The New Economy is not what you think

Stephen Waite, portfolio manager at C.I. Global Advisors, hates the term "New Economy". Specifically, he hates the way the label is being applied and tossed around like so much wisdom. So don’t call his new C.I. Global Business-business fund a "New Economy" investment.

"I’m just a guy looking to make money for my clients," he explains. "I’m trying to see where value is being created in the global economy." The 15-year Wall Street veteran works with Bill Sterling in New York and puts his talents to work on a number of other funds for C.I. Mutual Funds, including C.I. Global Biotechnology and C.I. Global Telecommunications.

The C.I. Global Business-business fund is designed to capture the value being created on the Internet by companies that are using the Web for business communications. According to Stephen, value is being created in three areas:

• Traditional companies using the web to drive their business, or morph into e-businesses (e.g., Ford, Home Depot, General Electric);
• Companies that create and sell tools that enable e-business (e.g. Oracle, Microsoft, Commerce One); and
• Communications companies that will facilitate e-business (e.g. MCI Worldcom, Vodafone Airtouch).

"We felt that we were at a significant turning point in how business is done," Stephen says. "Jack Wells of General Electric said that the Web is ‘the biggest revolution in business,’ and I agree with him." Stephen and C.I. Mutual Funds wanted a vehicle to focus solely on this initiative, thus the C.I. Global Business-business fund was born.

"It is very exciting," he says. "If we do our job right it won’t be a specialty fund." This is why Stephen does not want the "New Economy" label applied to his work. "We’re talking about real companies re-inventing the way they do business," he exhorts. "GE will become a new GE, Dupont wants to become a biotech company."

The fund will exclude business-to-consumer companies like Amazon.com. "But Yahoo! and AOL are getting into the B2B game," Stephen adds, "and Jeff Bezos [CEO of Amazon.com] is very interested."

Why should investors buy into this concept? "There is a lot of uncertainty," Stephen explains, "but what companies are doing right now in this area is unprecedented." Stephen had a chance to meet the top executives from Ford and General Motors recently and they told him that by using the Web to allow bidding on auto part production, the companies would realize 20 per cent savings. People at Oracle told him last week that they expect to extract an additional $1 billion savings through e-business initiatives. "It’s incredible," he says. "We’re at a very unique crossroads, and companies are trying to transition."

Stephen expects to see many companies stumble and fall. "U.S. Leather was one of the original Dow stocks," he says, "and was a prime supplier to the horse and buggy industry and was a major player in supplying machine belts." The company was out of the index in the 1940s, failing to adjust to the new business models. But many will survive and adapt, in the same way as IBM went from typewriters to computers.

So how about some hot picks that Stephen would include in his new C.I. Global Business-business fund? "The Internet knows no boundaries," he says, "so our outlook is global." He likes GE, Nortel, Ariba, Cisco and Microsoft. "It’s a global diversified fund," he says. That is a label that he’s happy with.

Levi Folk, Richard Webb and Peter Diplaros are Investment.com mutual fund specialists and editors of the Fund Counsel newsletter. They can be reached by e-mail at peterd@hqinvestment.com.