Thursday March 23, 9:00 am Eastern Time
Individual Investor
Orbitex Growth's Tech and Biotech Picks
Staff Writer: Judith Graham (3/23/00)
The Orbitex Growth Fund (NASDAQ: ORGAX - news) may be a diamond in the rough that is on the rise.
Boasting a 39.31% return year-to-date, this three-year old fund ranks among this year's top performers, according to Chicago-based fund tracker Morningstar. In 1999, the fund posted a 98.4% return.
Although the fund pursues growth without commitment to a specific sector, its holdings are nonetheless heavily weighted in technology and biotech, which have exhibited exceptional, though volatile growth.
Indeed, portfolio manager Richard Begun attributes much of the fund's recent success to its biotech and tech holdings, but he also cites the fund's investment philosophy as the primary growth driver.
``My buy discipline is a bottom up stock picking approach,' Begun explains. ``What I look for is companies that have dominant market positions, or a sustainable business model. Most companies [in the portfolio] have legs - their business models are leverageable.'
Once a company has fulfilled the growth portion of his investment criteria, Begun then looks for quality accounting and a visionary management. Most important, he says, is management's ability to meet consensus estimates.
Lastly, but to a much lesser extent than growth and quality, Begun looks at a company's valuation. While valuation is important, it's not an overriding factor in what makes him buy or sell a stock, Begun says.
The manager shies away from the notion that Orbitex Growth is a risky investment. He says he mutes the fund's risk by managing the companies in his portfolio.
``We don't take concentrated bets in any one company that will impact overall performance on the downside,' he says. ``We get enough upside that I don't need to swing through the fences. We're not overly risky at all. We're diversified across the industry, and across the sector. Even within tech, we have a variety of holdings,' Begun says.
Orbitex Growth's portfolio attests to this diversity. Begun says the portfolio is about 50% weighted in tech, about 22% to 25% in biotech, and the rest in service-oriented companies like CLECs (competitive local exchange carriers) and e-learning companies.
Begun says he believes tech is still the best place to invest because the companies are showing tremendous growth and delivering on their promises in terms of earnings and revenue. But the manager says he recently dumped the 6% or 7% weighting he had in energy, and also jettisoned the 2% or 3% position he had in financials.
Begun's sector favorites include names in wireless data arena, such as RF Micro Devices (NASDAQ: RFMD - news), a designer, developer, and manufacturer of proprietary radio frequency integrated circuits, or RFICs, for wireless communications applications such as cellular and personal communication services.
Begun also likes Research in Motion (NYSE: RIMM - news), which designs and manufactures wireless devices for the mobile communications market; 724 Solutions (NASDAQ: SVNX - news) a wireless software maker, and InfoSpace.com (NASDAQ: INSP - news) a wireless play and non-branded portal. The company's network consists of more than 2,500 web sites.
The broadband market, particularly the equipment providers, is another Begun favorite. ``Equipment providers are providing ammo to a war that's being fought over broadband,' he says. ``If you can supply equipment, you can win no matter who wins,' he says.
Among broadband plays, Begun likes equipment maker Next Level Communications (NASDAQ: NXTV - news), a top 10 holding. He also likes Netegrity (NASDAQ: NETE - news) and Art Technology Group (NASDAQ: ARTG - news) in the Internet customer relations management space.
In the business-to-business market, Begun finds top 10 holding I2 Technologies (NASDAQ: ITWO - news) an interesting play for both its supply chain management software and the B2B exchanges it's developing. It recently agreed to merge with Aspect Development (NASDAQ: ASDV - news).
Begun also says he likes fiber optics components names like Etec Systems (NASDAQ: ETEC - news), which makes equipment that produces high precision photomasks used to print circuit patterns onto semiconductor wafers. Earlier this year, Applied Materials (NASDAQ: AMAT - news) agreed to buy Etec. Begun also likes fiber optic equipment stalwart JDS Uniphase (NASDAQ: JDSU - news), a top 10 holding in the fund.
In the biotech sector, Begun says he's been taking money off table in the past few weeks as biotech stocks have run up considerably. ``I like the biotech space a lot, but I'm worried about the pure run up in this space without a pause,' he says. ``Are they going to be good investments? Will they be profitable and timely? Yes. But they won't run up like in the past four months.'
Among his current biotech holdings, Begun likes genomics play Incyte Pharmaceuticals (NASDAQ: INCY - news), ArQule Inc. (NASDAQ: ARQL - news), a company that discovers and produces chemical compounds for the pharmaceutical, agrochemical and biotechnology industries; and Pharmacyclics (NASDAQ: PCYC - news), which develops pharmaceuticals to treat cancer, arteriosclerosis and retinal disease.
Bottom Line:
The Orbitex Growth Fund has harnessed a number of high gloss companies in the fast growing but volatile technology and biotech sectors, while shedding a number of troubled sectors. |
