WHAT ARE WE LOOKING FOR?
Technology funds that are showing signs of life again.
These were high-flying funds a decade ago before the tech bubble burst in 2000.
Tech then became a "four letter word," RBC Dominion Securities Inc. chief strategist Myles Zyblock recalled in a report this week.
He figures it's time to look at the "underappreciated large-cap technology sector," saying the more positive tone in key economic data these days should help lift stocks higher over the near term.
"This area of the market stands to benefit from superior profitability, an impressive five-year track record of returning cash to shareholders, hints of accelerating demand and the ability to provide a portfolio hedge against input cost inflation," he wrote.
If commodity prices stay high or keep rising, more companies will try to improve total factor productivity - a measure that includes labour and capital - and that will include investing in technology, he suggested.
With this outlook in mind, we examined the science and technology funds in Globefund. We excluded U.S. dollar funds, and those valued weekly or monthly. We also searched for the best performers for 30 days ended Thursday, and checked out their longer-term performance.
WHAT DID WE TURN UP?
Science and technology funds have been very upbeat over the past month.
In most cases, they have performed better over 30 days than over six months or even one year.
Funds with a 10-year history, however, have been dogs. The poor performance may be partly attributable to the funds - which may hold a lot of U.S. stocks - not hedging their exposure to foreign currencies.
Studying long-term returns is a good reminder of just how risky sector plays can be. Investors are better off trading these funds versus holding them for the long haul.
Over five years ended April 30, iShares Canadian Technology Sector Index ETF has been the winner, helped by stocks like Research In Motion Ltd. The ETF garnered an average annual return of 16.4 per cent.
The TD Nasdaq Index-I fund posted an annualized return of 10.5 per cent. It tracks the Nasdaq 100 index, which includes 100 of the largest non-financial securities on the Nasdaq Stock Market. The fund is in Canadian money market investments, and uses options, futures and forward contracts whose value is based on the Nasdaq 100 index. (It is only sold through discount and full-service brokers.)
Among non-index linked funds, GGOF Global Technology Classic has the best five-year record. It posted an annualized 12.4-per-cent return.
Top 20 Science and Technology funds
|As of May 8, '08||As of April 30, 2008|
|Fund name||(as of April 30, 2008)||MER||% return||% return||% return||% return||% return||% return|
|RBC Global Technology||14.0||2.75||7.3||-17.1||-14.8||-2.2||-1.2|
|GGOF Global Technology Classic||0.3||2.25||7.0||-10.8||0.2||7.4||12.4|
|Renaissance Global Technology||1.3||2.91||6.8||-12.8||-13.7||0.0||3.4|
|TD Science & Technology||95.1||2.70||6.5||-12.2||-8.6||2.0||2.0||-4.6|
|Renaissance Global Sci & Tech||24.1||2.90||6.5||-13.0||-14.5||-1.3||1.1||-2.3|
|iShares CDN Tech Sector Index||N/A||0.55||6.4||-3.2||9.3||12.4||16.4|
|CIBC Global Technology||39.0||2.90||6.3||-13.0||-14.5||-1.2||1.3||-3.5|
|Scotia Nasdaq Index||10.4||1.06||6.3||-9.8||-7.5||1.9||3.2|
|TD NASDAQ Index-I||78.9||0.97||6.3||-14.7||1.1||8.6||10.5|
|Mackenzie Univ Wld Sci & Tec Class||62.6||2.53||6.1||-9.0||-14.7||-1.9||2.8|
|CIBC Nasdaq Index||13.9||1.16||6.1||-9.5||-7.3||1.8||3.0|
|CIBC Nasdaq Index RRSP||36.9||1.18||5.7||-9.4||-7.0||1.9||3.2|
|CI Glb Science & Technology Corp Cl||109.2||2.32||5.7||-12.4||-19.8||-5.2||0.6||-4.5|
|Fidelity Global Technology-A||23.6||2.66||5.5||-13.5||-10.6||2.2||3.0||-2.0|
|RBC Life Science & Technology||110.9||3.00||5.4||-13.0||-9.3||-2.4||-1.3||-5.1|
|AGF Global Technology Class||9.5||3.50||5.4||-23.4||-18.8||-1.4||-1.2|
|BMO Global Science and Technology||57.6||2.75||4.8||-5.5||-17.8||-6.4||-2.5||-3.9|
|Mackenzie Univ Emerging Tech Class||5.6||2.93||4.6||-2.2||-0.2||4.2||5.7|
|Altamira Science & Technology||54.1||2.70||4.6||-7.9||-1.8||2.5||2.1||-0.6|
|National Bank Global Technologies||3.7||2.70||4.5||-8.7||-6.1||-0.7||0.7|
|NASDAQ Composite ($ Cdn)||-10.3||-12.8||0.3||3.0||-0.9|
© 2007 The Globe and Mail. All rights reserved.
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