AT 8: 30 A.M. ON Friday, David M. Citron is bargain hunting.
The portfolio manager with Baltimore-based Wagner Citron Management Corp. is quickly calling bond dealers to see if he can shave a point on treasuries or government agency bonds on sudden news that the economy lost jobs in September -- the first time in eight months.
"If you get to the [bond dealers'] inventory before the traders up the prices, you can get a bargain," the 36-year-old Citron said.
It's Citron's aggressive work that has in part helped vault the little-known Baltimore firm to a quiet stardom.
Nelson Publications, the Port Chester, N.Y.-based financial information services company, named Wagner Citron one of the "World's Best" money managers in the fixed-income category this year. The firm churned out an annualized return of 10.29 percent from 1985 to 1995, net of fees.
"That's our report card," said Daniel E. Wagner, president of the company and a portfolio manager. "Our mothers are proud."
Wagner Citron, which manages a $14 million fixed-income portfolio, finished 10th out of about 1,500 investment management firms rated by Nelson. It trailed companies like Loomis Sayles & Co. L.P., which was ranked No. 1 and returned 12.21 percent; Morgan Grenfell Capital Management, 11.54 percent; and Fox Asset Management, 11.19 percent.
The performance isn't bad for a team that says it runs the firm like a family business. There is a relaxed air about Wagner and Citron. They share an office so they can overhear one another's conversations about customer accounts, and their door is always open to clients who pop in without warning. At times they find themselves advising clients not about their investments but about buying cars or paying off mortgages.
Wagner, 58, started the business in 1985 after leaving the Baltimore accounting firm of Naron & Wagner. He saw clients getting older and he wanted to do more for them than simply figuring out their taxes.
He told them he was going to do something more exciting than number crunching.
"We are going to buy stocks and we are going to buy bonds," Wagner said.
Citron, 36, traded bonds and precious metals for Salomon Bros. Inc. and Drexel Burnham Lambert Inc. in New York.
Salomon wanted him to move to Chicago, but he wanted a smaller city. So he picked Baltimore, where his wife had grown up. Citron worked on the trading desk at Ira Peregoff & Co., a small Baltimore-based brokerage firm where he met Wagner, who was working in the same office. Citron joined Wagner's company in 1991, four years after they met.
Since then, the two have built the portfolio to $130 million with clients ranging from young entrepreneurs to retirees to unions. Their biggest account is $8 million and their smallest is about $20,000.
Wagner and Citron want clients who have patience and expect steady gains over time.
"We don't want somebody who is looking for a hot-shot manager," Citron said. "We are not trying to hit home runs. We are trying to hit singles and doubles that will get you going over the long run. What they [clients] want is stability, not a lot of volatility." An investor who interviewed the firm said he expected to make $20,000 a year from his $150,000 investment.
"We said, 'No way,' " Citron said.
For their work, they receive a fee based on the percentage of assets they manage. The fee varies from client to client depending on the size of the portfolio.
The managers tailor a strategy for each client. A young entrepreneur might be 100 percent in stocks, while a retiree may have more invested in agency bonds like the Federal National Mortgage Association, better known as Fannie Mae, or the Federal Home Loan Mortgage Corp., also called Freddie Mac.
Of the firm's $130 million portfolio, about 60 percent is invested in stocks and 40 percent is in bonds. The managers like established companies that pay dividends, such as PepsiCo Inc., Gillette Co., General Electric Co., Intel Corp. and Coca-Cola Co.
Over a 10-year period, the equity portfolio has returned an annualized 14.84 percent, just shy of the Standard & Poor's 500 stock index's 14.86 percent.
Citron says his trading experience has helped boost the performance of the firm's bond portfolio. He buys Treasury bonds and agency bonds that have five-year to six-year maturities.
"It is an all triple-A portfolio, which adds some comfort," he said.
Citron likes the shorter maturities because, he says, they aren't as risky as 30-year bonds.
"When the markets get clobbered we don't take a big hit in our portfolio," he said.
And he's always looking for chances to buy bonds on the cheap, which has not only meant savings for the firm's clients, but a stellar performance record.
"Bonds are safe," Wagner says. "Bonds are wonderful."
Pub Date: 10/07/96
