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Compaq's Warning and Fallout for Funds

April 13, 1999|Bloomberg News

Compaq Computer's warning that first-quarter profit will be about half analyst forecasts is creating losses for scores of mutual funds that hold stakes in the No. 1 maker of personal computers.

Alleghany/Chicago Trust Talon Fund and Parnassus Fund had more than 6.2% of assets invested in Compaq at the end of last year, according to researchers at Morningstar. Neuberger & Berman Focus Fund had allocated 5.4% of assets to Compaq as recently as Feb. 28.

Other funds, including Mosaic Investors and White Oak Growth Stock, had more than 5% of assets invested in Compaq on Dec. 31, Morningstar reported. One Fidelity Investments fund, the $1.8-billion Select Computers Portfolio, included Compaq among its 10 biggest holdings at the end of December.

It's possible, of course, that some or even all these funds cut their holdings of Compaq before Monday's 22% plunge in the Houston-based company's stock, but there's no doubt funds were hurt by Compaq's slump and the broader decline in technology-related stocks, said Russel Kinnel, chief equity funds analyst at Morningstar. "It's a popular stock, and [Monday's] sell-off is sure to create losses for many funds," Kinnel said. In all, more than 560 funds recently held shares of Compaq, he said.

Compaq stock fell $6.88 to close at $24.06 on the New York Stock Exchange, as more than 110 million shares changed hands, six times the daily average of the last three months. Compaq said late Friday that it expects first-quarter earnings of about 15 cents a share--much lower than the 31 cents analysts expected.

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