INVESTOR PROFILE
Spend a day watching CNBC and the cavalcade of dark suits and drab ties sears the brain like one long, tangled Court TV show. But every so often a burst of color can shock the market-obsessed.
It's tough to miss the brightly attired William Fleckenstein, a frequent guest on the channel during the market day. Sporting a splashy open-collar shirt and shaggy dark locks, he looks like a typical Internet optimist. But he's something else: a loud and persistent voice decrying stocks as dangerously overpriced - especially those that have zoomed higher in the technology sector. He believes that most everything, from PC makers to Internet stocks to semiconductor manufacturers, is wildly overvalued. And during his market day, he consistently bets that these stocks will fall. But often they don't cooperate, spiraling higher with each bullish pronouncement. For several years, he has been a short seller in short-seller hell.
Unlike most investors, Fleckenstein has long had great faith that his dour view of the technology boom would take hold. "We've had a lot of mistaken beliefs in this market: New Era economics, the belief that Asia will have no impact on the markets, the confident acceptance of missed earnings," says the president of Seattle-based Fleckenstein Capital. "When it comes to technology, people want to believe in Santa Claus."
Despite his unpopular short positions, Fleckenstein has made decent money during the scorching market: His US$50 million fund has gained nearly 100 percent during the last three years (though that figure trails the market's gains over the same period). He credits perseverance and a few breaks. But he believes his fund should be doing better.
"I predicted that PC prices would collapse, but when that happened the stocks just kept on going for the most part," he says. "How can that be? How can these products become more like a commodity and trade more like a hot growth stock?"
As for every short seller's favorite target, go-go Internet stocks, Fleckenstein won't touch them - long or short.
"There are no fundamentals in the Internet space," Fleckenstein says with a smirk. "If Amazon can be worth $6 billion for selling dollar bills at 95 cents - and making up the difference on volume - then what can't succeed?"
CNBC: www.cnbc.com/.
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