|
BUSINESSWEEK ONLINE: DAILY BRIEFING | ||||||||||||
| ||||||||||||
|
BW ONLINE DAILY BRIEFING |
 | |
 | |
 |
|||||||
This Internet Bull Is Preparing for a (Temporary) Bust Amerindo Technology Fund's Alberto Vilar sees a 30% to 50% "correction" coming in 2000. But he's hardly worried Alberto Vilar, portfolio manager of the Amerindo Technology Fund (ATCHX), may go down in history as one of the Internet's great bulls. His highly concentrated portfolio is up 238% year-to-date and contains shares of Yahoo! (YHOO) at an original cost (split-adusted, of course) of less than a dollar. Vilar believes that the Internet will continue to change the economy and the world as it combines the strengths of the computing, telecommunications, and e-commerce industries. Over the next five years, he expects the Internet to create $2 trillion to $3 trillion in new market wealth. Since it has created only 15% to 20% of that amount so far, concerns about sky-high Internet valuations are unwarranted, he says.
MINOR DROP. Vilar has been right about this kind of thing before. In fact, Amerindo ranks in the top 3% of technology funds this year at least partly because last April Vilar foresaw that Internet names were due for a pullback. He pared some of his holdings and raised cash. From May to July, Amerindo fell just 2% while competing funds such as Monument Internet, the Internet Fund, and Munder Net Net, lost ground in the double digits, according to mutual-fund tracker Morningstar. "He called the last one right on the money," says Scott Cooley, a senior fund analyst at Morningstar. "It looks like he timed his reentry pretty well too." Vilar bought back into Net stocks early in the third quarter and was there when the sector popped back. He doesn't recommend that average investors play the Internet market-timing game. His advice now is to dollar-cost average into his fund and, when there is a pullback, put even more money in. Amerindo Technology earned its reputation on concentrated holdings in Internet bellwethers such as Yahoo!, Amazon (AMZN), and eBay (EBAY). But these days, Vilar is repositioning the portfolio away from so-called business-to-consumer Internet names in favor of business-to-business names, where he thinks 80% of the shareholder wealth created by the Internet will be generated. In the early days of Internet investing, it was possible for average investors to pick winners such as Yahoo! and America Online based on their own online experiences. Not so going forward. "The easy pickings have been picked," he says. HOLD THE WINNERS. Business-to-business stocks in the fund include Chemdex (CMDX), Inktomi (INKT), Broadcom (BRCM), FreeMarkets (FMKT), Critical Path (CPTH), and Ariba (ARBA). One of his top-three holdings, e-commerce software maker Ariba, trades above $200 a share, but Vilar believes it "can be a 10 bagger" (gain 10 times its current price) from here on. Stocks he's adding to his portfolio include CMGI (CMGI), Ask Jeeves (ASKJ), Akamai Technologies (AKAM), and Internap Network Services (INAP). Despite his emphasis on the business-to-business subsector, Vilar doesn't plan to sell the fund's business-to-consumer stocks, where he has huge capital gains and also sees plenty of upside. "Don't be in such a hurry to sell your winners," he advises. His other two top holdings are auction leader eBAy and Homestore.com (HOMS), which lists homes for sale on the Internet. He continues to hold onto Yahoo!, although he pared back from earlier this year since the holding had grown to more than 40% of his portfolio. "People always ask me what is the next Yahoo!," he says. "Yahoo! is the next Yahoo!." Vilar has a way of making Internet investing seem easy, but investors should keep in mind his fund's risks. Its three-year standard deviation (a measure of volatility) is a practically unheard of 94 -- about four times the standard deviation of the S&P 500, says Cooley. Vilar has held some stocks for years, but his turnover was 234% in the first six months of this year, according to Morningstar. Expenses run high -- 2.25% for Amerindo compared with 1.76% for the average tech fund. There's also a 2% redemption fee, so if you buy in now and the fund disappoints, you'll have to pay extra to get out in less than a year. "AROUND THE BLOCK." Of course, such negatives as Amerindo's risk and management fees are nothing compared with the risks and fees incurred by investors who try to trade Internet stocks on their own. And Vilar's experience makes Amerindo stand out from other Internet funds, says Cooley. "Most of the funds that operate in this area now are run by people who either don't have a lot of background in emerging-growth investing or are affiliated with shops that aren't in the top tier," he says. "The people who are running Amerindo have been around the block a few times and are very successful." That may be backhanded praise, but it's a darn good reason -- perhaps even better than sky-high recent returns -- to consider Amerindo Technology Fund. Especially if that Net stock correction really occurs. Stone is an associate editor at Business Week Online _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
| |
 | |
 BW's Amey Stone Drop Amey a line or join in an ongoing discussion now. Go to our "Ask Amey Stone" forum  Assistive Technology barker.online Byte of the Apple Eye on Japan Hers.online Inside Wall Street Not-So-Neutral Corner Online Asia Power Lunch Privacy Matters Sector Scope Sound Money Street Wise Washington Watch News Flash Archive | |||||||
