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Technology Stocks : RealNetworks (NASDAQ:RNWK) -- Ignore unavailable to you. Want to Upgrade?

To: Pruguy who wrote (2719)	4/17/1999 4:56:00 PM
From: LWolf	Read Replies (1) \| Respond to of 5843

SmartMoney.com: Fund Insight - April 17, 1999 BUYING BANDWIDTH INTO ORBIT Returns as of 4/8/99 * inception date: 10/23/97 "TO BE a technology investor today you have to know the phone companies," says manager Craig Ellis of Orbitex Info-Tech and Communications (OITAX1). He should know. This former telecom analyst from C.J. Lawrence has 39% of his fund in telecom-related stocks. Those holdings, including Intermedia Communications (ICIX2) and Northern Telecom (NT3), have pushed this fledgling fund up more than 40% this year. Since its October 1997 inception, Ellis' fund, which he founded, is up an average annualized 57.4%. That's more than twice the return of the S&P 500 in that time. Ellis' technology investment strategy is based on his belief that the infrastructure companies providing things like fiber-optic cable will be the growth leaders of the next few years. "It's not about companies like eBay (EBAY4) and Amazon (AMZN5)," Ellis remarks. "It's communications that's driving the technology curve." Explains Ellis, "With technology, you always have to address what your bottleneck is. In the old days we saw what was commonly called the ‘Win-tel consortium.' Windows would make a more cumbersome piece of software so you needed a higher speed microprocessor to process it. That was the age of Microsoft (MSFT6) and Intel (INTC7) But that's not the bottleneck right now. The network is. You could be running on a Pentium III chip at 500 megahertz per second mmx, but if you don't have the through-put on your network, that doesn't mean anything." Top Sectors Weighting Telecom Services 31% Networking 22 Internet Commerce 15 Wireless 8 Media 8 Software 7 Data Services 5 Data as of 4/14/99; Source: Orbitex So how does this shake out in an investment portfolio? Well, Ellis has a penchant for competitive local exchange carriers (CLEC). These are companies that offer local telecommunications services in competition with the Baby Bells. One of them, Florida-based Intermedia Communications, is the Orbitex fund's largest position. Besides offering fiber-optic services, Intermedia also owns Digex, a so-called Web hoster, which leases server space to Web site operators. When the company announced in mid-February it was considering spinning off Digex, investors suddenly discovered its "Internet potential" and the stock soared from 13 to 20 in a week. Now it's at 31. Ellis has other reasons for liking the stock. In January, the Supreme Court "reaffirmed the FCC's ability to regulate and enforce the Telecommunications Act of 1996," he says. "To stimulate competition, regional bells are going to have to give up market share." That's good news for emerging CLECs like Intermedia and Winstar (WCII8), another Ellis holding, because it means they will be able to compete more effectively in the local market. Ellis bought Winstar three weeks ago at $36 a share. Now it's at 46. Broad Bandwidth Top Holdings % Held YTD Return Intermedia Communications9 6.0% 72.5% Fore Systems10 4.0 27.7 RealNetworks11 3.6 371.0 Ciena12 3.8 37.6 ICG Communications13 3.7 4.7 Uniphase14 3.7 68.7 Qualcomm15 3.5 195.8 Winstar Communications16 3.3 18.1 PSINet17 3.2 156.8 Cisco Systems18 3.1 16.7 Data as of 4/14/99; Sources: Orbitex and Morningstar Another Ellis favorite is NTL (NTLI19), which Ellis calls "the At Home (ATHM20) of the U.K." It is the second-largest operator of broadband local services in the U.K. including cable television, telephone and Internet access. It has a very high 20% subscriber rate among homes its cables reach, and low customer turnover. Says Ellis, "It's been a really good story, and it's much cheaper than At Home." Indeed, the company has a current price-to-sales ratio of just 8.2, vs. 412 for At Home. It looks like the Internet has reached the U.K. before Internet stock mania has. -- By Lewis Braham21 SmartMoney.com © 1996-1999 SmartMoney. SmartMoney is a joint publishing venture of Dow Jones & Company, Inc. and The Hearst Corporation. All Rights Reserved. Please read our terms and conditions.22