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The only thing tarnishing that story is just their size.
Law of large numbers.
Law of large numbers. It's really the only bad thing you can say about them.
10 Questions Archive
Oakmark Global's Greg Jackson
Sit Science & Technology's Gene Sit
Amerindo Technology's Alberto Vilar
FBR Financial Services' Dave Ellison
They're a great execution story, they really, really dominate their business. If you look at the problems right now that
are having, it's just a great lesson of the sort of the problem that Cisco's not having.
Other than the law of large numbers, the only fear that you could have for that company is that they've gotten so good at acquiring the value of technology companies and then adding the value of sales, distribution, support and execution that they could become dependent on that. And if they become dependent on that then the other companies might price it out of the range where it makes sense for them.
We own Cisco in the Tech Leaders fund.
JDSU we don't own; Juniper we own in the
Technology Innovators Fund.
JDSU is the early leader in photonics components. If there's a thing to worry about there, it's the way that those components get manufactured is going to radically change over the next five years. They need to lead that change, otherwise they can still get left behind. In other words, it's really early there, in that industry's evolution.
Juniper is a best-of-breed product and it'll be a great example this year of where the carriers, even if they're cutting their spending, will still spend on the strategic stuff and that'll be Juniper's product.
7. I think that's a segue to a great point, which is, that tech spending is dropping, but it's not as if it's going to zero. Some people are still getting a lot of demand for their products, more than they did last year. Who are those folks?
Juniper's a good example.
. I think the optical-networking companies are still growing at a pretty nice rate. The problem there is that they were expected to grow even faster, but that's just an expectation issue. In terms of their business, it's very healthy.
And I think if you sell into the metro market, you're going to have a very good year. And it doesn't all have to be optical, it can also be ethernet switches, like
and a few private companies out there.
Are you folks dabbling in VC or private companies that maybe held off their IPO but you're seeing strong products?
Absolutely. Our prospectus gives us room for 15% of a fund's assets to go into private deals.
How much would you say you typically use?
Our Tech Innovators Fund and our
Communications Fund both have about 5% in what are known as "illiquids," and these are very interesting, young communications technologies that we expect to go public sometime in the next year, and that we have really great hopes for.
8. "Buy the winners" is a mantra we always hear but that assumes it's easy to discern the winners from the losers in tech. When you look at a company, what are you looking for to discern a company that is or will be the leader?
I would say a company that has the knack for providing the best products in an exciting market. If you have the best products in an exciting market, that's a pretty powerful combination.
I know a lot of people will talk about the management team. But to me, that's how you judge a management team, put together a team that has a knack for coming out with the right product at the right time, and your customers all respect you, that's the real measure of good management.
What's the last company that maybe isn't on everybody's radar screen, yet one that you've come across that jumped out to you as fitting the criteria?
Laughs There are so many right now. You know what? I think that a good example of that would be
, which was a big news stock when it went public and then had an adolescent stumble, and kind of got left for dead by people, and that's missing the point there. I think Ciena's a great company, very well-positioned, and doing all the right things.
9. If you had to pick three stocks to hold for five years, what would they be and why?
I would look at the way that the PC wave made Intel the world's most valuable chip company, and I'd take a look at the communications wave and ask myself, What is going to be the world's most valuable chip company based on catching this wave properly?'
And for that I would buy
Applied Micro Circuits
I would take a look at the e-commerce wave, and I would say e-commerce is all about
and Global 2000, it's not about the dot-coms. Whose software are they going to use to build it on? And for there, I think I would take
10. On a more personal note, Jim Cramer posted a piece to the site where he took some shots at your positions as the heavyweight of tech investing. What's your take on the criticism of your investing style?
I'm sure that some success leads to some personal attacks. I don't really understand the motivation behind it. You guys are in the business where you have to get ink, you have to get people to read and have some sort of sensationalism, but we
Cramer and Landis don't know each other and if you read it, you'd think that we were people who knew each other and had a falling out at some point.
But the guy doesn't know me, so I don't know where it's coming from. But you know what? Because I don't know him, I can't speak to his motivations, so that's one of those mysteries that I'm going to leave unsolved.
But I would say this: We are long-term investors. We're long owners and we don't try to time the markets. I think if you look back to what we said all along, we don't think you should trade around these things, you should buy tech, and buy the right stocks in tech, and own for the long term. And that means you're going to feel pain in markets like this.
But the alternative is to try to become a market timer and that's not us. I know there are people out there who believe that not only can you time markets but that you have a duty to try to time markets, I think that's just a fundamental disagreement. I don't believe that we have a duty to try to time markets, because I think that in the long term, we'll make more money for our investors by not trying to make these market calls, not being out of stocks when they move up. That's the difference between trading and investing.
Fund Junkie runs every Monday, Wednesday and Friday, as well as occasional dispatches. Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
firstname.lastname@example.org, but he cannot give specific financial advice.