Skip navigation

News

Globeinvestor

Technology

Vehicles

Careers

Home | Portfolio | Fundlist | Reports | Filter | Chart | Resources | News | Help

Globeinvestor   Globefund   GlobeinvestorGOLD Enter Fund Name:

Resource Centre
The Wise Investor

Resources Getting Started The Wise Investor Online Investing Glossary Book Centre globefund.com Alert Table of Contents Put your financial adviser on a leash February 11, 2000 100% Foreign content for your RSP December 22, 1999 Tax Loss Selling or Dealing With Your Mistakes November 26, 1999 Life Stages of your RRSPs November 12, 1999 Just give me boring (but great) rates of return November 3, 1999 De-mystifying Demutualization - part Two October 25, 1999 De-mystifying Demutualization - part One October 19, 1999 Seg funds for the simple minded September 14, 1999 The interest rate game Part 2 August 12, 1999 The interest rate game Part 1 July 30, 1999 Choosing funds: Five for the long run July 14, 1999 New Funds: To buy or not to buy July 2, 1999 Making sense of momentum investing June 18, 1999 Rating the fund managers June 4, 1999 Resource recovery hinges on supply and demand April 30, 1999 Tech funds draw strength from favourable trends March 24, 1999 Withdrawing from your RRSP March 9, 1999 The economic implications of the euro - An interview with Ranga Chand February 12, 1999 Underperforming small-cap funds have strong upside potential January 29, 1999 How to pick a winning equity fund portfolio January 15, 1999 View the Weekly Insight archive

Tech funds draw strength from favourable trends LEVI FOLK and RICHARD WEBB Editors, The Fund Counsel newsletter Wednesday, March 24, 1999 Over the last year, technology funds have been mutual fund investors' best friend. One-year returns for some funds to the end of January this year hit 100 per cent, and 1999 looks like it could be another good year for the tech sector. Fund Name 3-Month Return (%) 1-Year Return (%) Mgmt. Expense Ratio (%) Altamira Science & Technology 19.13 48.56 2.36 Fidelity Focus Technology 15.76 50.96 2.49 Green Line Science & Technology 17.39 33.06 2.58 Navigator Canadian Technology 25.65 10.24 2.85 Source: GLOBEfund.com. Data to February 28, 1999. Some analysts are skeptical about a continued boom. The Nasdaq 100 index of high-tech stocks has risen 385 per cent over the last three years, which causes overvaluation concerns for some investors. It is certainly the case that many Internet stocks are overpriced. Few firms in this sector have strong revenue streams, and, given the low barriers to entry in the industry, any future profit margins (should they appear) may be easily eroded. But that's not the case for many of the more established providers of hardware and software. Take Dell Computer, for example, which experienced a great deal of volatility in the past few months. A personal computer manufacturer that has obtained an industry niche by essentially cutting out the retailer and selling directly to the consumer, Dell had revenue of $18.2-billion in its last fiscal year, and January-quarter earnings were $425 million — a 55 per cent gain on the previous year. Microsoft, the largest stock on the Nasdaq index, had a 63 per cent profit gain to $6.4-billion in 1998. These numbers are in sharp contrast to many Internet stocks that have little or no revenue and have negative earnings, yet boast market capitalizations in the billions. The science and technology stock indexes such as the Philadelphia Semiconductor index, the Amex Technology index and the CBOE Tech index have been losing ground since January, after hitting record high levels. But short-term volatility is the name of the game for science and tech investors. Signs are now evident that patient investors will be rewarded again with a new upward spike. The release of the February US Producer Price Index, which measures the country's wholesale price levels, showed the largest decrease in two years, coming in at 0.5 per cent. This data, coupled with other recent economic growth data, will help ease investors' fears about a possible interest rate hike. The Wall Street Journal now reports that in this economic environment free of inflationary pressures, the Federal Reserve Board is in no hurry to raise rates. Salomon Smith Barney maintains that the rising trend of corporate consolidation, the demographic forces of the American population and the explosive growth of the Internet are three factors that will help make 1999 a good year for many tech, health and biotech, and communications stocks. Tech fund articles from The Globe and Mail Seg fund superstars add oomph to RRSPs - January 30, 1999 Tech funds smooth jagged little edge of erratic market - January 28, 1999 Your RRSP is no place for speculation - January 9, 1999 Oscar Castro of Montgomery Asset Management in San Francisco, considered one of the world's leading authorities on tech investing, recently stated that he expects 1999 to be a good year for tech stocks in general, although investors should not expect returns of 40 per cent or more to continue to be the norm. He expects selected stocks to emerge as big winners, especially in the equipment manufacturing and telecommunications sectors. In Canada, Gordon Pape, author of numerous Canadian mutual fund and personal finance books, says that science and tech funds have a positive five years ahead of them, although he, too, acknowledges the potential volatility of these funds. Many other technological developments are now just coming into the marketplace in full force, especially in Canada. Nortel Networks is developing North America's largest bandwidth channel for Internet and data communications. While the country is getting wired, opportunities in other sectors, such as aerospace, broadcasting and biotechnology, are providing companies with high growth avenues to pursue. They include the international space station, the Mars missions, the conversion of television broadcasting signals from analog to high-definition digital, the development of gene therapies and the provision of service and technical support for budding e-commerce hopefuls. Year 2000 computer problems are in part responsible for the spending boom on computer equipment over the last year or so, and this pattern will persist for the balance of 1999, helping tech funds move higher. Annual U.S. GDP growth in the final quarter of 1998 was 4.2 per cent including computer purchases, but only 3.5 per cent without computers. In fact, high-tech spending is up a massive 32 per cent over the last four quarters — eight times the pace of low-tech investments! Clearly then, investors can benefit from picking a good science and tech fund, for the balance of 1999 and beyond. But investors should seek products that avoid big positions in more speculative stocks. That could mean avoiding investments like the new Altamira e-business fund (which invests in firms involved in the young field of electronic commerce), sticking instead to more traditional products, such as: Altamira Science & Technology fund.  This $148-million no-load fund was launched in August, 1995, and has been one of the most consistent performers in its class, with a 65.6 per cent return in 1998 and averaging a 37.6 per cent compound return for the past three years with a very reasonable expense ratio of 2.36  per cent. Even during its worst 12-month period, the fund only lost 8.5 per cent. It is managed by Ian Ainsworth and David Cooke, two managers who are well-versed in Science and Technology issues. They aim for a globally diversified portfolio of companies that exploit or develop scientific and technological research in the telecommunications, biotechnology, environmental, health and computer sectors, using a five-year outlook. Fidelity Focus Technology fund. At $138-million in assets, this is a hot newcomer to the sector and has managed to put up the kind of numbers that attract investor attention: 83.3 per cent for one year, 77.3 per cent in 1998, and 44.5 per cent for the past three months. Manager Adam Hetnarski invests in companies that have or will develop products, processes and services that will provide or benefit from technological advances and improvements in productivity. The fund's top 10 holdings list reads a lot like a highlight reel from the Nasdaq 100 index, with Microsoft, Intel, Cisco and Dell occupying prominent positions in the portfolio. Green Line Science and Technology fund. A true growth fund, this $281-million portfolio is a clone of the world's biggest science and tech fund, the $4.7-billion T. Rowe Price Science & Technology fund, managed by Charles Morris in the U.S. The Baltimore-based manager has managed to beat the benchmark Lipper Science & Tech index during the past 10 years by concentrating on North American companies that show the highest potential for rapid growth and expansion. The fund is likely to have severe fluctuations in price and is not for the weak at heart. But it has shown superior long-term capital appreciation. The fund returned 51.1 per cent in 1998, 63.9 per cent for one year and 30.4 per cent compound return for five years. Navigator Canadian Technology. The Navigator fund invests exclusively in Canadian tech and telecom companies, which will do well this year as firms spend to fix their year 2000 computer problems. The fund surged 18 per cent in January, and is the only domestic RRSP product available in the science and technology mutual fund sector. The only downside of the fund is that the Navigator family does not provide much choice should you wish to switch out of the fund at a later date into an alternative investment. Levi Folk and Richard Webb are co-editors of The Fund Counsel newsletter. Visit www.fundcounsel.com for information on how to subscribe to this monthly mutual fund investment newsletter.

Back to top

Back to top