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June 30, 2000

The Value-Minded Trader

By Sanford Wexler

Peter Gonedes likes being a big fish in a small pond. He is the head trader at Franklin Advisory Services in Fort Lee, N.J., which has two traders, four portfolio managers, and two analysts. "We are one happy family in a small pond," Gonedes said.

Although the desk headcount is small, the assets his firm handles are considerable. In all, Franklin Advisory Services has about $2 billion in assets. That's invested exclusively in equities: 60 percent in listed and 40 percent in Nasdaq stocks, generating about 30 trades each day.

Franklin Advisory Services is the money management arm for seven value-oriented, equity mutual funds of Franklin Templeton. The fund giant has $225 billion in assets.

Cold Caller

Gonedes, 30, who was born and raised in Queens, N.Y., has an undergraduate degree in computer information systems and a MBA in finance, both from the City University of New York's Zicklin School of Business at Baruch College.

Unlike most equity traders, Gonedes started out his Wall Street career as a cold caller. His first job out of college was assisting a stockbroker at Oppenheimer & Co., now CIBC World Markets. The broker's clients consisted of mostly retail accounts, small institutions and several hedge funds.

Besides making sales calls, Gonedes was also expediting buy and sell orders. One day an Oppenheimer client, Oakhall Capital, offered him a position as a junior analyst, which he eagerly accepted. Within three months, he was named senior trader at the buy-side firm. It managed a mutual fund, a hedge fund, and several institutional accounts. Gonedes reported directly to the firm's portfolio manager. There was only one trader and he was it. Gonedes had to quickly master the complex skill and fine art of trading equities on his own.

Big Step Forward

A few years later, in 1996, Gonedes joined Franklin Advisory Services as head trader. This was a big change for a young trader who was accustomed to executing trades for a hedge fund. "I was used to being in and out of stocks all day long," Gonedes said. "When trading for value-oriented funds you want to ignore the short-term volatility. You want to stick to your price and create as little impact as possible."

According to Gonedes, the challenge that the value-oriented fund trader faces is not volatility, but buying and selling thinly-traded stocks. "It's important to be patient and wait for the right price," he advised. "My [trading] philosophy is to be slow and avoid the short-term volatility."

Gonedes predicts that increasing instances of short-term volatility will result from the changeover to decimalization. "There will be more erratic pricing throughout the day," he said. "People will be jockeying for a penny, a half penny or five cents." Gonedes foresees spreads becoming thinner. "You will have to be a lot more patient to execute your orders," he said.

The Franklin Advisory Services's trading desk taps several conventional broker dealer arrangements as well as ECNs. "I deal with the entire Street," Gonedes said. "You have to go where you can find the best execution. Sometimes Instinet provides that, other times a broker dealer provides liquidity."

He pointed out that trading on an ECN is a big plus when it involves thinly-traded stocks that have wide spreads. "They [ECNs] keep my anonymity and you are also able to control the order better than going through a broker dealer," Gonedes said.

"Sometimes the technology helps you because you don't give up your hand to the Street," he added.

When it comes to smoothly working with sales traders, Gonedes said, people skills are of the utmost importance. "Part of this business is having the ability to deal with a hundred different personalities," he said.

Living and working in Fort Lee, N.J., Gonedes said, offers the best of suburban life and easy access to the Big Apple. His office is a five-minute drive from his home. New York is a short commute across the George Washington Bridge.

"I love the excitement and action of trading," Gonedes said. "I also try to live a well-balanced life."

For fun and relaxation, he goes snowboarding and mountain biking. In the summertime, he enjoys the picturesque seaside on the Jersey shore.