* Sees both companies as smartphone victors
* Opened fund after beating market for 18 years privately
* Apple stock a 'home run,' with cheaper phones coming
* Microsoft/Nokia hurts Research in Motion
By Aaron Pressman
BOSTON, Feb 17 The latest headlines about
Google and Apple pit the companies against each other in a
heated battle for smartphone supremacy, but both will end up
winners, according to fund manager David Rolfe.
Rolfe, who runs a concentrated portfolio of just 20 to 25
stocks at the new Riverpark/Wedgewood Fund, says the history of
technological development shows the market will easily support
two or even three major platforms in the end.
"When the prism of such stories is winner take all, we
think that misses the bigger story that these two
ecosystem-driven platforms are basically crushing everybody
else," Rolfe said in an interview with Reuters. "We think the
news in the Apple-Google smartphone fight is literally Google,
Apple and who else?"
The new fund, which opened in September, represents the
first time ordinary investors can access Rolfe's investing
prowess in the large capitalization growth stock segment.
As chief investment officer at Wedgewood Partners in St.
Louis for almost 20 years, Rolfe ran up an impressive track
He has outperformed the Standard & Poor's 500 index by 7.3
percent a year since 2007 and by 3.0 percent annually over the
past 10 years in audited results after fees of private accounts
he oversees. Since 1992, his average annual margin over the S&P
was 3.2 percentage points.
APPLE A HOME RUN
While some pundits fear Apple Inc (AAPL.O) shares cannot
continue to rise after quadrupling since the end of 2008, Rolfe
argues that the price has barely kept up with the rise in
revenue and profits. He first bought Apple in 2005 under $80 a
share. It is now the fund's top holding.
"Outside of the iPod, here's a company that has low market
shares in globally enormous markets," he said. "And they are in
large part defining and redefining the changes in those
Amid rumors of new, cheaper iPhones and an updated iPad
line coming soon, Rolfe expects Apple will broaden its two
fast-growing lines with lower-priced models, just as it did
with iPods and personal computers.
"There's an iPod for every possible user experience and
pocketbook," he said. "It would defy comprehension that Apple
would not also embrace multi-product lines in their iPhone and
New products will increase the base of potential customers
by four to six times, providing another huge boost to Apple's
growth, he said. "It will be a home run," Rolfe said.
Google Inc (GOOG.O) is benefiting from fast sales of phones
running its Android operating system, which generate more
Internet searches and ad sales, Rolfe said.
"Last time I checked, mobile search was up about 300
percent," he said. "Google is just doing astoundingly well in
the mobile ad market."
FIGHT FOR THIRD
Microsoft Corp's (MSFT.O) recent deal to supply its Windows
Phone 7 operating system to Nokia NOK1V.HE could also end up
a winner, but in the meantime other players like Research In
Motion RIM.TO could be deeply wounded, Rolfe said.
"I'd be really worried if I was anybody else," he said.
Microsoft's history shows "they are not afraid to lose billions
for many years promoting a product line. They have bottomless
pockets to fuel this endeavor."
Rolfe does not see much of a future for Hewlett-Packard's
(HPQ.N) new WebOS devices based on software acquired from Palm.
Intel's (INTC.O) struggling Meego effort is also hurting.
Other top positions in Rolfe's fund include pharmacy
benefits manager Express Scripts (ESRX.O), medical supplier
Intuitive Surgical (ISRG.O) and online retailer Amazon.com
Born and raised in St. Louis, Rolfe caught the investing
bug in college at the University of Missouri, where he helped
start a student investing fund with $15,000 in 1985.
After graduation, he started at brokerage firm Paine Webber
but quickly switched to the "buy side." He has been chief
investment officer at Wedgewood since 1992.
As the tiny new fund expands, Rolfe said he will buy more
shares of his favorites but does not plan to hold more than
about 25 positions at a time.
"We think less is more," he said. "Why diversify away your
(Reporting by Aaron Pressman; editing by John Wallace)
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Keywords: RIVERPARK WEDGEWOOD/
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