Interesting article....
The Internet Fund eyes next Net frontier
By Deborah Adamson, CBS MarketWatch
Last Update: 4:12 PM ET Feb 28, 2000 Also: NewsWatch
WHITE PLAINS, N.Y. (CBS.MW) -- In 1999, The Internet Fund blew away most of its competitors with an amazing 216 percent return.
The three-year-old tech fund (WWWFX: news, msgs) quickly attracted a horde of investors, growing its assets to more than $1.2 billion today. But will it stage a repeat performance this year? Notably, the fund's hot manager Ryan Jacob left last summer to form his own money management firm. His post was filled by co-managers Steven Tuen and Peter Doyle, who also serves as the chief investment strategist.
They have a tough act to follow. But Tuen and Doyle seem to be holding their own thus far, with a 7.54 percent year-to-date return while the S&P 500 dipped by 9.25 percent. A CBS.MarketWatch.com chat with Doyle reveals the fund's strategy going forward, which should provide clueless investors with ideas on where to place their next Net bets.
One area Doyle wants to focus on is abroad, as the growth of the Internet spreads across the globe.
"We're finding better values overseas," the fund manager said.
Why go global when the Internet's greatest advances and development come from the U.S.? Doyle argues that America has less than 5 percent of the world's total population, yet it represents more than 90 percent of the market capitalization of all Internet companies. The rest of the world, notably Europe and Asia, will catch up.
"There are a lot of local winners around the world," Doyle said. "We'll try to ferret them out."
Looking at foreign plays is one of five investment themes that form the crux of the fund's strategy.
Another is to selectively look at Internet incubators, which Doyle said has the first crack at the best, upcoming tech companies.
In this niche, he likes Safeguard Scientifics (SFE: news, msgs) because it gives shareholders the right to buy shares in companies in which it invests. Safeguard even allocates IPO shares to big funds. Doyle said the better-known Net incubator CMGI (CMGI: news, msgs) doesn't spin off companies in the same fashion that would benefit its investors.
Doyle also likes to scour for "undiscovered" Internet companies.
In this category falls Comdisco (CDO: news, msgs). An equipment leasing company is a Net play? Absolutely, the fund manager contends. In the last few years, Comdisco has been taking cash and ownership stakes in tech companies in exchange for its services. To date, Doyle said, Comdisco has varying ownership positions in 600 companies including Northpoint Communications (NPNT: news, msgs), a provider of DSL high-speed data transmission services.
Another hot spot for the Internet Fund is proprietary infrastructure stocks.
These are companies that have proprietary ownership or rights to certain infrastructure that are in demand. Doyle declines to discuss any of his picks in this sector, as the fund still is building its position in them. However, he said, an example of this type of company is Qualcomm (QCOM: news, msgs), which holds proprietary CDMA technology for wireless phones.
Following proprietary infrastructure is the proprietary content niche.
Doyle said that anyone can put up a Web site, but the challenge is to attract a following. Therefore, he said companies with compelling content -- such as Time Warner (TWX: news, msgs), Disney (DIS: news, msgs) and CBS.MarketWatch.com investor CBS (CBS: news, msgs) -- are good Net plays. Branded, quality content is concentrated in a few media hands, he said.
Teflon |
