Mailing Address:
Marketocracy Capital Management, LLC
1200 Park Place -- Suite 100
San Mateo, CA 94403
Phone:
Main: 650 472-2274
Fax: 888 777-6181
My name is Ken Kam. I'm the President of Marketocracy Capital Management, LLC. I could give you the rest of my employment and educational history, but, in my quest to find the best investors in the world, I've found such information to be of little value. So, instead, I'd like to tell you what I have found to be of value.
When I graduated from the Stanford Business School in 1986, I was convinced that that market was so good at pricing stocks that it would be foolish to try to beat it. So instead of going into investment management, I chose a path that eventually led me to be a founder of a medical-products company.
We developed a cardiac catheter which we took through FDA approval and then manufactured, marketed and sold. We built a successful business, sold it and kept the remainder of the company, which eventually went public.
When the investment bankers came calling, I learned that Wall Street analysts really don't know a lot about the companies they cover. Warren Buffet likes to say that, in the short term, the market is a voting machine. If the people who have the most votes (because their opinions drive billions of dollars of capital) are not the most knowledgeable about the company, how can a stock's price end up being priced exactly right all the time?
I founded Firsthand Funds in 1994 based on the belief that someone with firsthand experience and a network of contacts knew more about their industry than the legions of people hired by Wall Street, most of whom have never worked in the industry.
As a result of my experience in the medical-products industry, I developed an extensive network among the best cardiologists across the country. So when I invested in medical products and pharmaceutical companies while co-managing the Technology Value Fund, I was able to tap into the opinions of the best research team in the world -- the people on the front lines, using and purchasing the products of the companies I was investing in.
I learned that even a bad product in the hands of the best cardiologist could work well and look great in a marketing video to promote a company. Until you test it in the hands of the average cardiologist, you don't know how well a product will really do. And I learned that staff members were the best people to listen to. Nurses aren't paid by product companies, and they see how the products work in the hands of all the doctors. When they give their opinions about a product, I listen.
When I wrote the first prospectus for the Firsthand Technology Value Fund, the SEC made me put the following warning on just about every page: "The portfolio manager has no previous experience managing money."
Needless to say, this made it hard to get anyone to invest in the fund. Almost no one wanted to invest based on the prospectus. The first investors were, by and large, members of my extended family and friends of the family.
Friends and family would not ordinarily provide enough assets to launch a mutual fund, but my grandfather had a lot of friends. When he arrived in Hawaii in 1906, he started out, as many people did, in the fields picking pineapples. After some years, the owners of the plantation made him a manager, and he learned to speak the languages of the different immigrant groups brought in to pick pineapples.
For many of the immigrants, my grandfather was not only their manager, he was also their translator and bridge to other social networks, and thus an important source of help in their efforts to build a better life. My grandfather listened to a lot of their business ideas. He encouraged workers to pool their savings to invest in the best ones and get them started.
It was in this way that many hard working people in Hawaii got their first opportunity to get off the pineapple plantation. And it was these people who years later were the first to invest in a mutual fund where the "portfolio manager had no previous experience managing money."
At the start, the fund's minimum account size was $10,000. When people who pick pineapples for a living invest $10,000 in a mutual fund, the fund manager feels a great responsibility -- at least he should feel a great responsibility. After all, for many of them this was single largest investment of their life aside from their homes.
Under my watch, lasting five years, their money multiplied ninefold. I don't like to toot my own horn, but it seems pertinent to mention that Lipper ranked the fund as the No.1 fund of all mutual funds for the five-year period ending in September 1999.
I cannot begin to describe the satisfaction I felt in delivering such gains to all the friends and family members who had entrusted me with their life savings.
At the end of the 1990s, I began to feel that tech stocks were no longer attractive. I could not, in good conscience, continue to manage a fund that was required to keep their money in tech stocks. So when these people gathered on March 18, 2000 to celebrate my wedding, I told them that I had left Firsthand Funds and that it was time get out of the Technology Value Fund.
As gratifying as my tenure at Firsthand was, it also made me aware of how vulnerable a portfolio is when it is narrowly focused. I could not sleep at night because I worried about what I was going to do when the stocks in my area of expertise were not worth holding.
I don't ever again want to put 100 percent of my portfolio into a single sector, no matter how good it looks. But, I also don't want to diversify so much that it is nearly impossible to deliver great returns.
I think the best way to live up to the trust that investors place in me is to find great stocks whose prospects are independent. That is, the gains in each case will be driven by different factors.
But it is hard for any single investor to master independent factors in diverse industries. Picking the right oil stocks takes a different expertise than what's needed to pick the right biotech stocks, or the right technology stocks. Developing and maintaining expertise in farflung industries is a job that no one can do all by himself.
I know I can't do it by myself. That's why I started Marketocracy. You see, Marketocracy enables me to form the ultimate investment team. I call this team the m100. They are 100 of the most skilled investors I've ever had the privilege to work with -- an All-Star Team!
Members of the m100 have distinguished themselves from a field of tens of thousands running virtual portfolios at Marketocracy.com. Each m100 member has proven his investment skill by building a great multi-year track record. Using the expertise of the m100 team, I can research stocks of every sector and size to build a portfolio that can deliver great returns and span the entire market. In other words, the strategy increases expected return while reducing downside risk.
To manage the Masters 100 Fund, I use the m100 team to find stocks with the potential to double in two years. I set my time horizon at two years because there is not much that a company's management team can do inside of two years to greatly affect the underlying value of the company. I set my sights for doubles because attention is a scarce resource. Keeping my sights set on doubles means that I focus only on developments that have the oomph to make them worth paying attention to.
When I opened the Masters 100 Fund back in November 2001, I recommended it wholeheartedly to my friends and family. I am honored that many of them invested alongside me. There are many other investors in the fund now, but I continue to run the fund with the feeling that I am managing the money of my extended family.
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