Forgive T. Gary Liberman if he looks a little queasy: For the technology-fund manager, the past year has been a roller-coaster ride. As the bottom dropped out of the Nasdaq, his J.P. Morgan Fleming U.S. Technology Fund plunged 88.6% for the 12 months ended Sept. 30. Then, a sharp fourth-quarter rally in the tech sector boosted Liberman's $200 million fund by 64%--the best performance of the 500 offshore investment funds that BusinessWeek tracks. So far this quarter, Liberman's fund has followed tech stocks down again, falling 4.1% as of Jan. 18.
An accountant by training, the 35-year-old Liberman took the fund's reins in December, 1997, just in time to guide it to mammoth gains in the late-'90s boom. In 1999 alone, the fund rose 166%. But by October, 2000, the good times were over. In fact, despite its fourth-quarter gain, the fund still posted a 61% loss for 2001. "It was a rough ride until the end of September," he says.
But for Liberman, there is no way out of the amusement park. As a tech-fund manager, he can't help but be exposed to the peaks and valleys of the Nasdaq. Also, Liberman steers his fund toward growth stocks, shunning conservative tech blue chips such as IBM (IBM ) and Electronic Data Systems Corp. (EDS ) in favor of more volatile mid-caps and small-caps.
The fund may be aggressive, but Liberman says he's looking for more than the next hot initial public offering. The New York manager spends much of his time in Silicon Valley, researching businesses before he invests in them. A stock must pass Liberman's four-point checklist: The company must have a dominant position in its subsector; its market should have growth potential in the short term; that market must be new, or at least changing; and the stock must be reasonably valued.
Liberman is bullish on his biggest holding--eBay Inc. (EBAY ), which accounts for 5.5% of the fund's value. The online auctioneer's solid performance in a tough 2001 leads Liberman to predict 40%-to-50% revenue growth for 2002. He also sees hope in the fourth-quarter rally: "Maybe some of the companies we left for dead aren't going to die out after all."
Still, Liberman does not expect tech stocks to run back up to their 1999 peaks anytime soon. But he figures that spending for information technology, which in 2001 saw its biggest decline in more than 25 years, has nowhere to go but up. That's good news for tech funds. It may even help settle the stomachs of their managers.
By Brian Hindo in New York