architects Inc., an Omaha, Neb., company that produces verification software for ATM systems. The $159.8 million company has 461 employees and its CEO, William Fisher, fits Lettenberger's "ego investment" profile as a hands-on operator.

Another sample of a Marshall Small-Cap company: Stewart Enterprises Inc., a Louisiana company with $433.4 million in sales and 7,500 employees. Lettenberger calls Stewart a "predictable industry," as in all of us will use the services of a company like Stewart some day.

The company manages funeral homes and cemeteries and Stewart's merchandising tactics interested Lettenberger as a candidate for growth.