Suresh,
Let's try this another way then.
***************************
Dual markets' trend is here for a
while
Banc of America fund manager sees tech holding
pace
The "dual market" trend,
with the technology-heavy Nasdaq soaring ahead and the
blue-chip Dow Jones index lagging behind, could continue for
quite some time, a Bank of America fund manager says.
"We think it's going to continue for a
while," John Zimmerman, manager of the
Nations Strategic Growth Fund (NSEPX),
told CBS.MarketWatch.com. "The new
economy, productivity, technology, will
continue to dominate for the next several
quarters at least."
The Nasdaq surged to another record
Friday, while the Dow fell below 10,000 --
down some 16 percent from its all-time
high.
"There's a battle going on between
productivity on one hand and inflation on
the other, and between the old economy and the new
economy," Zimmerman said in an interview..
The Nations Strategic Growth Fund, managed by
Zimmerman for Banc of America Capital Management, has
about $720 million in assets and invests mostly in large-cap
growth companies such as Microsoft (MSFT: news, msgs),
General Electric (GE: news, msgs), Cisco Systems (CSCO:
news, msgs) and Wal-Mart (WMT: news, msgs). It gained 28
percent in 1999 but is down 3.9 percent so far this year. The
fund was originally meant for institutional investors, but a
new share class for individuals was opened last October, with
a $1,000 minimum investment and a 5.75 percent sales load.
CBS.MW: How long can this "dual market" scenario
continue?
Zimmerman: We think it's going to continue for a
while.There's a battle going on between productivity on one
hand and inflation on the other, and between the old
economy and the new economy. The new economy,
productivity, technology, will continue to dominate for the
next several quarters at least.
CBS.MW: Your fund has about a 33
percent weighting in technology? How confident are you
that the recent surge in technology stocks will continue?
Zimmerman: When's it going to end? We don't think it is in
the near term. We are overweight technology and health care,
underweight utility stocks.
CBS.MW: Tell us about your investment strategy.
Zimmerman: We're a growth fund that will outperform the
index, but we're not a focused fund. We're not high risk. Our
beta (a measure of volatility in relation to the rest of the stock
market) is 1.01. We're extremely tax efficient -- 98.5 percent
in 1999. We balance risk and return. We're down so far this
year, but we're about 450 basis points over the S&P 500.
We're having a relatively very good year.
CBS.MW: What are some of your recent technology stock
purchases?
Zimmerman: Ciena (CIEN: news, msgs), Phone.com
(PHCM: news, msgs), Qualcomm (QCOM: news, msgs).
If you look at price-to-earnings, Qualcomm is expensive. But
if you look at its total available market, the upside is
phenomenal.
CBS.MW: Why do you like health care?
Zimmerman: As people age, they reallocate their income
away from houses and cars and toward health care and
leisure. About $700 billion a year is now spent on prescription
drugs. That number will jump to $7 trillion by 2040. We are
looking at tremendous growth.
CBS.MW: What do you like within health care?
Zimmerman: The biotech companies are going to do well.
But I am somewhat suspicious of some of the new biotech
companies. Their technology is untested.
Between now and then you've got companies like Merck
(MRK: news, msgs), Pfizer (PFE: news, msgs) and
Warner-Lambert (WLA: news, msgs) whose profit is going to
continue to grow.
Merck's pipeline is somewhat suspect, but it's an incredibly
cheap stock, and their management is among the best, not
only in the industry but in the whole economy.
CBS.MW: What other companies and industries do you
like?
Zimmerman: If and when tech slows, people will be looking
for other areas, and Honeywell (HON: news, msgs) is a
company they will turn to.
Wal-Mart is a company whose stock has been really tagged in
the last several months. The fundamentals are strong. The
company continues to grow. And they are starting to move
on the Internet. This company has figured it out every time
they have run into a roadblock. And it is my belief they will
again.
In the financial services area, Merrill Lynch (MER: news,
msgs) looks like a tremendous opportunity. Merrill has
become the one-stop shop for everything in financial services.
And they are a potential takeover candidate. Chase has been
rumored to take them for years, but it will probably be a
foreign bank. Citigroup (C: news, msgs) is also extremely
inexpensive.
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