A Date That Will Live in Infamy: Tech Fund 'Winners' Since March 10, 2000

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Just as middle-aged former high-school quarterbacks look wistfully back on their favorite Saturday win, tech-fund managers probably feel a pang when they look back to Friday, March 10, 2000.

That's the day the tech-laden Nasdaq Composite peaked. At that point, the Nasdaq was up 112% over the previous 52 weeks. Since then, the average tech fund has lost more than half its value. Like aging high school quarterbacks, the real test of any sector fund is how it has performed since its glory days.

So today the Big Screen is looking at the profoundly battered tech-fund pack, and the plain truth is revealed: All those folks who recommended broader tech funds over high-octane Net funds have plenty of "I told you so" ammo.

On Monday we asked the folks at Morningstar to sift tech funds by their returns since the Nasdaq's peak. On average, they're down 53.3%, but those funds focusing on the most speculative Net shops took a profound drubbing. At the other end of the spectrum, tech funds focusing on more vanilla tech fare like software shops held up better than their peers. Before we check out the losers and winners, you might be interested in the category's giant and some investor faves in recent years.

The $6.88 billion (PRSCX)T. Rowe Price Science & Technology fund, the largest tech fund in the nation, fell about as much as its average peer. Since March 10 it's down about 50%, compared with 53% for the average tech fund. The same is true of the $3.27 billion (FSPTX)Fidelity Select Technology fund, which fell 53% since the Nasdaq's top. Over the past three years, however, the Fidelity fund has shone. It has averaged a 21% annual gain, compared with 13.9% for the average tech fund and 5.6% for the mammoth T. Rowe fund.

The $3.36 billion (JAGTX)Janus Global Technology fund, which had to close last year due to steep inflows, slightly trailed its average peer with a 55.5% fall since the Nasdaq's peak and a 55% tumble over the past year. The fund doesn't have a three-year record yet.

Those are ugly numbers, but they're nothing compared with the carnage among Net-focused funds. These staggering funds, many lacking a three-year record because they were launched near the height of investors' Nasdaq fever, dominate the list of the biggest losers since March 10, 2000.

Decked Tech
Tech Fund	Return Since March 10	3-Year Return
(JAMFX)Jacob Internet	-82.9%	N/A
(PNETX)Potomac Internet Plus	-80.3	N/A
(INGAX)Pilgrim Internet	-76.9	N/A
(TEFQX)Firsthand e- Commerce	-71.2	N/A
(PBTCX)PBHG Technology & Communications	-70.0	11.8%
(ATCHX)Amerindo Technology	-70.0	7.9
(FATAX)First American Technology	-70.0	2.8
(MFITX)Monument Digital Technology	-69.5	N/A
(NETAX)Westcott Technology	-69.3	N/A
(IINTX)Investec internet.com Index	-69.0	N/A
Avg. Tech Fund	-53.3	13.9
S&P 500	-12.2	3.8
Source: Morningstar. Returns through June 30.

The (JAMFX)Jacob Internet fund, run by former wunderkind Ryan Jacob, tops this infamous roster with a jaw-dropping 82.9% loss since the Nasdaq's peak. He even managed to top the (PNETX)Potomac Internet Plus fund, down 80.3% since March 10, 2000, which uses leverage to make outsize bets on Net stocks. Other big-time Net losers are the (INGAX)Pilgrim Internet fund (formerly the ING Internet fund) and the (TEFQX)Firsthand e-Commerce fund.

This list also highlights how impermanent and misleading fund names can be. Given the severity and similarity of these funds' losses, it's safe to imagine that they might all deserve a Net label. The (MFITX)Monument Digital Technology fund and the (NETAX)Westcott Technology fund both formerly had "Internet" in their names. Once the sizzling subsector cooled -- and then froze -- their names changed. And though Amerindo Investment Advisors clearly tell investors the (ATCHX)Amerindo Technology fund is a Net fund, the word "Internet" isn't in its name.

No matter what their label, it's easy to see why these funds lost a lot of money and might deserve a Net tag. We tossed each fund's portfolio in a pot and sifted out their cumulative top-five holdings. Their faves are online auction titan eBay(EBAY), business-to-business software shop Ariba(ARBA), online security concern VeriSign(VRSN), as well as Net blue-chips AOL Time Warner(AOL) and Yahoo!(YHOO). These five stocks have had varying degrees of failure since March 10, 2000: eBay is down 28%, Ariba is off 96%, VeriSign is down 76%, Yahoo! is 89% lower and AOL is off 11%.

Now that we've seen the vanquished, let's check out some tech funds that didn't take on quite as much water in the past year's storm.

The Unvanquished
Tech Fund	Return Since March 10	3-Year Return
Potomac Internet/Short	81.5%	N/A
(ICTEX)Icon Information Technology	-11.2	42.7
(FSCSX)Fidelity Select Software & Computers	-25.3	22.0
(LUXRX)Light Revolution	-31.9	N/A
(PPTIX)North Track PSE Tech 100	-34.1	26.5
(SLMCX)Seligman Communications & Technology	-35.9	13.8
(STECX)STI Classic Information & Technology	-36.0	N/A
(MTCAX)MFS Technology	-36.3	N/A
(ETCAX)Evergreen Technology	-37.2	N/A
(FSELX)Fidelity Select Electronics	-40.7	32.6
Avg. Tech Fund	-53.3	13.9
S&P 500	-12.2	3.8
Source: Morningstar. Returns through June 30.

If we look at these funds' favorite stocks, we come up with less racy and profitable tech shops like software giant Microsoft (MSFT) and graphic art software maker Adobe(ADBE). On average these funds took a broader view of the tech sector, spreading their assets more widely and paying closer attention to valuations than did their riskier competitors. This style might have more appeal if you're looking for a tech fund that offers tech exposure without eye-popping risk.

One name that leaps off the list is the (SLMCX)Seligman Communications & Information fund, where Paul Wick has held the reins since 1990. Wick's tendency to focus on smaller-cap stocks with less pricey valuations has held the fund back in big-cap tech rallies, but it also kept its losses to 35.9% since the Nasdaq's top. Over the past three years, the fund's 13.8% annualized gain is about even with that of its average peer.

Unlike many tech specialists, Wick spreads his fund's assets among more than 130 stocks, so if you're looking for a diversified, lower-risk approach, this fund might be worth some research.

Another fund you might look at is the (ICTEX)Icon Information Technology fund, where the lead manager uses a series of quantitative screens to rotate the fund's assets among several tech subsectors looking for rising earnings and modest valuations. The approach has often led the fund to put money in slower growth shops not defined as "technology" by Morningstar, but it has led to solid results. The fund lost only 11.2% since the Nasdaq top, and its 42.7% annualized gain over the past three years tops that of all its tech peers.

You might be tempted to check out the two Fidelity funds on our list -- (FSCSX)Fidelity Select Software & Computers and (FSELX)Fidelity Select Electronics -- but keep in mind that they made our list because their slices of the tech sector have fared decently. That can and will change whenever the market winds shift again, so you might be better off with the Fidelity Select Technology fund, which offers access to the Boston fund giant's deep analyst bench with a broader menu of stocks to choose from.

Of course, many investors prefer a Goldilocks approach -- spurning both Net funds that flamed out and the category's least racy funds, which might not rocket as high in a tech rally. If you're in that camp, you might look to two tech funds this column has used in building model portfolios over the past year: The (TVFQX)Firsthand Technology Value fund and the (DRGTX)Dresdner RCM Global Technology fund.

Both the Firsthand fund, run by Kevin Landis, and the Dresdner fund, skippered by Walter Price and Huachen Chen, have vets at the helm. Both fell just a bit less than their average peer over the past year, but over the past three years each averages annual gains of a little more than 24%, compared with 13.9% for the average tech fund.

If you're looking for a fund that should lose about as much as its peers but gain more on the upside, these two are probably worth a peek. No matter what kind of tech fund you're looking for, it's probably a good idea to focus on its losses over the past year. If you can't stomach a 50% decline, a broader growth fund might make more sense.

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