John, you sound pretty excited about Murphy's pronouncements. Perhaps you missed this article. Also, perhaps Murphy is still being 'affected' by that overly high dose of LSD. From the look of things, he learned his craft in jail. Dell closed pretty weak today in view of the news...
John
Technology Expert's Mutual Fund Takes Last Place for Past 3 Years
By KAREN DAMATO
Staff Reporter of THE WALL STREET JOURNAL
The worst-performing technology fund of the past three years is run by one
of the most ardent proponents of technology investing.
Michael Murphy, the oft-quoted editor of California Technology Stock
Letter, regularly urges investors to load up on technology stocks and
mutual funds as a way to profit financially from society's dramatic
technological advances. The "buy tech" message is in his late-1997 book,
"Every Investor's Guide to High-Tech Stocks & Mutual Funds," just
released in its second edition.
But while investing in the average technology fund has indeed paid off for
people over the past few years, Monterey Murphy New World
Technology Fund, managed by Mr. Murphy, has been a dramatic
exception. The fund posted a negative 8.2% return last year, for instance,
while the average technology fund tracked by Morningstar Inc. gained
51.6%.
Monterey Murphy Technology has the worst
three-year record among 44 tech funds tracked by
Morningstar, a negative 8.3% average annualized
total return, compared with a 27.6% average
annual gain for the tech-fund category. "It's rather
remarkable to see a tech fund with that kind of bad
performance," says Russel Kinnel, head of
stock-fund research at Morningstar in Chicago.
Paradoxically, tech bull Mr. Murphy has also been
an active short-seller over the years and in recent
months has advised investors to "short" Internet
stocks -- or bet that their stratospheric prices will
tumble. But Mr. Murphy says the technology fund's woes haven't been
produced by unsuccessful short sales. He says the fund has done very little
short-selling over the past few years, although it has about 10% of assets in
short positions on Internet issues CNET Inc., Excite Inc., InfoSeek Corp.
and Yahoo Inc.
So what has hurt Monterey Murphy Technology? "I made two strategic
mistakes," the 57-year-old Mr. Murphy says. His technology fund
emphasized biotechnology stocks rather than the better-performing
electronic-technology stocks that typically dominate tech funds. And Mr.
Murphy ignored most of the largest technology companies, recently stellar
stock-market performers, to load up on tiny companies that continue to
languish at cheap prices.
Mr. Murphy, who operates from Half Moon Bay, Calif., says he was
betting that the long bear market in biotechnology stocks was ending and
that "the pendulum between large-cap and small-cap [stocks] was going to
swing back to small cap." In hindsight, he says, "that was the wrong
decision, for sure."
Not a lot of investors have gotten burned by Monterey Murphy
Technology's poor performance; the fund is tiny, with just $1.1 million in
assets. (Mr. Murphy also runs a biotech fund and a technology
convertible-securities fund that also are small and have been weak
performers.) Still, the poor results of Monterey Murphy Technology are a
reminder of the importance of understanding a fund manager's strategy and
of the need to be wary when it comes to investment seers.
In his book, published by Random House, Mr. Murphy says most people
"are woefully underinvested in the greatest opportunity of our generation."
He explains that "the world is no more than halfway through a massive
30-year to 40-year growth cycle in electronics and computer technology"
and just beginning a similar period of huge growth in medical technology
and biotechnology. Mr. Murphy says people who buy individual
technology stocks should emphasize dominant companies such as Intel
Corp., Microsoft Corp., Cisco Systems Inc. and Applied Materials Inc.
He says these will be among the blue-chip stocks of 2010.
But those dominant names haven't dominated Monterey Murphy
Technology. "I should have taken my own advice," Mr. Murphy now says.
"It would have worked spectacularly well."
Mr. Murphy says he is hoping to "work our way out" of the technology
fund's performance problem by bulking up on larger stocks. But after
selling stakes in Intel and Applied Materials last month, he says the biggest
company in the portfolio is LSI Logic Corp., a mid-cap semiconductor
maker and probably less than a household name. Mr. Murphy says he is
thinking of cutting back on the biotechnology stocks that represent about
40% of the technology fund's assets and restricting those holdings to his
dedicated biotech fund.
Currently, the stocks in which the technology fund has the biggest stakes
include medical names Cephalon Inc. and Dusa Pharmaceuticals Inc. and
software company Informix Corp.
Mr. Murphy has sometimes attracted attention for matters other than his
performance record. In 1995, for instance, he drew criticism for an unusual
explanation of his decision to sell short the shares of two drug companies
producing treatments for acquired immune deficiency syndrome, or AIDS.
He said he had come to believe that HIV doesn't cause AIDS. He is still of
that mind and says more and more medical researchers have come to
believe that HHV-6, the human herpes virus, causes AIDS.
Earlier on in life, Mr. Murphy attracted the attention of the police and the
judicial system, he relates in his book. After experimenting with an
unintentionally high dose of LSD, he says, he had a "personality
breakdown," dropped out of law school and went on to rob a bank. He
got his start in the financial world in 1968, he says, fresh from spending two
years in the Danbury Correctional Institution in Connecticut.
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