Gabelli Growth Fund Leaps Without Net

Howard Ward, manager of the $2-billion Gabelli Growth fund, has avoided surging Internet stocks and lived to tell about it.

Even without significant “pure play” Internet investments, Gabelli Growth ranks in the top 7% of U.S. growth funds--No. 37 out of 592--over the last three years, according to Bloomberg Fund Performance.

Its 31.4% average annual return beat the Standard & Poor’s 500 index, up 28.6% annually in the same period.

“The Internet stocks are an island unto themselves, and it’s Fantasy Island,” Ward, 43, said in a recent interview at the Rye, N.Y., headquarters of Gabelli Funds Inc. “A lot of these companies are simply not going to make it, and someday someone’s going to wake up and yell, ‘Fire!’ and they’re all going to go down.”

Net fever may have peaked with last week’s initial public offering of Priceline.com Inc., the name-your-price retailer worth more than $10 billion after its first day of trading, Ward said. “Priceline.com will be viewed as the high-water mark for the Internet stock boom, which has only one way to go, and that’s down.”

Gabelli Growth has gladly owned tech stocks, including companies that supply hardware and software to Internet users.

More than a quarter of the fund was in computer and communications equipment stocks on Dec. 31, with Cisco Systems and Microsoft among its five biggest holdings.