Tech From Top to Bottom
Aug. 27, 2003 — After more than three years of steep declines, tech stocks have rebounded this year. Most funds that invest exclusively in tech have delivered returns of 30%, 40%, 50%, or even higher. Through the end of July, the tech-heavy Nasdaq has gained 29.9%, versus 12.6% for the Standard & Poor’s 500-stock index.
The $49-million Hartford Global Technology Fund/A (HGTAX) has paralleled the performance of the overall tech sector. After incurring losses in 2001 and 2002, the fund has surged 32.6% this year through July. For the three-year period ended July 31, the fund lost 25.8% annualized, versus a 30.6% drop for the average tech fund.
Launched in May, 2000, two months after the tech/telecom meltdown, the portfolio is managed by team of global analysts at Boston-based Wellington Management. Each member focuses on a specific subsector within technology. Scott Simpson serves as the fund’s “portfolio coordinator,” while John F. Averill, Vikram Murthy, Bruce L. Glazer, Eric Stromquist and Anita M. Killian round out the management team.
As it stands now, the underlying causes behind the resurgence in technology have come under debate. Some believe that fundamentals for the sector have finally turned bright, while skeptics contend that sales remain tepid, and profits have been propped up by a weak dollar.
Simpson cites three factors behind tech’s rebound this year. The first is that tech stocks overshot on the downside, more than discounting how bad things really were. Secondly, and more importantly, are signs of stabilization in certain subsectors he has seen, as well as an improved outlook for the broader economy. Finally, as capital spending increases, “tech should be a primary beneficiary.” However, Simpson cautions that tech is unlikely to ever deliver the growth rates seen in the late 1990s.
The fund’s portfolio is typically concentrated with heavy weightings on favorite holdings. As of June 30, the portfolio comprised 44 stocks. The ten largest holdings as of that date were Cisco Systems Inc. (CSCO), 8.2%; Microsoft Corp. (MSFT), 7.9%; First Data Corp. (FDC), 5.9%; International Business Machines Corp. (IBM), 5.1%; Dell Computer Corp. (DELL), 4.6%; Cendant Corp. (CD), 3.9%; Analog Devices Inc. (ADI), 3.6%; Maxtor Corp. (MXO), 3.5%; Nokia Oyj (NOK), 3.4%; and AOL Time Warner Inc. (AOL), 3.1%. The ten top stocks accounted for nearly half (49.2%) of the fund’s assets.