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Tech funds win in drought
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August 13, 1999: 5:43 p.m. ET
Firsthand Funds have three winners despite Nasdaq's summer losses
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - There may have been a summer drought in technology stocks, but fund manager Kevin Landis has avoided getting scorched.
Landis, manager of three technology funds at Firsthand Funds, has delivered top returns this year through July by avoiding battered PC stocks and "dot-coms."
"We didn't take it on the chin quite so badly," said Landis. "We take advantage of the fact we're here in Silicon Valley and we dig."
The Nasdaq Composite is off 8 percent from its high of 2,864.48 on July 16 after the index rebounded sharply on Friday. The index had been down from its July high by as much as 12 percent.
Less than one-third of the 90 funds tracked by Morningstar turned a profit in July, including the three Firsthand funds.
The Firsthand Technology Value Fund, the group's flagship, delivered the second-best returns in the category in July with a gain of 5.80 percent, Morningstar said. It is up 76.52 percent year to date as of July 31.
The Firsthand Technology Leaders Fund earned 1.25 percent in July and is up 48.84 percent this year, while the Firsthand Technology Innovators Fund eked out a gain of 0.68 percent in July and is up 76.33 percent year to date. The funds have combined assets of $550 million.
"If you own the right companies, you'll be fine," Landis said.
The technology leaders fund invests in the biggest players like Cisco Systems (CSCO), Lucent Technologies (LU), Microsoft (MSFT) and Intel (INTC), Landis said. The innovators fund looks for small companies that "have greatness written all over them." The value fund owns a little of both, but is "ultra price-sensitive."
Some of Landis' favorite stocks include chip companies like Applied Micro Circuits (AMCC), which is up 172.49 percent as of Thursday, and PMC-Sierra (PMCS), up 172.47 percent in that time. Applied Micro Circuits' biggest customer is Lucent, while PMC-Sierra's biggest client is Cisco Systems, he said.
"We play the Internet through Internet infrastructure companies," Landis said. "Their function is moving data."
As far as the outlook for technology, Landis remains bullish. Friday's surge may be the start of a healthy rally, he said.
"I think tech equals growth," Landis said.
Speaking of Firsthand Funds, Ken Kam, a co-founder of the company who managed Firsthand's Medical Specialists Fund, is leaving to start his own firm. But Kam will continue to pick medical stocks through a consulting agreement.
"The purpose of (the agreement) was continuity," Landis said.
And more growth is on the horizon for the San Francisco-based firm. The company will introduce the Firsthand E-commerce Fund and the Telecommunications Fund in the fourth quarter.
Besides Kam, another star manager at Transamerica Premier Fund has flown the coop. Philip Treick, who had been manager of the Premier Aggressive Growth Fund and the Premier Small Company Fund, is leaving to form his own firm. Christopher Bonavico, who had been co-manager of the two funds, will take his place.
Ed Foster, chief investment strategist at Fabian Investment Resources, said a fact of life in the fund business is that top managers get lured away.
"This is like free agency in baseball," Foster said. "These guys are getting great offers to go out on their own or join other mutual funds. These guys are hot."
Another traditional Wall Street player is getting into the Internet fund business. Goldman Sachs plans to introduce its Goldman Sachs E-commerce Index Fund on Oct. 1. The index will include 39 stocks that generate most of their revenues online.
- Staff writer Martine Costello covers mutual funds for CNNfn.com. If you have any comments about mutual funds, you can contact her at cnnfn.interact@turner.com
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