It's A Tech Stock? Bring It On!
Defining technology broadly has been a winning strategy for Craig Ellis, whose Orbitex Info-Tech & Communications Fund is up 70% so far this year after jumping 52% in 1998. Its 5.75% sales charge would have clipped about nine percentage points off this year's return to a hypothetical investor. That will turn off many do-it-yourself fund pickers, but others still may want to tune in to how Ellis, a former telecommunications analyst, sees the market in tech stocks. He spoke recently with Senior Writer Robert Barker. Some excerpts:
Q: Why is the fund up so much?
A: Diversity. The Internet played a big part in it the first part of the year. But that was only a portion of it. In the wireless-communications arena, Omnipoint was a big hit for the fund. In the networking area, the buyout at FORE Systems was a big hit. And January's buyout of AirTouch Communications was a big hit. So it has been across the space of network systems, Internet, and communications services.
Q: In market caps, too, I see. You've owned mega-caps such as AT&T and little stocks such as JDS Uniphase.
A: Exactly. The only thing I tend to stay away from are micro-cap stocks that don't have much of a following.
Q: So what have you bought lately?
A: Oracle is a big name. That's the kind of thing we started adding back in midsummer: Oracle, Microsoft, Intel. We're ramping back up into Sun Microsystems. And there was another area we went after very hard--the network-infrastructure group: Juniper Networks, Extreme Networks, and two new names in the fund, F5 Networks and Packeteer.
Q: Let's take those last two in turn. F5--why would you buy that?
A: [It] came to me via another holding, Extreme Networks, [which] makes a switch that competes with Cisco Systems'. F5 showed up as a major component supplier to Extreme. We added it around $64 a share.
Q: How about Packeteer?
A: Packeteer is about network bandwidth-management tools. When corporations are trying to get these data networks connected to the public network, they run into bottlenecks. Who can help you prioritize the information? Get the important stuff through and recognize that data as mission-critical? Packeteer showed up as best of breed.
Q: What is Packeteer's competition?
A: Names like Virtual Networks, Check Point Software Technologies, and some of the big companies: This is a space Cisco is very focused on.
Q: The fund has grown swiftly, from next to nothing last year to more than $100 million. When will you close it?
A: We have a long way to go before we have to worry about that. But I think a tech fund up in the $700 million space is a good fund. That gives you the respect and credibility of the investment community. It certainly gives you the attention of most companies out there. Yet there's still enough liquidity in the marketplace for you to work a fund like that.
Q: What's the holding you're most worried about?
A: Juniper Networks. It's up a lot. Here's my predicament: I have a $2 million gain. Now, I also have a role in being tax-efficient, and I need a really good fundamental reason for me to be selling off or just trading away my gains.... I don't see that reason. I also think the estimates are outrageously low. The [earnings] consensus right now is $150 million for 2000. [Juniper] could easily do $300 million.