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Galloping Google Propels Tech Funds

What a week for Google (GOOG)! The stock cut through $600 a share like a hot knife through butter. And, not to be outdone, Google senior advisor and purported "Internet inventor" Al Gore won the Nobel Peace Prize for his global initiative on climate change awareness.

Google shares closed on Thursday at $622, up 7.42% for the five trading days under review. This brought the company's market capitalization to $194.1 billion. That's bigger than Chevron (CVX), Johnson & Johnson (JNJ) or Wal-Mart (WMT).

The run-up in share price is in advance of Google's third quarter earnings release on October 18. If the company meets consensus estimates of $3.78 per diluted share on continuing operations, that would be just over 60% higher than third quarter 2006.

The second- and third-best performing technology, Internet and telecommunications funds have one important thing in common this week. The (BFOCX) Berkshire Focus Fund (BFOCX), up 3.81%, and the (FNINX) Fidelity Select Networking and Infrastructure Portfolio (FNINX), up 3.58%, both list Google as their largest holding. The fourth-place (RSIFX) Information Age Fund (RSIFX) has Google as the second largest holding.

But the top performer this week was the UltraShort Semiconductors ProShares (SSG). The exchange-traded fund rose 4.07% by being 200% short the performance of the Dow Jones U.S. Semiconductor Index. The outlook for semiconductor stocks is tarnished by the downturn in home sales, as most new household products contain chips.



You can find an explanation of our ratings here .

The average tech, Internet and telecommunications fund we track (excluding the two that short the tech sector) rose 1.31%. Of those, 127 funds rose while 23 fell.

Among the losers, none fell more than (WCPIX) ProFunds Mobile Telecom UltraSector ProFund (WCPIX). Sprint Nextel (S), the fund's largest holding, sank 6.69% for the week after it lost its CEO. Gary Forsee's departure came just days after a report emerged that the company was already looking for his replacement.

There are other clouds on Sprint's horizon. In another blow to the established wireless telecommunications companies, U.S. Federal Communications Commission Chairman Kevin Martin affirmed Wednesday that about one-third of the spectrum for sale in the January 2008 auction will be designated as an open platform. For this slice of the airwaves, consumers would get to choose handsets and software not controlled by the network operator.

Which brings us back to Google. Lehman Brothers has issued a report speculating that Google might enter the mobile phone market by February 2008. So it will be interesting to see if the Internet search engine participates in the January spectrum auction. Its hypothetical "Gphone" could be a game-changing player in this space.

Second on the list of worst performers, the UltraShort Technology ProShares (REW) gave up 3.43% betting against the likes of Microsoft (MSFT), Cisco Systems (CSCO), IBM (IBM), Intel TICKER TYPE="EQUITY" SYMBOL="INTC" EXCHANGE="NYSE" PRIMARY="NO"/> and Apple TICKER TYPE="EQUITY" SYMBOL="AAPL" EXCHANGE="NYSE" PRIMARY="NO"/>. Not to mention Google.

You can find an explanation of our ratings here .

Funds and individual investors holding Google stock should be encouraged by the news of Google's plan to present YouTube videos with embedded ads on thousands of other Web sites to monetize the $1.76 billion acquisition into revenue growth. In a similar initiative to leverage YouTube content, the video clips would be "geo-tagged" to pop up in reference to places searched on Google Earth. $700 a share in the near future sounds reasonable.

Best Performing Technology Funds
Ranked by returns for the week ending Oct. 11
Fund Ticker Rating Fund Type 1 Week Total Return
UltraShort Semiconductors ProShares SSG U ETF 4.07%
Berkshire Focus Fund BFOCX C Open-End 3.81%
Fidelity Select Networking and Infrastructure Portfolio FNINX E+ Open-End 3.58%
Information Age Fund/The RSIFX C Open-End 3.42%
WisdomTree International Communications Sector Fund DGG U ETF 3.21%
Rydex S&P Equal Weight Technology ETF RYT U ETF 3.18%
ProFunds Internet UltraSector ProFund INPIX D Open-End 3.14%
Ultra Technology ProShares ROM U ETF 3.12%
Fidelity Select Computers Portfolio FDCPX C+ Open-End 3.06%
Kinetics Internet Emerging Growth Fund WWWEX D Open-End 3.05%
Source: Bloomberg

Worst-Performing Technology Funds
Ranked by returns for the week ending Oct. 11
Fund Ticker Rating Fund Type 1 Week Total Return
ProFunds Mobile Telecom UltraSector ProFund WCPIX E Open-End -6.43%
UltraShort Technology ProShares REW U ETF -3.43%
Ultra Semiconductor ProShares USD U ETF -2.87%
ProFunds Semiconductor UltraSector ProFund SMPIX E Open-End -2.34%
B2B Internet HOLDRs Trust BHH D+ ETF -2.13%
Powershares Dynamic Semiconductors Portfolio PSI D+ ETF -1.97%
Rydex Series - Electronics Fund RYSIX E Open-End -1.68%
Semiconductor HOLDRs Trust SMH C- ETF -1.48%
iShares Dow Jones US Telecom Sector Index Fund IYZ B+ ETF -1.41%
iShares S&P GSTI Semiconductor Index Fund IGW C ETF -1.32%
Source: Bloomberg

Baker does not own Google directly, but it is a holding in one or more mutual funds he owns.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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