Plenty of good ways to ride the tech wave

Posted by: Aaron Pressman on September 25, 2007

Amidst the rough and tumble of this year’s stock market machinations, it’s rapidly turning into the fall of technology, or should I say the autumn of technology. Today, for example, the Standard & Poor’s 500 finished just about unchanged as companies in the energy, health care and materials sectors lost ground. The tech sector, however, was the strongest performer, rising 0.9%, thanks to big gains at megacaps like Cisco Systems (Symbol: CSCO), Apple (AAPL) and Microsoft (MSFT). At the same time, tech isn’t nearly as big a portion of the market as it used to be, making up about 16% of the S&P 500 at the end of last month, and many general equity funds have even less exposure.

If a quick check of your portfolio finds severe underexposure, you could just run out and buy the top-performing tech funds of the year. But historically that’s a ticket to next year’s worst performers. Instead, look for steady performance, low fees relative to similar funds and a long-term track record that’s among the best. A couple of funds come to mind in the tech sector.

The Allianz RCM Technology Fund (Symbol: RAGTX), which has been run by Walter Price and Huachen Chen for the past 12 years, is Morningstar’s pick and it’s a good one. Morningstar says the fund’s 14% average annual return over the past 10 years is better than 93% of other tech funds. The fund prospers by performing deep research on tech trends. Nintendo (NTDOY), for example, is a top holding and a top performer thanks to the Wii (we got one in our house recently).

Another choice, which was award a best-fund designation in the science and technology category by Lipper in March, is the Columbia Technology Fund (CTCAX) managed by Wayne Collette. It’s only been around since 2002 but it’s in the 98th percentile for tech funds over the past three years according to Morningstar. Collette likes to venture beyond the most common names and also play trends among more specialized firms. The fund’s top holdings at the end of July included several cell phone tower companies, tech outsourcer Cognizant (CTSH) and MEMC Electronic Materials (WFR), which makes silicon wafers for computer chips and solar power cells.

For those more partial to index funds, there is the usual array of exchange-traded funds in this sector, as well. The Technology SPDR (XLK) owns all the tech companies in the S&P 500 and has an expense ratio of just 0.24%. Vanguard’s similar Information Technology ETF (VGT) has expenses of 0.25%. For a more worldly play, the iShares Global Technology Fund (IXN) invests in companies all over and has expenses of 0.48%.

Reader Comments

czander

June 22, 2010 7:00 PM

The data on the average length of stay at the top is not definitive. I have discovered it has been decreasing, from 11.4 years in 1980 to 8.6 years in 2000 (Klein, 2007) and 3.2 years in 2007 (New York Times, 2008b). While we see the length of stay drop significantly, so has the age. The CEO “class of 2004 was the youngest on record, with an average age of 57.8 years. With a young age and short stay these CEO’s have been called “The most prominent young temp workers”.
Some of the reasons for such a short stay at the top are attributed to burnout, retirements, resignations and failure/terminations. With the average length of stay at 3.2 years these CEO’s barely have time to impact the corporation before they leave. What we have is instability at the top caused by this revolving door. The brief length of stay strongly suggests we have weakly committed CEO’s who’s chief aim is to “fill their personal coffers,” with little concern for their employees.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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