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Net fund goes overseas
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September 15, 2000: 12:20 p.m. ET
Monument EuroNet capitalizes on new cell phone uses; micro cap fund soars
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - Imagine avoiding the headache of circling the block over and over for a parking space. Instead you flip open your cell phone and find a spot right away using a map on the Internet.
Tech strategist Robert Burgoyne sees innovations like this happening all over Europe, and he's hoping they'll help his new Monument EuroNet Fund soar.
"I think the Internet is a key driver of world economies," Burgoyne said.
Also in this column: Schroder fund manager Ira Unschuld is finding buried treasure for the Schroder Micro Cap Fund, up nearly 108 percent this year.
The Monument EuroNet fund, one of only a handful that invests in Internet stocks outside the United States, started trading in June and is down 2 percent year to date as of Sept. 12. It has $12 million in assets and is listed under the ticker symbol ENETX.
You might be wondering why Monument would launch an Internet fund at a time when the sector is under water -- funds that invest in Internet-related companies have been slammed this year, down almost 15 percent as of last month.
But Burgoyne thinks Europe is poised for a growth spurt in the Internet arena.
"You will see more services on your cell phones, access to e-mail and basically the cell phone knows where you are, like when you're driving around and you're looking for a parking space," Burgoyne said.
While telecoms might seem a stretch from the Internet sector, analysts say the lines are blurring between wireless and Internet technology. The fund invests 65 percent of its assets in Internet companies in the 15 European Union nations. His top holdings include Finnish company Nokia and Wanadoo, a French Internet provider.
The latest rage, he reports from his travels around the world, is happening in some Scandinavian countries where people can use cell phones to get a can of soda out of a drink machine. The user punches a code into the machine and the cost of the soda is then added to the cell phone bill.
It's only a matter of time until these services make their way to the United States, he says. Eventually, the copper cable lines running underground will be replaced with fiber-optic cable.
Wireless communication though is set up differently in Europe than in the United States, Burgoyne explained.
"Years ago (Europe) established one single platform so the phones work everywhere and they have one uniform system which lends itself well to activities like train schedules," he said.
But besides the quirky advances being made with the Internet, cell phones are becoming a fashion statement as well. Burgoyne, who travels around the world researching Internet companies, said phones often come in a variety of colors and styles especially in Italy where many users have two phones - to match different outfits.
And in Japan cell phone users are sending messages to each other through a service called I-mode -- a hot feature that allows you to send playful cartoon characters and smiley faces, make dinner and travel reservations, and surf the Internet.
"We need things like that here," Burgoyne said. "We need the cell phone to stop just looking good."
Chris Traulsen, an analyst at Morningstar, agrees the sector could explode.
"In Europe, (the Internet) is in an earlier stage growth, not as many companies are using the Internet, so there's room for explosive growth," Traulsen says.
Other Internet funds that invest abroad include Kinetic Global Growth, the Munder International NetNet Fund, the Enterprise International Net Fund, the Global e-fund and the WWW Global Internet Fund.
Finding buried treasure among the micro caps
Ira Unschuld is a pirate navigating the waters of the micro cap universe. As the manager of the Schroder Micro Cap Fund, he describes buying stocks for his $80 million fund like a treasure hunt.
The fund is up a stellar 108 percent year to date as of Sept. 13, according to Morningstar. It earned 94 percent in 1999. The fund was closed to new investors in December 1998 when its asset size began to swell. Unschuld says he's not sure when the fund would be reopened to new investors.
Unlike large cap growth stocks, the micro cap arena "is a tremendous universe with thousands of companies and lots of opportunities," Unschuld said.
Most of the micro cap companies aren't followed by Wall Street analysts so their stories aren't really known among investors, added Morningstar analyst Scott Cooley.
"There's an opportunity to find some stocks that are bargains. It's pretty tough to know more than everyone else about General Motors or Microsoft."
Currently, the fund holds about 70 stocks of companies with an average market cap of $260 million.
Some of the top holdings include retailer Fred's (FRED: Research, Estimates) and Haven Bancorp (HAVN: Research, Estimates).
Unschuld, who's worked at Schroder for 10 years, says the fund is aggressive and carries some risk but his job as manger is to "find companies that are doing well and continue to do well."
If you are interested in upping the micro cap exposure in your portfolio, Cooley suggests looking at the following funds:
And keep in mind, as with any mutual fund, you should look for a manager who has a long-term track record and assess your tolerance to risk since micro caps can be volatile.
"In general micro caps are riskier because their share prices jump around more because not as many people are trading them so moves can be more dramatic," Cooley said. 
-- Staff Writer Jennifer Karchmer covers mutual funds for CNNfn.com. Click here to send her e-mail.
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