Barbra Streisand's Latest Role: Stock Picker "IF I SEE RED, I SELL QUICKLY"

(FORTUNE Magazine) – So Barbra Streisand was talking with her good friend Donna Karan on the phone last fall, and she told Karan she'd made $130,000 on eBay stock in just one month. Karan was duly impressed. As Streisand tells it, "She said, 'Oh, can you do that for me? I'll give you a million dollars to invest for me.' And I said, 'You're crazy, why would you do that?' She said, 'Well, it sounds like you're making so much money, so do it for me.' So I said, 'I'll do it if you're willing to lose it. Are you willing to lose a million dollars? That's the only way I'm willing to do this.'"

At the outset it looked as if the famed designer would indeed take a big loss. "The first day I bought eBay and Amazon, and they dropped like 20 points each, at least," Streisand recalled recently in an exclusive interview with FORTUNE. "I couldn't even call her, because I was heartsick. I was having heart palpitations.... So I waited till the stock went back up, when I could call her again, and then I said, 'I don't think I can do this'...yet I was fascinated to try." The result was stunning: After five months of intense trading, Streisand managed to nearly double her friend's stake, to $1.8 million.

Never mind gold records. Who cares about Academy Awards? Investing--especially in volatile tech stocks--has recently become a consuming hobby for the star of Yentl, Funny Girl, and The Way We Were. She studies business publications like Barron's and watches CNBC religiously. She has installed a real-time stock-quote service at home. And she wakes up at 6:30 every morning to catch the opening of the East Coast stock markets. ("It's terrible! I have a natural-born alarm clock that goes off every morning at, like, 6:30. I want to sleep, but I just wake up.")

Where does the singer-actress-director get her financial ideas? The same places as any investor--from friends, relatives, and daily life. "We go to Starbucks every day, so I buy Starbucks stock," she explains. (Streisand also gave some Starbucks shares to her longtime housekeeper recently as a birthday gift.) Another pick is Time Warner (the parent company of this magazine), which Streisand has held since 1992.

One day last summer she and her new husband, actor James Brolin, were cruising off the coast of Greece when Brolin started talking about America Online. Streisand got so excited about the stock that she immediately phoned her broker--from the boat--with a "buy" order. The stock was then $31. Since that call it has quadrupled.

Overall result, as of mid-May: "I'm up 89% today on my account since Aug. 31!"

Not that Streisand is about to drop her day job for a career in money management. "I'm making an album [now]," she explains, "but I can make an album at the same time as I can trade stocks." Then, like a good finance professional, she corrects herself: "But it's not necessarily trade. I like quality companies." So while she picks Net stocks for fun, the bulk of Streisand's wealth--she won't reveal how much that comes to--is in the more risk-averse, professional hands of her friend and money manager, Todd Morgan, chairman of Bel Air Investment Advisors (see below).

Until early last year Streisand was "very passive," in Morgan's words, leaving all the decisions to him. What changed? During the winter Streisand heard a doctor friend discussing Pfizer's new impotence wonder drug, Viagra. She thought it sounded brilliant, so in March 1998 she bought some shares (she won't say how many) of Pfizer at $89. Shortly thereafter, she says, Barbara Walters discussed the drug on television, and the stock shot up to $120. Streisand was hooked.

"I don't pretend to be some maven, like the guy in Barron's last week who can analyze all the companies and so forth," Streisand demurs. Maybe not, but she can hold her own with the pros. This past February, when Streisand dropped by for lunch, Morgan hooked up a 45-minute phone call with famed Internet analyst Mary Meeker of Morgan Stanley Dean Witter. (It's hard to say which star was more thrilled.)

Streisand understands a thing or two about diversification too. Putting most of her money with Todd Morgan gives her a cushion against risk, she says, "because on the days that I lose money on highflying stuff, I'm so thrilled that he has his feet on the ground with quality companies. He's the rock of my Gibraltar. He's such a good friend, and a caring human being." Morgan's take: "Barbra is a great trader. She's got a terrific, terrific instinct, and she's got the courage to act on it."

For all her dabblings in risky territory, Streisand admits that the volatility makes her nervous. "Last week I hated it," she confesses. "I can't stand to see red in my profit-or-loss column. I'm Taurus the bull, so I react to red. If I see red, I sell my stocks quickly."

And she stopped handling outside money after she decided that the heart palpitations and anxiety were putting too much strain on her friendship with Karan--who had designed Streisand's wedding dress for her marriage to Brolin and whom Streisand describes as "like my sister." (What about those profits from eBay and Amazon? The two friends decided to spend the earnings on cruises.)

Who knew the Funny Girl could be such a Money Girl? --Jeanne Lee