Tech's Bargain Bin Fails to Attract Many Fund Buyers

Many growth-fund managers have finally kicked the tech-fund habit. And it doesn't appear that many value-fund managers are even experimenting.

Five of the biggest names of the technology-stock bull run of the late 1990s are now in the under-$3 bargain bin: optical-networking parts makers JDS Uniphase(JDSU) and Corning, networking outfit Sun Microsystems(SUNW), PC maker Gateway(GTW) and phone gearmaker Lucent(LU).

With these stocks all off more than 85% from their highs, some investors might make the knee-jerk assumption that they represent value plays. But most money managers don't seem to think so.

According to data compiled by mutual fund tracker Morningstar for TheStreet.com, growth-fund managers who once owned these stocks have largely headed for the exits -- either liquidating or sharply paring back their holdings. And only a handful of small-cap and mid-cap value managers have dared to take their place, the data show.

Once Upon a Growth Story... Large-cap growth funds have been reducing their positions in these stocks
Category	Quarter	JDSU	SUNW	LU	GTW	GLW
Small Value	Q4 2001	0	0	1	1	2
Small Value	Q3 2002	0	1	2	8	3
Mid Value	Q4 2001	4	4	9	5	6
Mid Value	Q3 2002	7	3	14	9	10
Large Value	Q4 2001	20	33	64	22	41
Large Value	Q3 2002	18	44	65	17	43
Small Blend	Q4 2001	0	2	0	0	0
Small Blend	Q3 2002	0	2	0	2	0
Mid Blend	Q4 2001	1	5	9	4	7
Mid Blend	Q3 2002	1	5	7	4	9
Large Blend	Q4 2001	171	279	204	135	185
Large Blend	Q3 2002	144	240	197	132	168
Small Growth	Q4 2001	2	2	1	2	0
Small Growth	Q3 2002	5	2	1	4	1
Mid Growth	Q4 2001	22	12	5	1	5
Mid Growth	Q3 2002	18	13	4	1	3
Large Growth	Q4 2001	103	223	46	17	51
Large Growth	Q3 2002	58	129	41	11	24
Source: Morningstar

"All five of them are in the same boat, trying to figure out a way to survive," said Richard Eakle, president of Eakle Associates, a Fair Haven, N.J.-based hedge-fund advisory firm, which counts George Soros among its clients. "I've owned JDSU and Sun, but I don't anymore. It was a valuation decision. The stocks got overpriced, and there was no indication of any kind of revenue growth picking up."

Indeed, fund ownership of Sun Micro has slid from 560 funds three quarters ago to 439 in the third quarter of this year. But this ownership slide has been especially concentrated in the large-cap growth-fund universe, where Sun Micro was a top holding three years ago. Large-cap growth fund ownership of Sun has been nearly halved in the past year, from 223 to 129 in the third quarter of 2002, according to Morningstar.

Some of Sun's biggest believers have abandoned the company, such as the (FDGFX)Fidelity Dividend Growth fund, which sold 4.3 million shares, according to the most recent data in August, reducing its position by two-thirds. Likewise, (FBGRX)Fidelity's Blue Chip Growth fund sold 4.2 million shares, cutting its position nearly in half. (Bill Nygren sees value in Sun, however, as Dagen McDowell reports.)