Are Funds Buying the Wireless Rally?

Back in 1999, the sky was the limit for companies connected to wireless --service providers, handset makers, telecom-equipment companies. Mutual fund managers hopped on the gravy train of runaway stocks such as Nokia(NOK), Motorola(MOT) and Qualcomm(QCOM).

Then, the first shoe dropped: Unrealistic growth targets went under the knife. Then, the second shoe: The stocks started falling. Then, sadly for fund investors, the third shoe dropped: Many funds who held on too long started selling.

The past month has witnessed a resurgence in many moribund tech and telecom companies, leaving many asking: Is this rally for real? It also should be leading many burned fund managers to ask: Am I overexposed once again to bubble-like stocks?

According to research conducted by fund-tracker Morningstar for TheStreet.com, money managers haven't rushed headlong into wireless companies. The data only show purchases through Sept. 30, so it isn't clear yet how many bought in the past month, when wireless companies became Messrs. October. Nonetheless, the numbers show some interesting trends on Qualcomm, Nokia and Motorola. Fund ownership in Qualcomm, while down from its peaks, matches levels from fourth-quarter 1999, when the stock was completing its 2,619% one-year moon shot. Nokia, "the Dell of wireless," is still a favorite of large-cap growth funds (including Janus, even after a lot of selling). And Motorola, serial cutter of earnings expectations, is now seen by fund skippers as the sector's de facto value play.

Qualcomm: A Pricey Bet on the Next Generation

In the bizarre world of 1999, Qualcomm's stock was the most bizarro. Mutual fund managers cast caution to the wind, hitching a ride just as the stock was falling off a cliff. The number of funds owning the company went from 5% in first-quarter 1999 to 22% when the Nasdaq peaked in spring 2000. During the tech revival of the past month, Qualcomm's stock surged from the mid-$20s to $39.50.