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DJ TIP SHEET: AIM's Barnard Looks For Perfect Tech Stocks
By Marcelo Prince
NEW YORK (Dow Jones)--Today's technology stocks are priced for perfection, and
David Barnard will settle for nothing less.
That's why Barnard, senior portfolio manager of the AIM Global Technology and
Telecommunications fund, says there's no such thing as a hold in his fund - it's either a
buy or a sell.
"All my stocks are buys, and I just wait until the earnings come in," Barnard said. But
"there's no room for error - at the slightest hint (of a slowdown) I'm gone."
True to his word, Barnard has added to positions in his portfolio companies that have
shown solid growth even as their prices have soared, and doesn't hesitate to dump a
stock if its quarterly results come up short. For instance, he sold his entire stake in
International Business Machines Corp. (IBM), a top 10 holding, after it warned of a weak
fourth quarter.
He eschews price-to-earnings ratios - "they're an afterthought," he says - and prefers to
focus on "rate of growth and how sell-side analysts are changing their numbers."
The demand for new technology is just too robust, he explains: "Once a company starts
buying it, they can't stop. It's like a black hole; they have to continue to invest."
Although the fund is diversified among hardware makers, software firms and telecoms,
Barnard said it's focused on bandwidth plays - companies that stand to benefit as the
Internet's pipeline is widened.
Many of his holdings are popular tech names, including America Online Inc. (AOL),
Yahoo! Inc. (YHOO), Cisco Systems Inc. (CSCO) and JDS Uniphase Corp. (JDSU).
And while he still thinks these companies have the opportunity to post solid earnings and
revenue gains, he has trimmed some of these stakes recently because their run-ups
have bloated their presence in the portfolio.
"When they have moved up, there's nothing wrong with paring back," Barnard said. "You
lose when you eliminate your (entire) position because you think it's too expensive."
His strategy seems to be working. Although turnover has been heavy, the potent cocktail
that makes up the $1 billion fund is up about 50% since June 1, when Barnard and his
colleagues took over management of the fund then known as the GTG Global
Telecommunications Fund. AIM Management Group Inc. (X.AIM) is based in Houston.
Barnard manages the fund from his offices there and in Jackson Hole, Wyo.
The fund's performance has also received a boost from some of its younger holdings.
One of Barnard's latest picks is Cobalt Networks Inc. (COBT), which makes low-end
servers that allow small and midsize companies to set up Web sites. The stock, which
went public at $22 on Nov. 5, is up more than 600%.
Barnard also shares the market's affinity for business-to-business Internet firms. He likes
Ariba Inc. (ARBA), which is nine times above its June IPO; Exodus Communications Inc.
(EXDS), which has gained more than 200% since the start of June; and Clarus Corp.
(CLRS), which has tacked on 700% in the same period.
"The market they are serving is what I'd call virgin," Barnard said. When asked to pick a
winner among the upstarts, he said, "I'd rather take a little bit of each one and not make
major bets."
As bandwidth is widened and more information is passed along, corporations will be
looking for places to store and manage that data, Barnard said. That's why he likes
so-called storage networking firms, including EMC Corp. (EMC), which has nearly
doubled since June 1; and Brocade Communications Systems Inc. (BRCD), which is up
400% in that period.
Unlike some market watchers, Barnard said tech firms' fourth-quarter earnings should be
good, with only a few companies feeling the pinch of the year 2000 computer glitch.
And while some experts are promising tech nirvana once Y2K blows over, Barnard is
more cautious: "Somewhere we are going to have a hiccup in the first quarter."
But if it's just a "P/E correction" as he anticipates, Barnard said he'll be looking to buy,
not sell.
- Marcelo Prince; Dow Jones Newswires; 201-938-5244 |
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