|
McHugh on tech exposure
|
 |
August 24, 2000: 11:16 a.m. ET
Says stocks like Ciena, Corning and Jabil Circuit are poised to start climbing
|
NEW YORK (CNNfn) - Technology should be an important part of a person's investing portfolio, and stocks like Ciena and Corning should climb after Labor Day, a tech fund manager told a chat audience on CNNfn this week.
Christopher McHugh, co-portfolio manager of the Turner Technology Fund, Turner Wireless and Communications Fund, and the Turner B2B E-Commerce Fund, answered questions Wednesday as part of a weeklong chat series in CNNfn.com's special report, The Road to Riches.
In addition to his portfolio-management duties, McHugh covers the technology and producer-durables sectors for all of the Turner stock funds.
Here is a transcript of McHugh's session. (Note: CNN staffers asked some questions. Also, there are references to America Online during the session. AOL is merging with Time Warner, parent of CNNfn.com).
Chat moderator: Thanks for joining us today, Christopher McHugh, and welcome.
Christopher McHugh: Well, thanks very much for having me. I look forward to talking to the audience.
Chat moderator: What are some of your favorite tech stocks?
McHugh: Well, right now, we're pretty bullish on the tech sector in general for the second half of the year, especially after Labor Day. Some of the areas that we like right now are in the optical space such as Ciena (CIEN: Research, Estimates), Corning (GLW: Research, Estimates) and Sycamore Networks (SCMR: Research, Estimates). We also like the contract manufacturers Jabil Circuit (JBL: Research, Estimates).
Question: I'm interested to hear how much of a 29-year-old's portfolio Mr. McHugh thinks should be in tech.
McHugh: Well, technology is the fastest-growing segment of the economy today. It represents the largest portion of all the major industries out there, such as the Russell 1000 Growth, which is large-cap stocks, the Russell Mid-Cap Growth, which is mid-size companies, and the Russell 2000 Growth, which represents small-cap companies. So, any exposure to technology for someone at a young age is good if they have a long-term perspective. Please always keep in mind you need a diversified portfolio.
Question: How do you feel about small-cap funds?
McHugh: We think small-cap stocks have been hit here in the year 2000 when the Nasdaq sold off in April. Small-caps sold off more than large-caps, also, because people gravitated to large-cap holdings out of the fear of higher interest rates. However, now with what seems to be interest rates not going up anymore, it will provide a good catalyst for small-cap stocks going forward.
Chat moderator: Is technology too risky to have in a portfolio if you're close to retirement?
McHugh: There are degrees of risk in technology. The more aggressive means that you go into obvious risk associated with them. There is more risk in a small start-up company with great growth potential versus a seasoned technology company, such as Cisco (CSCO: Research, Estimates) or Intel (INTC: Research, Estimates). So again, I would say you probably would have less risk with a blue chip technology fund with companies that have been around for many years and have proven themselves.
Some exposure to technology with companies that have good track records could be part of an overall portfolio, because technology is a segment of our economy. The percentages depend upon the risk tolerance of the individual.
Chat moderator: What's your outlook for Internet stocks?
McHugh: I think the Internet stocks should see a rally going into the seasonally strong third and fourth quarters, both the Internet software infrastructure companies as well as the traditional B2C companies -- such as Yahoo, Amazon and AOL. The interest rate increases over the last year have hurt these stocks and they've come down to pretty attractive levels. We like the group right here.
Question: You " think." Sir, what makes you sure?
McHugh: The stocks are moving into the strongest period of earnings for these companies. The online companies do extremely well during the holiday season. Online usage increases significantly as the summertime fades. Seasonal shopping patterns pick up year after year. Minutes spent on the Internet are increasing. PC demand is also increasing, which will attract more users.
Question: What do you think will happen with AOL stock once the merger with Time-Warner is completed? AOL has been pretty stagnant since the merger was announced.
McHugh: It's been our experience that when there are mergers of this size, that these stocks tend to under-perform in the market as a whole until the deals are consummated. If you look at other deals, such as WorldCom (WCOM: Research, Estimates) and Sprint (FON: Research, Estimates), both stocks have under-performed. The VeriSign (VRSN: Research, Estimates) and Network Solutions deal is another example. Once these companies get approval, then there is liberty to talk about the benefits, cost savings and new products the joining of the two companies will offer.
So I think AOL is a stock you want to accumulate now at these levels. And as we become closer to the deal closing, we anticipate the stock will move higher.
Question: Sun Microsystems (SUNW: Research, Estimates) just announced a split. What is your outlook for that stock?
McHugh: We're very bullish on Sun. It's been a core holding for us in our large-cap portfolio. The company just had an analyst day, with very positive comments on the outlook for their server business. We expect strong earnings and revenue growth to continue.
Question: Innovations have primarily been due to market competitiveness. With all the mergers, and fewer competitors, do you think new innovations will decrease?
McHugh: I would say no. Innovation is the key for a company to remain competitive versus its industry peers. Because of strong competition, companies continually need to think of new ways to keep customers, track new ones and bring innovative products to the marketplace. So I think innovation will always remain in technology.
Chat moderator: Do you have any final thoughts for us today?
McHugh: I think technology in general is quite a volatile sector. However, it is also one of the most exciting sectors of the economy. We think some of the major trends such as business-to-business, fiber optics, wireless and communications are themes that will be played out over the next three-to-five years.
Stock selection is always the key. And the winners in these trends will reward investors, if they are involved with the best-positioned companies.
Chat moderator: Thanks for joining us today, Christopher McHugh. We appreciate your insights.
McHugh: Thanks, audience, for your great questions. I look forward to the next time.
* Disclaimer 
|
|
|
|
|
 |
|
