5 Techs Fueling Fund Gains…Besides Apple
03/09/2012 6:30 am EST
Tech fund manager Ian Warmerdam says there are plenty of areas within the broader sector that have delivered gains. He sees valuations of techs at attractive levels, despite recent rallies.
Ian, most people associate tech with growth, of course. Is that, indeed, among your fund’s objectives?
Ian Warmerdam: Yes, I would say so. I would say our main objective is capital gain; however way we can achieve that to maximize that for our clients.
We don’t consider ourselves either growth or value investors. We actually think it is a mistake to differentiate between the two. We are, if you like, very valuation-sensitive investors, to growth and sometimes often high-growth companies.
Often we get categorized as growth at a reasonable price, but we think that does the model a disservice. We much prefer growth at an attractive price—after all, why would you want to buy anything at a reasonable price?
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Kate Stalter: I was looking at some of the year-to-date performance numbers. You have been outperforming the S&P 500. Of course, I did see your top holding has been Apple (AAPL), so I am guessing that has been a contributor. But what other factors where holdings have impacted your gains so far this quarter?
Ian Warmerdam: Well, first of all, compared to the S&P 500, we are obviously a technology fund, and technology is outperforming. We very much believe that will and should continue.
We don’t like to make short-term prediction. But over any reasonable time period given the valuation of technology at this point in time, and given the growth profile of the sector, we think it looks very attractively positioned.
In terms of our outperformance versus the peer group, Apple has, needless to say, been a contributor as our largest possession—over 9% of our funds. That has been one of largest positions in our funds for many, many years now, going all the way back to 2003.
We also have had success investing in various stocks in and around the Internet space. We have had very successful performances for companies like Priceline.com (PCLN), companies like VeriFone Systems (PAY) in the payment space, like MasterCard (MA). Numerous stock-specific stories have aided our performance.
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Kate Stalter: In looking at some of the performance data, one thing that caught my attention: Morningstar categorizes some of your holdings in sectors other than technology. So are there truly non-techs in there, Ian, or is it just stocks that are categorized differently?
Ian Warmerdam: I would suggest more the latter. We have a significant investment around certain themes.
Two of our favorite themes are e-commerce and online advertising. This can take us into sectors which are not defined as technology. Various areas of e-commerce, for instance, fall outside the hard definition of technology.
We look at technology in its broadest sense. When we see opportunity and areas in and around technology, we will select stocks from all these areas.
Kate Stalter: As we are speaking today, the worldwide indexes had a big sell-off in the prior session, making people very nervous. What would you say to retail investors who are once again perhaps getting nervous about this renewed volatility in the markets?
Ian Warmerdam: Yes, needless to say, the stock market, broadly speaking, has had a strong run year-to-date. On a few technical indicators, we are starting to look overbought. This is very short term; I think it is quite healthy for the market to sell off to some small extent after such a strong run.
Specifically looking at technology and our fund, we think that the future looks very bright. We are seeing very attractive valuations across the board. We think technology on an absolute basis is at almost record low valuations, that we have seen for a generation, relative to the broader market.
Equally, the technology sector looks very attractively valued as a sector. It has very strong balance sheets, is throwing off lots of cash, and has strong prospects for growth.
All of these factors create an environment which we believe over any reasonable timeframe suggests the potential for a strong performance.
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