Investor's Business Daily: CYMI
Technology Value Gets
Caught In Sell-Off But
Managers Holding On,
Saying Many Picks Are
Oversold
Date: 12/15/97
Author: Doug Rogers
What do managers do when the market is killing
their favorite stocks? In the case of Kevin
Landis and Ken Kam, they start two new funds:
Technology Leaders and Medical Specialists .
Their flagship Technology Value Fund wowed
the fund world with 60% gains in '95 and '96.
Those performances helped the fund attain an
IBD grade of A+ for its 36-month return of
216% - the highest of all funds.
But the fund's holdings have been decimated by
two waves of tech sell-offs, one in October and
the other last week. The fund fell more than 8%
last week and is off about 24% from its '97 high
reached Aug. 5. Once up 37% for the year,
Technology Value was ahead by just 5% going
into Friday.
By now it's no secret that many tech companies
have exposure to Asia's woes. Troubles in South
Korea hit chip- gear makers especially hard.
Orders from chipmakers are seen drying up.
Among Technology Value's big holdings are
chip-gear firms Cymer and Integrated Process
Equipment. As of Oct. 31, they were 4.36%
and 3.27% of the fund's $234.1 million in assets.
The fear has spilled over to other areas. Many of
the fund's other tech holdings, which make up
about 66% of assets, have dropped.
''A lot of fear has been priced into these stocks,''
said co-manager Kevin Landis. ''You never like
to see share prices head south. But I'm more
comfortable than ever in these names.''
Landis and Kam aren't planning to sell many
stocks because of the sell-off.
''Even if the worse-case scenario plays out, the
discounting has been so heavy that it's hard to
imagine the market pricing in more doom and
gloom,'' Landis said Friday.
Both Cymer and Integrated Process have
products that chipmakers need to stay
competitive, Landis says.
The only evasive action taken was to raise cash
to about 5% of assets and lift assets on the
medical side gradually to 33% from 10% at the
start of '97.
This move had little to do with forecasting the
trouble.
''We don't try to make great trading calls,''
Landis said. ''We're much better at bottoms-up
selection.''
Kam and Landis use their hands-on experiences
in the medical and tech fields - and their network
of experts -to find out how well each company's
products and services are accepted in their
markets. Once they find one with good
prospects, they wait for a good price.
Top holdings of the 40-stock fund on Nov. 30
were Altera at 10% of assets, Integrated
Process, Medtronic 4.6%, Technology
Modeling 4.5%, Cisco Systems 4.2%,
PMC-Sierra 4.1%, Anadigics 4%, Ascend
Communications 3.8%, Texas Instruments 3.5%
and Immunex.
The fund has seen minor net redemptions this
month, but nothing extreme, says spokesman
Steven Witt.
Technology Value plans a year-end capital gains
distribution of $2.50 a share next week. That
amounts to 8.9% of its net asset value on
Thursday.
Despite the sell-off, the managers see no reason
to delay their new funds.
''We're starting these funds in the midst of a
sale,'' Landis explained. ''It's almost too good to
be true.''
Medical Specialists is the more aggressive of the
two. It will invest in companies poorly
understood by Wall Street. Kam aims to use his
expertise to add value with stock picking.
Among such choices found in Technology Value
is Cardiothoracic Systems. The money-losing
company is pioneering ways to do coronary
bypass surgery without cutting the sternum and
stopping the heart.
Over 7,000 procedures have been done and
Kam is hearing that more than half of such
surgeries are expected to be done this way by
2000. Kam also likes the other play in this area,
Heartport .
He sees the new fund as a long-term investment,
requiring at least five years.
Landis' Technology Leaders will focus on the
strongest tech companies he tracks. Some also
will be found in Technology Value Fund.
For information, call (888) 883-3863.
(C) Copyright 1997 Investors Business Daily,
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