Another mutual fund (Oak Associates) joins the ASND train...
[See bolded section at the bottom]
thestreet.com
Top Stories: Microsoft Carries Tech
Stocks on Its Coattails
By George Mannes
Staff Reporter
3/25/98 6:44 PM ET
As Microsoft (MSFT:Nasdaq) goes, so goes the nation.
That's what technology investors were betting
Wednesday, as good news out of Bill Gates' software
colossus propelled the company's stock to an all-time
high and carried the rest of the tech market along with it.
The resilience in technology shows how U.S. investors are
largely discarding earlier concerns about the impact of the
Asian economic crisis. As recently as January, Wall
Street chin-scratchers argued that the crucial technology
sector had, potentially, the most damaging exposure to
the collapsing Asian economies. And, more recently, a
battery of earnings warnings from some hardware
technology firms had sowed another layer of concern
through the volatile sector. Now, with Microsoft trumpeting
its current strength, tech-minded investors are once again
lusting for a position in the sector.
Buoyed by Microsoft's early-morning gains, the
tech-heavy Nasdaq Composite Index started out strong,
fell back, but still climbed 12.24 to close at 1824.68. The
Morgan Stanley High Tech index rose, too -- all on the
same day that the Dow got cold feet flirting with the 9000
mark and ended more than 31 points to the south.
Investors reacted positively to Microsoft's disclosure
Tuesday evening that it would beat analysts' earnings
estimates for the fiscal quarter that closes at the end of
the month.
The market, just as significantly, shrugged off another
important piece of tech news: That the computer
networking manufacturer 3Com (COMS:Nasdaq) suffered
a steep drop in sales and earnings for the quarter ended
March 1, falling well short of analysts' earnings
predictions.
The market demonstrated it has an inexhaustible appetite
for good news out of Microsoft, valuing it more that news
coming out of other tech stocks that they won't meet
expectations. And investors aren't fazed by warnings out
of Microsoft, which has been predictably conservative in
its financial predictions, that sales and earnings may slow
down later in the year.
"It was sort of a Rorschach test for the investment
community," said Kevin Landis, portfolio manager at San
Jose-based Interactive Investments, in a reference to
the ink-blot tests used by psychologists. "Did they want
to focus on the good news or the bad news? Looks today
like they're focusing on the good news."
That being said, short-term bad news lurks, says Landis,
who manages the Technology Leaders fund -- a
Microsoft shareholder -- and co-manages the Technology
Value fund. "Everybody has been anticipating the recovery
from the Asian crisis," he says. "There's a pretty good
chance ther's going to be some more bad news out there.
My gut feeling is that people have been a little quick to
anticipate the recovery."
But that's just the short-term tech market, according to
Landis. "These stocks are going to be higher a year from
now," he says. "This is, believe it or not, rational behavior
from the market, because people are actually investing
with a sane time horizon."
The market shouldn't put too much emphasis on an
individual quarterly report, says Doug MacKay, an analyst
with Oak Associates, which manages the tech-heavy
White Oak Growth Stock fund. "Our view on tech as a
whole is that it remains a strong, vibrant industry," he
says. "And that the U.S. is the dominant player and that
the rest of the world is going to need our goods."
He adds, "Short-term trends aside, that long term trend is
going to remain intact."
Unlike Landis, MacKay minimizes the hazards that Asian
currency woes and economic declines have on the tech
industry. Calling the market underpenetrated, he says,
"The worst [scenario] isn't something to worry about in the
big-picture scheme of things. ... I don't think it affects the
long-term outlook at all."
A more significant trend facing the market, says MacKay,
is rapidly growing demand for communications bandwidth
-- a boost for networking stocks that White Oak holds,
such as Cisco (CSCO:Nasdaq), Ascend (ASND:Nasdaq)
and 3Com.
Landis, whose funds don't have holdings in Cisco, says
that the company is going through a process repeated
often in the tech industry: dropping prices to build up
market share. "That's always a tricky thing to manage,"
he says. "Sometimes that works, and sometimes it's a
little bit of a rocky ride. Right now, I think for 3Com it's a
little rocky." |
