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Information Technology

Mid-Week Update 02-03-10

In Monday’s Market Update, we highlighted the few information technology companies that we feel qualify as franchises. With one exception, all of those companies are represented in our Growth Portfolio. Today, we add Qualcomm (QCOM) to the portfolio – completing our technology franchise portfolio. Read more...

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Updating the Best from the Brainiest

All the stocks in FundFinds remain buys

 
FundFinds is a stock portfolio with a difference. We don’t look just for stocks we like—we first look for funds we like and then seek out the newest, or biggest, or most unusual of their holdings. Next we evaluate those holdings using our own stringent criteria. If they make the grade, they join FundFinds.
 
Using this approach, which lets us benefit from the expertise of top fund managers, we’ve accumulated a diversified group of 16 stocks. They all remain buys.
 
Our first picks, from Sequoia fund, were giant pharmaceutical chain Walgreen and rug maker Mohawk Industries.
Read more...

The Tricky Art of Buying Tech

As tech products come down in price, investors need to get a lot pickier

 
The chart below graphically presents the dilemma you face when it comes to investing in tech. Depicting the role information technology has played in the economy over the past eight years, it has two separate lines. As you can see, one line is virtually flat—in fact, it is down a bit from its high point in 2000. The second line, though, rises steeply.
 
The flat line shows the dollar value of tech in the economy. The uptrended line reflects the actual physical presence of tech in the economy—for instance, the number of semiconductors in use. The explanation for why the two lines don’t look the same is simple: we’re using more tech, but prices have been coming down.
 
This, in a nutshell, is why the technology arena is both compelling and tricky for investors. The rising demand for tech products creates an indisputable opportunity.
Read more...

Four Tech Companies that Skirt the Margin Trap

They have found ways to control pricing and keep profits flowing

 
First, some recent quarterly results. We don’t plan on getting complacent, but nearly all our Growth Portfolio picks came through with earnings in line with or better than expectations. The worst miss came from BiogenIdec. Because of various nonrecurring items, it had profits of $.24 a share vs. estimates of $.32. But we’re not fretting, given that BiogenIdec also was our best performer, vaulting well over 50 percent on news that preliminary results for its MS drug Antegren justified early filing of a drug application. Moreover, positive results from the same drug in combating Crohn’s disease were reported as well. Stocks of ours beating their estimates by 10 percent or more include Intel (see p.1), Schlumberger, Devon, and EnCana. Besides BiogenIdec the only meaningful miss was Petro-Canada, the result of higher finding costs.
Read more...

A Better Tech Fund

A young Wasatch entry makes its mark with IT and health stocks

 
Most mutual fund investors should own at least one tech fund. After all, tech is an area that can rise suddenly and sharply, and you don’t want to miss out.
 
Be alert, though, to expense ratios. Typically, smaller-cap and specialty funds—which encompass tech funds—as well as international funds have higher expense ratios than domestic, large-cap, or bond funds. And remember, the expense ratio remains constant whether your fund soars or tanks. One of our goals, with tech as with all funds, is to ferret out those with expense ratios below the category average.
 
This issue we’re dropping one of our two tech funds, Kinetics Internet, in part because of its above-category average expense ratio.
Read more...

Core Funds with a Can-Do Attitude

Three broad funds that have shown they can go the S&P 500 one better

 
Decisions, decisions—you can’t avoid them. Mutual fund investing is designed to let others make a lot of investment decisions for you. But first you need to make one key decision yourself—picking your core fund, the foundation of your investment life.
 
As we’ve explained before, to keep volatility low, core funds should be primarily large-cap funds. That, however, still leaves a lot of room for choice. One approach, of course, is to buy an index fund. That’s fine if you’re content simply to perform in line with a major market average like the S&P 500. But we think selected actively managed funds are better choices, offering not just safety but a good chance to outperform.
Read more...

The Wilder Side of Fund Investing

Sector funds let you benefit from constantly changing market leadership.

 
Last issue we focused on “core” funds. The basic idea: aim to build your mutual fund portfolio around diversified, relatively stable, primarily larger-cap funds, whether growth- or income-oriented. That way you’ll keep volatility low and avoid nasty surprises.
 
But as we also noted, even if core funds make up 60 percent or so of your fund holdings, that still leaves plenty of room to venture out into narrower but potentially more profitable sector funds. These add color and depth to your portfolio and give you a way to benefit from constantly changing market leadership. Just consider that in the first eight months of 2003, the best-performing sector, Information Technology, was up 32 percent, while the worst-performing sector, Consumer Staples, gained only 1.5 percent. That’s a dramatic difference of more than 30 percentage points. Latching on to the sectors poised to become the new market leaders can ratchet up your profits in a hurry.
 
There are lots of ways to bet on a particular sector.
Read more...

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