They are now saying that 'Tech is Back' <G>...FYI...
<<Mutual Funds
Mar 02, 2000
February Surprise: Tech Is Back!
Staff Writer: Judith Graham (3/2/00)
The tech sector took a drubbing in January but bounced back strongly in February, benefiting many of the month?s top performing mutual funds.
Biotechnology stole a big part of the show again, which helped secure healthcare and biotech funds? continued lead in the fund market so far this year. Investor optimism surrounding the human genome project ? an endeavor to sequence DNA in all 100,000 genes in the human body ? continued to push biotechs higher.
The technology group turned out a sizeable number of chart toppers, both directly through tech sector funds and indirectly through several growth funds. ?The divergence is still there, but if it?s not tech, then it?s probably not doing all that well,? says Value Line mutual fund analyst Reuben Brewer. ?If you?re a value fund, look out below.?
Thanks in part to recent tech sector strength, tech funds rallied enough to outpace healthcare in the individual category results.
That?s a notable shift from last month?s tech performance: tech funds fell 1.81% on average for the January term amid tremendous market volatility. In February, techs took a sharp turn in the other direction, as earlier investor qualms about Y2K ? which were partly responsible for January?s downturn ? were safely a non-issue. The tech category returned an average 23.92% for the month, while healthcare funds were up an average 18.03%.
?Last month, the fire that had caught on tech shifted to health, and now I think they?re both caught up in it,? says Morningstar analyst Michael Gaul. ?With the Fed?s movements, you?d think it would be the other way around [for tech] ? I think people still continue to be excited about its prospects going forward, especially now that [prior] uncertainties have been cleared up.?
Among other top fund performers, small-cap and growth funds posted strong returns. Gaul says one of February?s biggest fund market trends was a broadening investor focus on small caps.
?Looking at the choppy market at beginning of year, people started paying more attention to valuations, and large caps had been on such a tremendous run,? he says. ?Also, there were a fair amount of buyouts, which brought attention down to small caps.?
February?s Winners Circle
According to Morningstar.com, Dresdner RCM Biotechnology Fund (NASDAQ:DRBNX - news) topped the list of highest returning funds for the month, with a 65.56% return. Dresdner?s key holdings include biotech Amgen (NASDAQ:AMGN - news) , genomics play Gene Logic (NASDAQ:GLGC - news) , and IDEC Pharmaceuticals (NASDAQ:IDPH - news) .
Also appearing among the top performers was Dresdner RCM?s Global Health Care Fund (NASDAQ:DGHCX) , which returned 41.68%. Its holdings include MedicaLogic (NASDAQ:MDLI - news) and Sciquest.com (NASDAQ:SQST - news) .
Not far behind Dresdner?s biotech fund, Franklin Biotechnology Discovery Fund (NASDAQ:FBDIX - news) , one of the more biotech-focused funds, returned 53.02% for the month. Franklin Biotech was also a notable performer in January, and ranks third for the year to date behind Dresdner RCM Biotech and small-cap growth fund Frontier Equity (NASDAQ:FEFPX - news) . Among its top holdings you?ll find Amgen, Biogen (NASDAQ:BGEN - news) , and MedImmune (NASDAQ:MEDI - news) .
Rydex Biotechnology (NASDAQ:RYOIX - news) , which returned 40.98% for the month, posted a 70.08% gain year-to-date, next in line behind Franklin Biotech. Its primary holdings include genomics plays Human Genome (NASDAQ:HGSI - news) and Affymetrix (NASDAQ:AFFX - news) , and biotechs like Biogen and Amgen.
But while biotech and healthcare funds saw strong returns, many small cap and growth funds, especially those with a heavy tech weighting, outpaced their gains. As Value Line?s Brewer puts it, ?they?re showing a little bit of moxie.?
Behind Dresdner RCM Biotech, Frontier was the second best performing fund for the month, with a 59.03% return. Frontier is also the best performing fund for the year-to- date with a 106.93% return. Its holdings include RSI Systems (NASDAQ:RSIS - news) , which makes video conferencing systems, and Mitek Systems (NASDAQ:MITK - news) , which makes character recognition technology.
Orbitex Growth (NASDAQ:ORGAX) also beat out a number of healthcare funds with a 55.71% return, thanks in large part to its tech-laden portfolio. Its key holdings include JDS Uniphase (NASDAQ:JDSU - news) , Nokia (NYSE:NOK - news) , and Sun Microsystems (NASDAQ:SUNW - news) .
PBHG New Opportunities (NASDAQ:PBNOX - news) , which closed to new investors late last year, was another top performer for February, returning 46.33%. Holdings include InfoSpace.com (NASDAQ:INSP - news) , Exodus Communications (NASDAQ:EXDS - news) , and Verisign (NASDAQ:VRSN - news) .
Among other smaller cap funds, Westcore Small Cap Growth (NASDAQ:WTSMX) returned 48.69% for the month, while BlackRock Micro-Cap Equity (NASDAQ:BMEAX - news) posted a 41.22% gain. BlackRock?s Small Cap Growth fund (NASDAQ:CSGEX) also made the cut, with its 37.04% return. The Grand Prix Fund (NASDAQ:GPFFX - news) returned 40.34%.
In the stricter tech fund segment, Firsthand Technology Innovators (NASDAQ:TIFQX - news) ranked among the top 10 highest returning funds for the month with a 44.34% return. Its holdings include wireless plays Digital Microwave (NASDAQ:DMIC - news) , NaviSite (NASDAQ:NAVI - news) and Concentric Network (NASDAQ:CNCX - news) .
Firsthand Funds? Director of Research Ken Pearlman attributes the fund?s strong performance to a combination of good timing and the fund team?s methodology.
?Certainly one of things you have to realize is that this is a tech stock ? we?re all tech all the time. When you combine that with the current frenzy for tech stocks, we?re in right place at right time,? Pearlman says.
Pearlman adds: ?We try and stay in touch with all the trends. Unlike other shops that are more idea-driven, we take a little different approach to investing in tech. We identify trends and segments that we want to be investing in and exclude those we don?t want to be investing in. And within those trends, we determine the bottlenecks.?
PBHG Tech and Communications (NASDAQ:PBTCX - news) also posted strong results, returning 38.46%. Its portfolio includes InfoSpace.com, JDS Uniphase and Qualcomm (NASDAQ:QCOM - news) .
Among the month?s losers, financials continued to falter. The sector was down an average 8.81%, led by funds including Rydex Financial Services (NASDAQ:RYFAX) , which was down 10.27% and the Davis Financial Fund (NASDAQ:DFIBX) , whose B and C class shares were both down 10.59%.
?Financials are still struggling and continued to slide,? Gaul says. ?They ?re the worst of the bunch.?
Specialty real estate also slumped, as did large-cap value funds, Gaul says. Specialty real estate fell an average 2.10%, while large cap value funds lost an average 5.48%.
?The funds that are under performing are the ones that have no technology,? Brewer explains. ?If it?s a value name, it?s still out of favor.?>>
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