Investment: Carr’s Enterprise

Far from Wall Street, a relatively small mutual fund last year put some of the East’s established giants to shame. Enterprise Fund of Los Angeles registered a 116.9% gain in net assets. Among the 20 best mutual-fund per formers for five years, Enterprise really started moving when soft-spoken Fred Carr, 36, took over its management in October 1966: under his guidance, the fund’s assets have increased from less than $20 million to $250 million, and the value of a share has jumped from $3.77 to over $9.

Carr works with only one assistant, a secretary, and the informal counsel of a group of young investment analysts whom he calls his “dirty dozen.” He specializes in ferreting out what he calls “emerging growth companies,” and he puts most of his fund’s money into little-known firms with untapped market potential. Over a third of the companies on Enterprise’s list are still traded over the counter. When he cases a situation, Carr looks for two things: proven, imaginative management and a low price-earnings ratio. That way he is likely to catch a star as it moves from small to medium size.

No Fried Computers. So far, at least, the Carr formula seems to work. Tonka Toys, which he picked up for about $14 a share a year ago, is now being quoted at twice that amount. Another winner, Kentucky Fried Chicken, was acquired by the fund at about $7 per share; it is now selling in the $50s. “We took a lot of ribbing, especially from the East Coast, for adding something called Kentucky Fried Chicken to our portfolio,” says Carr. “Had it been called Kentucky Fried Computers it would probably be selling now for 180 times earnings.”

Carr’s father, an immigrant from Rumania, used to hawk vegetables from a pushcart in Manhattan. Young Fred had grander ideas. He began hanging around brokerage board rooms when he was 14. Every dollar he made while in high school—some $500—he invested and promptly lost, but his infatuation with the stock market continued. A junior-year dropout from California State College, he amassed $10,000 in such small business ventures as building concrete aprons for driveways and operating a gas station, before going to work for Bache & Co. as an assistant broker at $217 a month in 1956. Ten years later, when he joined Shareholders Management Co. of Los Angeles, which operates Enterprise Fund, he was able to buy a 20% interest. Today Carr’s personal worth is estimated at over $4,000,000 and he can devote more time to his hobby of solving chess problems, watched over by his wife, Dianne.

Not Too Worried. He hands a large share of the credit to the dirty dozen. Instead of the generally favored investment-committee process, he consults his advisers one by one. “These are loners, people who couldn’t work together,” he says. “They are cynical like I am. They don’t believe what they’re told. Together we open companies up to see what makes them tick.”

With that kind of philosophy, Carr isn’t too worried about the vagaries of the market in the year ahead. In fact, he coolly predicts a 200% growth rate for Enterprise in 1968.