Fore ...Limiting portfolio like playing golf with one club

Match play, stroke play, wolf, bingo-bango-bongo it doesn't matter which game we play, a round of golf with Uncle Larry always finds me reaching for my wallet when we're in the clubhouse. I have often wondered how many sets of clubs I could have bought over the years if I had simply turned a deaf ear to his, "What should we play for today?"

I can recall beating him once in our 30 plus years of competition.

It was his first round after convalescing from a heart attack,when I kept reminding him to swing easy and not worry about his questionable health and asked him if something happened to him on the course that day could I have his clubs.

(I am convinced that his equipment, not his talent, is the reason his scores are better than mine. Until a few years ago his license plate was 1-IRON, testimony to his ability to hit the most damnable club ever conceived by a sober club maker.)

He has a full complement of wedges, different putters for different green conditions, and sometimes carries a baffler for those trouble shots from the rough that he never suffers when I'm his opponent.

Our next round of golf will probably be the weekend of the Master's. With luck we will watch a practice round and the first day of the tournament, then return to his home in Birmingham to continue our competition. (Did I tell you he lives on a golf course, for crying out loud?)

This is the year! Here's my plan: He can choose any club he wishes, but must play the entire round using only that club. Good idea?

I'll probably let you know the outcome in my April column, depending on well, you know.

So where did I get the idea? Since this is a column about investing, it shouldn't surprise you to learn that it came from an article I read recently about why investors should now be acquiring only small company stocks.

The gist was that historically, small company stocks have outperformed large company stocks, and, since they have significantly under-performed for the past two years, their day is here.

According to data compiled by Ibbottson Associates, from 1925 through 1997, small outperformed large 12.7 percent to 11 percent. Perhaps their day is here now, but it certainly was not at this time last year.

Acting on faith that the past long-term performance would hold true for 1998 would have produced the negative returns we wrote about last month.

Choosing investments solely on the basis of capitalization, or any other single criterion, is akin to Uncle Larry being limited to playing 18 holes of golf with just a 5 iron.

He might succeed for a few holes, or even a whole round (please, not in April), but over the course of his playing years, being able to use the best club for each shot will produce more winning rounds.

Don't limit your portfolio to a single company size, sector or industry. Sound, long-term investments can be found in all sizes of companies, across many sectors, and in a myriad of businesses.

The keys are solid financial fundamentals, good management and sufficient daily volume to provide liquidity.

You are buying good companies with serious money, so don't be swayed into placing arbitrary limits on your investment universe.

It would be like Uncle Larry and the single golf club trap.

Or, as a friend of mine, who thinks golf is boring and prefers hunting, said after discussing a rough draft of this column with me, "It would be like having a hunting license that only allowed you to shoot rabbits."

(Clark Davis is a 30-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money management company. Questions or comments can be directed to him by mail via the Springfield Business Journal, 313 Park Central West, 65806 or by e-mail at clark @ slia.com.)

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