Jordan Fund posts big gains with oil and steel purchases

Jerry Jordan beat all rivals this year as his Jordan Opportunity Fund purchased steel and oil shares and pulled out of financial stocks.

Jordan, who oversees $500 million as president of Hellman Jordan Management Co., put 45 percent of his stock mutual fund in oil and materials, which have surged along with other commodities. He cut holdings in financial stocks to 5 percent from 15 percent in June, as losses from subprime mortgages spread through banks and brokers.

Those moves helped Jordan's $72 million fund gain 4.8 percent this year as of Tuesday, the most of 509 large-company growth funds tracked by research firm Morningstar Inc., of Chicago. The Standard & Poor's 500 Index dropped 7 percent in the same period on increasing signs that the U.S. economy is heading into a recession.

"Energy is going to be enormous this year," Jordan, 41, said in an interview from his office. "We went piling into steel stocks in December and January" on expectations that low inventories would boost prices, he said.

Jordan Opportunity Fund owns shares of about 40 companies, which have an average market capitalization of $20 billion, according to Morningstar's data. The fund, which invests in companies with above-average earnings growth, has advanced 19 percent during the last three years to rank as the fifth-best fund in its group, more than triple the pace of competitors.

"It has been a fairly volatile three years and the fund has held up well in a variety of markets," said David Kathman, an analyst at Morningstar. "Still, it's a fairly concentrated portfolio, which has some risks."

The fund has a three-year Sharpe ratio of 1.04, compared with 0.2 for competing funds, according to Morningstar. A higher Sharpe ratio means better risk-adjusted returns. The fund has Morningstar's highest ranking of five stars.

Hellman Jordan was founded in 1978 by Jordan's father, Jerry Jordan Sr., to manage private accounts for wealthy individuals and institutions. The company began offering its investing strategy to mutual-fund clients with the opening of the Jordan Opportunity Fund in 2005.

Seven of the fund's 10 largest holdings as of Monday were energy or materials companies. Its main steel picks included U.S. Steel Corp., the largest U.S. producer, which accounted for 5.6 percent of assets, and Nucor Corp., representing 4.2 percent of assets. The fund has also added Luxembourg's Tenaris SA, the world's largest maker of seamless steel pipes, which accounts for about 2 percent of assets, Jordan said.

U.S. Steel of Pittsburgh and Nucor of Charlotte, N.C., have both climbed 17 percent in New York Stock Exchange composite trading this year through Wednesday. Tenaris has risen 16 percent.

U.S. steel prices may increase 29 percent to $850 a ton in the second quarter, according to Purchasing magazine, a trade publication that tracks the data. Non-U.S. steelmakers are shipping product elsewhere because the weak dollar and generally lower prices in the United States make it an unattractive market. That's reducing supplies and leaving domestic producers more room to boost prices.

The fund's energy holdings include Transocean Inc., the world's largest offshore oil driller, which accounts for 5.4 percent of assets, and Weatherford International Inc., which represents 4.4 percent. Transocean, of Houston, climbed 3.5 percent this year and Weatherford, also of Houston, advanced 8.8 percent.

The fund has 4.1 percent of assets in Houston's Schlumberger Ltd., the world's biggest oil-field contractor, whose shares fell 8.7 percent on signs a slowing U.S. economy may curb demand for oil. Crude is trading at about $111 a barrel, a gain of 80 percent in the last year.

Jordan sold positions in New York securities firms Merrill Lynch & Co. and Goldman Sachs Group Inc. in November and December after becoming convinced that the collapse of the subprime mortgage market would hobble earnings more than he had originally estimated. Merrill has slumped 14 percent in NYSE trading this year and Goldman has declined 19 percent.

"I believe the secular story for financials is over," he said, referring to the view that financial stocks are safe long-term bets. "I don't expect to be buying them anytime soon."

Manager:

Jerry Jordan.

Assets:

$72 million.

Performance:

Up 4.8 percent in 2008.

Key holdings:

Energy and materials companies, including U.S. Steel Corp., Nucor Corp. and Tenaris SA.