A Tech Fund for the Long Term
03/21/2012 9:30 am EST
Tech is a good value right now, and this fund is holding the players that will go the distance, writes James Kedzierski of Canadian Mutual Fund Adviser.
At the turn of this century, technology stocks were highly favored for their "growth" and "momentum." These days, tech stocks are again showing some momentum, but this time they're often regarded more as "value" plays.
Since the beginning of this year, the S&P 500 Information Technology Index has risen about 16%. Tech stocks, therefore, have substantially outperformed the overall market, as the S&P 500 Index has gained just 9% year-to-date.
Tech stocks may be headed for a repeat of last year's performance. Many of them got off to a good start in the first half of the year, only to be sideswiped by the European debt crisis and slower-than-expected US economic growth.
Continued global economic and budgetary pressures may once again turn back the tech tide, but the need to reduce costs and improve productivity is an ongoing one that bodes well for the sector not only in the short term, but the long term as well.
Tech Stocks Offer Good Value
Meanwhile, a big difference between the technology stocks of today and those of 12 years ago is that they are now quite attractively valued. Rather than trading at price/earnings multiples of more than 100, as many did back then, US tech stocks, on average, now trade at about 15 times estimated earnings.
One way to participate in the momentum and value that tech stocks offer is through BMO Guardian Global Technology Fund, which has gained 11.4% year-to-date. One of our Top 40 funds, it provides you instant diversification, and thus reduces the risk involved in picking individual technology stocks.
The fund seeks long-term growth through capital appreciation by investing primarily in companies whose principal businesses are in the technology sector, located throughout the world, with no restrictions on the capitalization of those companies. It uses a bottom-up selection process to invest in companies that display strong growth in earnings or sales.
Its portfolio advisors, lead manager Walter Price and his co-manager Huachen Chen of RCM Capital Management, have both been with the fund since its inception in 1999. Under their direction, it has been the only fund of its kind in Canada that has been profitable over the last ten years.
Over these difficult years for tech companies, the fund managed to eke out a compound annual gain of 1.6%. With many stocks now possessing attractive valuations and solid fundamentals, we think Guardian Technology will do much better in the coming decade.
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