Fund managers slow to warm to tech stocks
By James Paton
biz.yahoo.com
NEW YORK, June 13 (Reuters) - Mutual fund managers once again are nibbling on battered tech shares, but they have yet to work up a real appetite.
The $88.2 billion Fidelity Magellan Fund, the country's biggest actively managed mutual fund, released data this week showing it raised its information technology stake at the end of April to 13.8 percent, from 11.6 percent a month earlier.
But that's only a modest investment considering tech shares made up 19 percent of the Standard & Poor's 500 index at the end of April. And the fund's bigger tech stake may have less to do with a strategy shift and more to do with the market's performance.
The Nasdaq Composite Index .IXIC jumped 15 percent in April, driving up the value of Magellan's tech shares. Investor money also began flowing back into funds in recent months, forcing managers to put the cash to work, industry experts said.
At other Fidelity funds, the $12.6 billion Fidelity Fund dropped its tech stake in April to 20.4 percent of the portfolio, from 25.2 percent in March, and the $35.7 billion Fidelity Contrafund raised its tech exposure only slightly to 4.1 percent in April, from 2.5 percent a month earlier.
``I haven't seen any evidence that fund managers are warming to technology,'' said Scott Cooley, an analyst at Chicago-based research firm Morningstar Inc.
``I've talked with most of the Fidelity large-cap managers, and I haven't sensed any bullishness at all,'' he added.
John Rutledge, whose $5 million portfolio is devoted exclusively to technology, remains cautious about the sector, despite the prevailing sentiment that the market and battered tech shares at this point can only head up.
Rutledge's Evergreen Technology Fund, down 3.2 percent so far this year, is still crouched in a defensive posture, investing in companies better suited for economic turmoil. The fund's holdings include First Data Corp. (NYSE:FDC), a credit card transaction processor, and Sabre Holdings Corp. (NYSE:TSG), the computerized travel reservations company.
ONLY A SLOW RECOVERY
``Even when the economy is slowing down, people are still flying and using their credit cards,'' he said.
Still, he said he doesn't believe the the broader tech category will perk up in the near future.
``I don't think there will be any sharp rebound in typical technology for the next six months,'' he said. ``I think it will be very choppy and only a slow recovery should be expected.''
After getting a jolt in April, the Nasdaq slipped 0.3 percent in May and is still down more than 12 percent for the year. Some fund managers have seized on the declines to increase their tech holdings.
Eric Weigel, manager of the Pioneer Growth fund, recently boosted technology to 34 percent of the portfolio, up from 18 percent, Russel Kinnel, director of fund research at Morningstar, noted in a recent report.
At Lyon Street Asset Management, fund managers have mixed views. They are skeptical of semiconductor makers but more optimistic about computer hardware companies such as IBM (NYSE:IBM), said Allan Meyers, the firm's director of equity management.
Roughly 27 percent of the firm's growth fund and 19 percent of its value portfolio is in tech -- but don't expect those stakes to increase much for now, Meyers said.
``Tech is such a broad area,'' said Meyers, whose firm oversees about $4 billion in assets. ``There are areas that are doing well, and then there are areas that are sucking wind.''
While Evergreen's Rutledge embraces technology, Steven Lehman, portfolio manager of the $36 million Federated Market Opportunity Fund, steadfastly avoids it. The fund does not own any technology shares and that's unlikely to change, he said.
The products of many technology companies can seduce investors but then become obsolete -- or at least ordinary -- very quickly, Lehman said. ``Eventually all technology becomes a toaster,'' he quipped.
``Too many investors are searching for a bottom in technology,'' he said. ``But technology in my view will not have reached a bottom until the sector is detested by people or ignored for several years.'' |
