'I'm Always Invested In Something' -- A Conversation With Money Manager Wayne Rogers

Wayne Rogers: Well, actually, when I first came to Hollywood many years ago, I had started out as an actor on the stage and I came out here to do a TV series. I made a lot of money in that first year. I'd always heard these stories about business managers in Hollywood who had lost their clients' money just through ignorance -- or fraud in some cases. Of course we know that goes on now primarily in the sports world, where kids come from a disenfranchised background and have no idea who to go to, and wind up with a business manager or agent who is either unethical or dishonest. So, I determined that if I was going to lose my money, I wanted to be the author of my own demise. I taught myself. The first thing I did was invest in an apartment house -- I think it was a 50-unit apartment building -- that I bought out of foreclosure. I turned that around and that was how I started.

Connors: And what happened from there?

Rogers: Well, one thing would lead from another. I found the process fascinating. I mean, we live in a capitalist society, so we all practice capitalism. If we lived in a communist society, I'd probably be in politics. We don't -- so the game we play is capitalism. And how you keep score is the money. I'm fascinated by the game. I love to solve problems and problem-solving is -- I think if you have an enquiring mind -- it's sausage to your grinder. And that's what I like.

Connors: When you got going, this was pre-M*A*S*H?

Rogers: Correct, pre-M*A*S*H.

Connors: So M*A*S*H comes about for you and obviously I assume your earnings and everything must have exploded for you?

Rogers: Not really, because you look at what people make today -- I think Kelsey Grammer for example gets $1.4 million an episode. The cast of "Friends" gets in excess of $1 million, $1.5 million, per episode... The pilot for M*A*S*H was done in 1972 -- so that's over 31 years ago -- and we were making three or four thousand bucks a week and delighted to do it. I remember when I first came to Hollywood, Dick Boone, who was a friend of mine, was doing "Have Gun, Will Travel." He was making $400 a week and thought it was sensational. It tells you what's happened to salaries. Of course I remember Bill Bradley (the former senator from New Jersey) telling me when he first went into the League, the NBA, the average salary was $16,000 a year. The guy at the end of the bench today is making $1 million or so...

Connors: And we've got LeBron James signing $90 million sneaker contracts.

Rogers: Yes -- so it's nuts. Those salaries are massively overpaid. In fact the IRS said to get in the Top 400 in the United States, I guess, you had to have earned in excess of $90 million.

Connors: That's unbelievable. Talk about your investment philosophy as it ties into the stock market. How did you find your way into the stock market and what is your philosophy?

Rogers: Well, I am essentially a fundamentalist as far as being a value person. I'm looking at real value in a multiple of earnings that is relatively conservative. I'm looking at the balance sheet more than earnings statement, sometimes. I'm looking at it from a long-term point of view. Then I use technical analysis for timing purposes. That's looking at a chart and seeing price vs. volume, whether stocks are breaking out or not breaking out. How many institutions hold the stock. Part of the fundamental analysis is how many mutual funds hold it, or how many institutions hold a stock and whether institutions are buyers or sellers. Whether the stock is under accumulation or distribution -- and that you can tell, I think, to a certain extent, from matching a chart with volume.

And you follow, to a certain extent, things like insider sales, and then global trends that may or may not affect certain stocks. Obviously the housing stocks this year have been massively affected by the decline in interest rates. So there are things like that that you tend to watch and after a while, those things become second nature. When somebody says, "Oh you have a feel for it," well, you don't have a feel for it. That's garbage. What you have is an accumulation of knowledge that is embedded in your computer brain somewhere that triggers certain things that you look for.

Connors: The perfect stock -- the stocks that have done the best for you -- if you had to put this thing into some sort of model, what would it be?

Rogers: The best stocks? You mean in a generic sense or a specific stock?

Connors: In a generic sense. The ones that have done the best for you over the years. Did they fit into a formula?

Rogers: I don't think there's a formula, no, but as I said, when you look for certain characteristics, the ones that I just talked about are what you're looking for: increasing earnings, increasing revenue, a strong balance sheet, a segment of the economy that is benefiting from something happening. Obviously during war times, defense contractors benefit. It's just logical to follow economic trends in the macro sense, then in a micro sense, you look at the timing of your purchases and your sales, based on what the stock is telling you.

For the show that's going to be on tomorrow, for example, they asked us to pick a stock that would benefit during an election year. Well, I don't know that an election year is going to affect a stock except that since World War II, every pre-election year, the market has gone up by an average of 16% to 17%. We're already up on the Dow maybe 8% or 9% this year, so maybe it's halfway there. Maybe it won't go up. But I'm not going to argue with history. I'm not going to stand in front of a freight train.

Connors: Right.

Rogers: One of the stocks that I picked this morning is the kind of stock that I own, but I picked this stock off increasing earnings and increasing revenue stream and the fact that it had a pretty good breakout here in the last three months. It's UT Starcom (UTSI | Quote | Chart | News | PowerRating). But the stock that I have in the FOX Challenge, Vympel Communications (VIP | Quote | Chart | News | PowerRating) is the second-largest mobile phone company in Russia. Once again, the timing of that purchase was picked off of the charts. So, these are fundamentally sound companies. It may be dot-com all over but it's dot-com with some reality.

Connors: What happens when you're wrong?

Rogers: I'm not a good seller, I confess to that. I'm a very good buyer but a bad seller, so in order to help myself be a good seller, I use stop loss orders and things like that.

Connors: Good. And how does that work? Let's take UTSI. When you first got on, where would the stop loss be?

Rogers: Generally, I would see where the last accumulation was, for example: UTSI appeared to be under accumulation -- well, it has been since it was around $14 a share -- but it moved fairly sideways between last November and April 2003, right around $20. It got as high as $24. It got as low as $19. A true signal breakout was toward the middle of April and it broke out on some fairly strong volume. So I tend to look at that and say, "OK, I will put my stop under that price by maybe a buck and a half and two bucks, something like that -- somewhere between 8% and 10% under that breakout. And the stock has risen steadily since then up to $35. Now I would raise that stop as it -- right now, I think my stop is around $30 and a half -- it's probably right in there.

Connors: Wayne, would you at any point start taking profits or will you let the stock stop take you out?

Rogers: Let the market take me out. The reason I won't take profits is I'm a terrible seller, as I just said. I sold part of my position on the FOX Challenge. I sold half of my position. Everybody asked me, "Why did you sell half when you did it?" I bought back (VIP | Quote | Chart | News | PowerRating), so I made a good trade there. I'm generally not a trader but I got panicked in the sense of seeing a big rise in a very short period of time, so I sold half. And they said, "Why half?" I said, "Look, I'm either half right or half wrong -- and I don't know which half." So I sold half. Now I've come back into Vympyl and it's up some more. Now I'm not averse to selling a stock and saying, "Hey, I was wrong," and buying it back, or buying a stock and saying I was wrong and selling it.

Connors: Are you always invested or do you balance it between...

Rogers: I am always invested in something. Now, I think cash is an investment, by the way. It's a commodity, you know, it has a price. It goes up and down like everything else. For example, if you had sold the dollar and bought the euro on the first of this year, in the first three months you would have been up 27%. Not a bad return for three months.

Connors: Yes.

Rogers: I think of cash as an "investment." There are times when it's a bad investment and there are times when it's a good investment. Right now it's a bad investment because you don't get any return. On the other hand, if I was looking for returns, there's one of those master limited partnerships, Pengrowth Energy (PGH | Quote | Chart | News | PowerRating). I think it was written up in Barron's some time ago. Their stock has traded around $10, it's up to $12 now... and that stock throws off like 14% or 15%! And people around me are wringing their hands and saying, "I can't get 2%." Pengrowth is actually a company that's got a $1.4 billion capitalization, so it's not chopped liver.

Connors: What's the business they're in?

Rogers: They're one of those oil & gas master limited partnerships. The price of gas is going up and the price of gas won't stay there obviously because coal or other alternative fuels will come in when it gets to that price it will be competitive, but we do have a gas shortage and a lot of that has probably contributed to it going up 10% or 15%. But I wouldn't buy... I own that stock and I don't own it for going up and down and getting the capital gain. I own it because it throws off 15% in cash. And it pays every month -- so it's not as if you're buying it and at other times it's going to make a difference. There are individual stocks that you buy for different reasons under different circumstances. The answer is though that I am fully invested: I own real estate, I own stocks, we own companies that are privately held. I'm always invested.

Connors: Obviously people identify you as an actor because of M*A*S*H and some of your other roles -- but it seems that your passion very much is money management

Rogers: Well, it's fascinating to me. As I said, we live in a capitalist society and if you have an enquiring mind at all, you are fascinated by the game. I say it's a game but I take it very seriously. If I play tennis, I take that seriously. If I play golf, I take that seriously. It's not competitive...you're measuring yourself in golf against the golf course and in this, you're measuring yourself against the economy. Can you do better or worse against the economy? Now I've arrived at that age in life where most of it I've left to my children or grandchildren or I give it away. But making it is in and of itself an interesting and fascinating occupation.

Connors: Is it more fascinating than acting?

Rogers: Well, they all present problems. When I say problems, I don't mean that in a negative sense. They present dilemmas. Just like chess -- the game presents a dilemma. Your judgment is always called into question as well as your expertise. That's very true of acting. I see in the creative process -- and I think of capitalism as being very creative and entrepreneurial, I don't think of it as being something that is drudgery -- I find the creative ideas and the creative activity have similarities in a lot of things and it's a question of finding those things that get to your creative juices. So I find it all very similar.

Connors: If you had to give advice to somebody coming into the investment or money management business, what would you tell them? What's the single best thing that you do?

Rogers: I would say there is no substitute for experience, obviously. I would try to read a number of books on the subject if I can. There are a number of studies... everybody talks about Warren Buffet and those kinds of things. If you are a value investor, you would look at those things. I tend to look at those as a value investor. At the same time, there is a lot of technical analysis and there are some books on that that people can get.

You may say there are not patterns in the stock market. Well I think there are patterns in price and volume. I think people still behave emotionally. Money managers as a group are almost as bad, if not worse, than the public. If you look at the record for money managers even during the '90s when crazy things were going on, I don't think money managers did as well as some of the index funds. You have to say, "Why would I pay some guy X% to manage my money when he's not even doing as well as the averages?"

So I don't know what goes into that but for people that are interested in it, you can get a lot out of the reading part of it. Then take yourself and be prepared to pay for the education. Take some of your own money and risk it. That will teach you a lot. It teaches you also whether or not you should be doing this. Whether you have the emotional make-up to do it. And I say it's emotional because 90% of the people -- including money managers -- trade on emotions. If they didn't, they'd be right all the time and they're not right all the time.