Dual markets' trend is here for a while
Banc of America fund manager sees tech holding pace
By Michael Molinski, CBS MarketWatch
Last Update: 6:05 PM ET Feb 25, 2000
Mutual Fund Center
Mutual Understanding
SAN FRANCISCO (CBS.MW) -- The "dual market" trend, with the
technology-heavy Nasdaq soaring ahead and the blue-chip Dow Jones
index lagging behind, could continue for quite some time, a Bank of
America fund manager says.
"We think it's going to continue for a while," John
Zimmerman, manager of the Nations Strategic
Growth Fund (NSEPX), told
CBS.MarketWatch.com. "The new economy,
productivity, technology, will continue to dominate
for the next several quarters at least."
The Nasdaq surged to another record Friday, while
the Dow fell below 10,000 -- down some 16
percent from its all-time high.
"There's a battle going on between productivity on
one hand and inflation on the other, and between
the old economy and the new economy,"
Zimmerman said in an interview..
The Nations Strategic Growth Fund, managed by Zimmerman for Banc of
America Capital Management, has about $720 million in assets and
invests mostly in large-cap growth companies such as Microsoft (MSFT:
news, msgs), General Electric (GE: news, msgs), Cisco Systems (CSCO:
news, msgs) and Wal-Mart (WMT: news, msgs). It gained 28 percent in
1999 but is down 3.9 percent so far this year. The fund was originally
meant for institutional investors, but a new share class for individuals was
opened last October, with a $1,000 minimum investment and a 5.75
percent sales load.
CBS.MW: How long can this "dual market" scenario continue?
Zimmerman: We think it's going to continue for a while.There's a battle
going on between productivity on one hand and inflation on the other, and
between the old economy and the new economy. The new economy,
productivity, technology, will continue to dominate for the next several
quarters at least.
CBS.MW: Your fund has about a 33 percent
weighting in technology? How confident are you that the recent
surge in technology stocks will continue?
Zimmerman: When's it going to end? We don't think it is in the near term.
We are overweight technology and health care, underweight utility stocks.
CBS.MW: Tell us about your investment strategy.
Zimmerman: We're a growth fund that will outperform the index, but
we're not a focused fund. We're not high risk. Our beta (a measure of
volatility in relation to the rest of the stock market) is 1.01. We're
extremely tax efficient -- 98.5 percent in 1999. We balance risk and
return. We're down so far this year, but we're about 450 basis points over
the S&P 500. We're having a relatively very good year.
CBS.MW: What are some of your recent technology stock
purchases?
Zimmerman: Ciena (CIEN: news, msgs), Phone.com (PHCM: news,
msgs), Qualcomm (QCOM: news, msgs).
If you look at price-to-earnings, Qualcomm is expensive. But if you look
at its total available market, the upside is phenomenal.
CBS.MW: Why do you like health care?
Zimmerman: As people age, they reallocate their income away from
houses and cars and toward health care and leisure. About $700 billion a
year is now spent on prescription drugs. That number will jump to $7
trillion by 2040. We are looking at tremendous growth.
CBS.MW: What do you like within health care?
Zimmerman: The biotech companies are going to do well. But I am
somewhat suspicious of some of the new biotech companies. Their
technology is untested.
Between now and then you've got companies like Merck (MRK: news,
msgs), Pfizer (PFE: news, msgs) and Warner-Lambert (WLA: news,
msgs) whose profit is going to continue to grow.
Merck's pipeline is somewhat suspect, but it's an incredibly cheap stock,
and their management is among the best, not only in the industry but in the
whole economy.
CBS.MW: What other companies and industries do you like?
Zimmerman: If and when tech slows, people will be looking for other
areas, and Honeywell (HON: news, msgs) is a company they will turn to.
Wal-Mart is a company whose stock has been really tagged in the last
several months. The fundamentals are strong. The company continues to
grow. And they are starting to move on the Internet. This company has
figured it out every time they have run into a roadblock. And it is my belief
they will again.
In the financial services area, Merrill Lynch (MER: news, msgs) looks like
a tremendous opportunity. Merrill has become the one-stop shop for
everything in financial services. And they are a potential takeover
candidate. Chase has been rumored to take them for years, but it will
probably be a foreign bank. Citigroup (C: news, msgs) is also extremely
inexpensive.
Michael Molinski is Mutual Funds Editor for CBS MarketWatch.
Refer this article
to a friend
Printer friendly
format
Backflip this article to find it again
For more breaking news, visit our Front Page.
Also, search our news archives:
Ticker Keyword
(For more options use our Advanced Search)
CBSMW MarketPlace
CBSMW Commerce Partners
Personal Finance :
• WingspanBank.com - Apply now! Simplify your life.
• Let the Loan arRanger find you the best rates. Visit our Loan Center.
• Finding your dream car has never been easier. Visit our Car Club. New!
• Free insurance quotes. Visit our Insurance Center. New!
• Get a free copy of your Credit Report online. New!
Investing:
• The Direct Investor Center, the premier place for direct stock investing.
• Access over 250,000 investment research reports. Free membership!
• Free subscriptions to top performing financial advisory publications!
• CBS MarketWatch LIVE:real-time equity quotes and news over the Internet.
How to Spend it!
• Put your market gains to work at the Online Golf Superstore. New!
• Explore The Good Life with Cigar Aficionado and Wine Spectator.
• A top 10 shopping site, FreeShop puts the free in free market
economy. New!
|
