The Daily Screen: Tech and Telecom Funds With Tenured Managers

There might be a lot of tech and telecom sector fund managers out there, but few of these funds or managers have been around long.

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On the heels of record returns -- the average tech fund rang up a 135% return last year -- and inflows, fund companies tripped over one another to roll out new tech and telecommunications or communications funds. Today, there are more than 140 tech or telecom funds out there, but the vast majority are less than three years old. Usually the Daily Screen sifts category leaders using performance yardsticks, but this week we're adding portfolio management criteria, too.

Given the stern thrashing tech and telecom stocks and funds have absorbed this year, it's probably not a bad idea to stick with folks who have at least been around the block a time or two. The average tech and telecom funds are down 17.3% and 21.8%, respectively, according to Morningstar.

Hard Times This year has brought the tech and telecom fund boom to a screeching halt
	AverageTech fund	Average Communications fund	S&P 500
YTD Return	-17.3%	-21.8%	-5.1%
5-Year Return	27.4	22.4	19.3
10-Year Return	27.5	20.6	18.1
Source: Morningstar. Annualized performance figures through Dec. 8.

That said, these fund flavors have led the market in recent years, with solid long-term returns to prove it. If you're looking for more exposure to these industries -- keep in mind the average growth fund has about more than half of its money stashed in these sectors -- we've made a first cut for you. We screened both bins for those funds that beat their average peer this year and over the past three years with the same manager.

Surprisingly, this seemingly simple screen thins the field considerably -- for more on this topic check out Monday's Fund Junkie column. First, let's look at the two telecom funds that made the cut.

Leading Phone Funds with Some Experience
Fund	1-Year Return	3-Year Annualized	Manager Tenure
(ISWCX)INVESCO Telecommunications	-8.8%	40.7%	3
(GABTX)Gabelli Global Telecommunications	-16.6	24.6	6
Average Communications fund	-21.8	24.1	1
S&P 500	-5.1	12.4	-
Source: Morningstar. Annualized performance figures through Dec. 8.

These two no-load funds represent either end of the telecom fund spectrum. (ISWCX)Invesco Telecommunications manager Brian Hayward has a taste for tech stocks, which make up 64% of the fund, while (GABTX)Gabelli Global Telecommunications fund managers Marc and Mario Gabelli chart a less aggressive course with a heavier bent toward less expensive telecom stocks.

That said, Hayward's fund has been hit less hard than the Gabelli fund this year -- for a closer look at his strategy, check out this recent 10 Questions Interview. It's important to note that over the past three years, the Invesco fund has been more volatile than its average peer, while the Gabelli fund has given shareholders a smoother ride.

Among the some 120 tech funds out there, only six made our cut, but there are some intriguing options there.

Leading Tech Funds With Steady Management
Fund	1-Year Return	3-Year Annualized	Manager Tenure
(ICTEX)Icon Information Technology	28.8%	44.4%	3
(TVFQX)Firsthand Technology Value	15.8	50.1	6
(DRGTX)Dresdner RCM Global Technology	7.0	62.3	4
(PPTIX)Principal Pres PSE Tech 1	2.6	40.1	4
(DTGRX)Dreyfus Premier Technology	-6.9	58.2	3
(BINVX)Berger Information Technology Inv	-7.1	50.3	3
Average Technology fund	-17.3	35.0	1
S&P 500	-5.1	12.4	-
Source: Morningstar. Annualized performance figures through Dec. 8.

Over the past three years, no-load chart-topper (ICTEX)Icon Information Technology and broker-sold (PPTIX)Principal Preservation PSE Tech funds have hit the fewest bumps, according to Morningstar. That said, the Icon fund isn't necessarily a tech fund per se. Only about half of the fund's assets were in tech stocks, according to its most recent portfolio report, which dates back to June 30.

The Principal Preservation PSE Tech fund tracks the PSE Tech 100 Index, which is price weighted. That weighting scheme -- the higher a stock's price, the bigger part of the index it is -- can lead to an odd portfolio. For instance, software shop Adobe Systems(ADBE) is a bigger part of the index than software titan Microsoft(MSFT). Though the fund carries a maximum 5.25% front-end load or sales charge, it sports a 0.70% annual expense ratio, which is much lower than the category's 1.73% average.

In looking over the other funds on our list, the standout is probably the no-load (TVFQX)Firsthand Technology Value fund, which tops all funds over the past five years. Before this year, one might have wondered if manager Kevin Landis merely rode the tech wave, but his solid gains in this tough year illustrate stock-picking skill. Keep in mind that this fund carries a steep $10,000 investment minimum and Landis now runs or helps run six different tech/telecom funds at Firsthand Funds.

If you're wondering what stocks helped these funds stay ahead of their peers this year, we've looked into it. We combined the portfolios of the eight funds above and sorted them to find their cumulative top 10 picks. As you might imagine, there aren't any sagging bellwethers on the list. Rather, you'll find the likes of networker Ciena(CIEN) and semiconductor concerns Applied Micro Circuits (AMCC) and PMC-Sierra(PMCS).

Under the Hood The stocks with the biggest weighting in the combined portfolios of the eight tech/communications funds listed above
Stock	Weighting in Top-Eight Funds	Number of Top-Eight Funds Owning the Stock
Applied Micro Circuits(AMCC)	2.0%	4
PMC-Sierra(PMCS)	1.8	5
Ciena(CIEN)	1.7	5
EMC(EMC)	1.7	5
Corning(GLW)	1.5	3
Siebel Systems(SEBL)	1.4	3
Network Appliances(NTAP)	1.4	3
Juniper Net(JNPR)	1.3	4
BEA Systems(BEAS)	1.3	3
Vitesse Semicon(VTSS)	1.3	5
Source: Morningstar. Holdings as of funds' most recent portfolio reports.

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