Bill, don't worry about it. Anyone who's been around here for a while knows your stock picking ability is second to none...It's just technology investing is different this year.
>NEW YORK (AP) - Second-quarter earnings reports from the technology industry are in and the numbers aren't pretty.
Investors will just have to accept the fact that returns on technology mutual funds aren't going to match the performances of past years. Young investors had grown accustomed to high double-digit - and even triple-digit - returns. But that won't be the case this year.
While most technology companies lived up to Wall Street's expectations, either barely surpassing or equaling analysts' estimates, the numbers didn't impress investors.
Amazon.com is a case in point. When the Internet retailer announced late last month that second-quarter sales had fallen below predictions, investors pummeled the stock, pushing it to its lowest level in nearly two years.
The pounding came in spite of the fact that Amazon beat Wall Street's estimates for overall losses by 2 cents per share.
And when a sector bellwether like Amazon disappoints, investors have a tendency to exact their vengeance on the entire technology sector. The pattern has repeated itself over and over since companies began reporting second-quarter results in early July.
A similar dynamic dragged down the broader markets when Microsoft, Apple and Intel reported results that lived up to Wall Street estimates but failed to meet investors' lofty sights.
In that sense, investors who have been transfixed by individual technology stocks are similar to their peers who rely on mutual funds in that their expectations have grown so high in recent years that anything short of spectacular is seen as a disappointment.
All of this is bad news for that unfortunate breed of mutual fund investors who placed their faith exclusively in the tech sector.
A look at some recent statistics shows why.
For the year, science and technology funds are up a scant 3.2 percent as of July 31, according to Lipper Inc., a Summit, N.J. firm that tracks mutual fund performance.
In 1999, science and technology funds far outpaced any of their sector rivals, generating average gains of 132.3 percent for the year, primarily on the strength of a handful of funds that focus on Internet stocks.
And mid-cap growth funds, or ones that focus on the stocks of mid-sized companies with strong growth potential, were down 2.8 percent through the end of July, according to Lipper. That same category rose an average of 70.1 percent in 1999. Finally, small-cap growth funds, which rose an average of 59.3 percent in 1999, were up just 4.3 percent on July 31.
Mid-cap and small-cap growth funds are laced with technology stocks that surged in value during the past two years as investors scrambled to invest in anything related to the Internet.
But that was then and this is now.
Analysts attribute the reversal of fortune to the market downturn that began late in the first quarter and has shaved more than a quarter of the value off the technology-dominated Nasdaq stock market since it hit a high of 5,049 in mid-March.
The selloff in the science and technology sector has lent credence to numerous warnings issued by industry professionals who cautioned against an apparent shift away from long-term investing to one that sought short-term profits by chasing hot sectors.
Vanguard Group chairman John Brennan was especially prophetic.
``People chase yesterday's performers regularly, but it's a losers game. Investors need to step back from the frenzy and invest for the long-term,'' Brennan said during a speech in New York, less than a month before investors soured on technology stocks.
For evidence of Brennan's prescience, consider the current performance figures of two of 1999's hottest tech funds.
The Monument Internet fund posted an astronomical 273 percent gain in 1999, its first year in existence. But the fund is down 23 percent in 2000, placing it among the worst performers of any fund category, according to Lipper. And Amerindo's Technology fund, which soared 251 percent in 1999, is down 33 percent for the year.
AP-NY-08-02-00 0751EDT |
