WHILE INVESTING LEGEND Warren Buffett continues to keep his distance from the market's rocketing technology companies, other money managers of his generation are jumping into the wired (and wireless) world unabashed. We talked with a few of them.
"Every bull market gets to speculating heights," observes Edson Bridges III, who, like Buffett, is 68 years old. "The difference is that the New Economy is the Tech Economy, giving people capabilities and resources they never had before." Bridges, who launched Bridges Investment (BRGIX) in 1963 in Buffett's stomping grounds of Omaha, has had some help in joining the information age from his 41-year-old son, who now manages the fund day to day. But the senior Bridges definitely approves of the fund's top two holdings — mobile-telecom provider Vodafone Airtouch (VOD) and wireless-equipment supplier Qualcomm (QCOM), both with 200-plus price-to-earning ratios.
Do today's lofty valuations frighten industry veterans who lived through the crash of the Nifty Fifty stocks of the early 1970s? "Today completely blows away anything we've seen in history," says 59-year-old Alfred Henderson, now a senior portfolio manager at American Express in Minneapolis. "During the time of the Nifty Fifty, you paid a premium for quality and assurance. We were entering a period of rising inflation rates, rising oil prices, and we turned to the Nifty Fifty as a security blanket. Today what's driving the New Economy stock is anticipation of great growth. "
And plenty more is possible, stresses Richard B. Hoey, chief economist and chief investment strategist at Dreyfus Corp. From his vantage point, technology stocks have plenty of wind left in their sails. "Some have rejected this as a mistake that will go away soon," says the 56-year-old Hoey, "But this is a powerful transformation."
Keeping up with that transformation is important for any investor, insists Hoey. Even the old-timers. In fact, Hoey still sits in on presentations made to portfolio managers by young tech firms like Priceline.com (PCLN) and Juniper Networks (JNPR). "These companies help me to understand how the U.S. economy is actually changing," he says.
And Hoey disagrees with those reactionaries who insist that P/E ratios and other market valuation measures will revert to the mean. "Those who have stayed on that thesis have become frustrated," he says. A "speculative bubble" looms today, he admits, but he thinks the possibility of a steep, prolonged plunge is unlikely in today's expanding, low-inflation economy.
Having managed money through the long bear market from 1974 to 1982 has marked Hoey and his contemporaries. "Only the graybeards remember the long bear markets," he says. The challenge is to profit from the experience, not be imprisoned by it.
chasefunds.com
Written March 16, 2000 |
