Q&A: ELIZABETH R. BRAMWELL: "WE LIKE INVESTING IN THEMES"

Elizabeth R. Bramwell is doing fine on her own, thank you. Ms. Bramwell, who left Gabelli Funds Inc. in 1994 to start her own firm, has just reached that all-important milestone, chalking up a three-year track record with an average annual return of 28.22% in her growth fund as of Feb. 28 vs. 31.89% for the Standard & Poor’s 500 stock index.

Of course, even before passing the three-year mark, Ms. Bramwell and her staff, currently seven, were able to bring in assets faster than most startups – a total of $180 million – thanks largely to the groundbreaking letter she secured from the SEC. It effectively gave her the green light to promote past performance with Gabelli in the prospectus of her Bramwell Growth fund.

Needless to say, her move paved the way for many other entrepreneurial fund managers to do the same.

She says including past performance in a prospectus “shows that the portfolio manager wasn’t selling apples on the street somewhere, and suddenly decided to run a mutual fund.”

For her part, Ms. Bramwell has 30 years’ experience managing equities using a bottom-up growth approach, while paying some attention to macroeconomic trends. She’s a growth investor who also gravitates to certain themes. Her biggest bets at the moment are in companies engaged in temporary staffing and financial services.

“Liz is a good analyst of business, while other managers are good analysts of numbers,” says A. Michael Lipper, president of Lipper Analytical Services Inc. in New York.

Nevertheless, during an interview at her corner office on Fifth Avenue overlooking Central Park, her biggest struggle appeared to be averting her eyes from her computer screen.

Q Describe your stock-picking process.

A We like investing in themes. Outsourcing is a big area. Placing personnel. Robert Half International Inc. is a large holding. Interim Services Inc., which places accountants, is another. Computer Sciences Corp. has been a holding for a couple of years. Computer Sciences does the outsourcing
for various companies like E.I DuPont de Nemours, J.P. Morgan & Co. and ING Groep in Amsterdam.

The use of technology is another good theme. We think a lot of the banks – some are more successful than others – have the ability to cut down redundant costs and to enhance cross-marketing of various financial products from mortgages to credit cards to mutual funds.

Washington Mutual (which just acquired H.F. Ahmanson Inc.) is a big holding in this category. I think it’s a positive. In the past, Washington Mutual has done a good job absorbing acquisitions, cross-marketing and reducing costs.

Q Any themes you consider especially offbeat?

A We’re expanding our offices, so

we started looking at things like

furniture.

The market for office furniture is very strong. With all this electronic gear there’s a need for reconfiguring office space. It’s a real growth area, and probably will continue for a good while. The same thing is true of the home offices. The need for new furniture at home is tremendous, entertainment centers and all this stuff! We’ve looked at these companies – Leggett & Platt Inc., Herman Miller Inc., Knoll Inc., because of our own particular interest.

Q What else?

A Contract research organizations, CROs, which do clinical research for the drug companies. It’s another form of outsourcing. Quintiles Transnational, Parexel International Corp. are two.

Another really attractive industry is biotech. There should be new things coming into the markets. Two companies: Closure Medical Corp., which has a topical glue to seal a wound, and Focal Inc. which has a glue that can be used internally.

Q Why is that significant?

A Sutures and staples were never meant to do a perfect seal. There’s a gap between the stitches and they create a lot of swelling.

If you can come up with a glue you can get a more perfect fit. You cover a stab wound with a primer and then cover it with a polymer, and get a real seal. Pretty amazing stuff.

Q Once you identify a theme, how do you select a particular stock
?

A The stocks we own generally have 15% to 30% growth rates. Ideally, they will have 30% of their sales coming from new products.

And we have companies in totally new markets such as Amazon.com, one of the rocket ships here. Do you know the stock is actually up 6? today? It’s at 83 and something! (It was near $86 at presstime.)

Q This although archrival bookseller Barnes & Noble is competing on-line?

A Amazon was the first one there, and they have a great name. Don’t discount the letter A being the first in the alphabet. It doesn’t hurt. Barnes & Noble has a lot of real estate, an expense they have to cover. So, it’s not that they won’t be there or successful. Amazon was first.

VITAE

Elizabeth R. Bramwell, 57, president, Bramwell Capital Management Inc., manager Bramwell Growth Fund and Selected Special Shares Fund

Bramwell Growth Fund: (assets: $180

million); one-year, 40.96%; three-year, 28.22%

Selected Special Shares Fund: (assets $84 million); one-year, 38.94%; three-year, 25.96%

Lipper Small Cap Index: one-year, 26.45%; three-year, 21.28%.

Standard & Poor’s 500 stock Index:

one-year, 35%; three-year, 31.89%.

Returns through Feb. 28. Source: Lipper Analytical Services Inc.