Many of the people watching the Daytona 500 will only see cars going around in circles. But to John Allen and Kim Torrence, those cars are high-speed investment vehicles.
Allen and Torrance are the principles behind the StockCar Stocks Index Fund, a mutual fund made up of 56 publicly traded companies that sponsor Nascar Winston Cup Series stock cars.
The fund was started in Oct. 1998. For the three months ended Dec. 31, it returned 22%. In comparison, the average Standard and Poor's 500 index fund returned 25% from Oct. 1 through Dec. 31, 1998.
At the end of the quarter, the fund reported assets of about $1 million, and has taken in another $200,000 since then, Allen said in February in an interview with Dow Jones.
The idea for the fund came to Allen when he was at a Nascar race in Charlotte, N.C., in 1997.
'I was watching the cars go around and noticed that some of the top-performing stocks in the S&P 500 and the Dow were in Nascar,' said Allen, who used to track enhanced index funds for BankAmerica Corp. (BAC) in Charlotte.
Using a book he was reading to study to become a certified financial analyst, Allen created the fund using a standard industry formula. Enlisting Torrance, who was a stockbroker at BankAmerica, they maxed out their credit cards, borrowed from relatives and struck out on their own.
Today, the fund includes 38 stocks from the S&P500 and 12 from the Dow Jones Industrial Average. This year, it added Home Depot Inc. (HD) and Sara Lee Corp. (SLE), both new Nascar sponsors. In March, it added AT&T Corp. (T), which recently announced a Nascar sponsorship agreement.
Allen adjusts the investment mix of the fund every January, in accordance with each stock's performance and to coincide with the start of the Nascar season in February. As of Jan. 31, the fund's biggest allocations are 2.51% in Action Performance Cos. (ACTN), 2.08% in Dover Downs Entertainment (DVD), 2.17% in Exide Corp. (EX), 2.12% in General Motors Corp. (GM), 2.14% in Kellogg Co. (K), 2.07% in MBNA Corp. (KRB) and 2.05% in Walt Disney Co. (DIS).
Allen said he is talking with the American Stock Exchange, where the fund is listed under the symbol RCE, about options and other products related to the fund. He is also talking with some of the Fortune 500 companies in the fund about making it an option for employee self-directed 401K contributions.