So you're shopping for a tech fund and you're, shall we say, frugal?
High Yield Funds
If so, today's Big Screen is just for you. Our mission is to dig up tech funds that have beaten their peers, but also have a below-average expense ratio and don't levy a load or sales charge.
If you think you don't have enough tech exposure -- a market or neutral weighting would be about 21% using the
as a yardstick -- you might be watching the scoreboard with interest. After a boffo year in 1999, the average tech fund lost more than 30% last year, with many faring even worse.
So far in this young year, the sector is looking healthier, with a 9.5% gain since Jan. 1. And over the past 10 years, tech funds' dominance remains intact after a string of monster years -- 2000 was the tech fund category's first down year since 1984, according to
We screened the 123-fund category for no-load funds that beat their average peer over the last one- and three-year periods and have an annual expense ratio below the category's 1.75% average. To make this list, funds also couldn't levy an annual marketing or 12b-1 fee.
We came up with four funds -- keep in mind that about two-thirds of the tech funds out there aren't yet three years old -- and here they are ranked by their three-year annualized returns. We'll talk about these funds, some other cheap funds that barely missed our cut, and the stocks that put these four funds on our short list.
Some might dismiss the idea of weighing a tech fund's costs, but they do matter because they come directly out of a fund's return. This might not matter during a once-in-a-generation year like 1999, when the average tech fund gained 135%, but in down years like 2000, a cheaper fund reduces your losses.
Initially, we screened for cheap funds that beat their peers over the last one-, three- and five-year periods. That left us with two funds: Chart-topper
Dresdner RCM Global Technology and
The share class of the Dresdner fund that made our list is actually for institutional investors, but there is a
no-load share class for retail investors with expenses right at the category's average.
This fund is worth a look. Co-managers Huachen Chen and Walter Price Jr. have run the fund since its December 1995 inception and they've got 10 years' experience running tech portfolios together for institutional investors. The pair spread the portfolio among "concept" stocks, blue-chip tech plays and battered tech leaders that might be trading below their true value.
You might think the diversified strategy would hold back returns, but from 1996 through 2000, the fund beat at least 65% of its peers each year. The fund's 47.6% five-year annualized gain beats almost all of its peers and leads the S&P 500 by more than 28 percentage points.
William Keithler has run the Invesco Technology fund only since the start of 1999, but there's still good reason to check it out. Before taking the reins of this fund, launched in 1984, he built a solid track record running the
Berger Small Company Growth
fund from 1994 through most of 1998.
He isn't afraid to focus heavily on a few industries he likes, such as fiber-optic networkers, but he doesn't load up on individual companies as much as his peers. That approach helped the fund ring up a 144.9% gain in 1999, but a 22.8% loss in 2000 -- keep in mind this beat more than 80% of peers.
Icon Information Technology fund and the
Sit Science & Technology funds spread their money broadly, including stocks that don't have tech labels.
A team of managers has run the Icon fund since its February 1997 inception and has put the fund's money in companies of all sizes, mainly within the tech and telecommunications sectors. The fund beat more than 90% of its peers over the last one- and three-year periods, and these managers' diversified approach helped them post a 14% gain last year, when their average peer fell more than 30%.
Eugene Sit has run the fund that bears his name since its 1998 inception, blending tech with pharmaceutical and biotech stocks. At the end of the year, 66% of the fund was in the tech sector and 26% was in health care stocks, according to Morningstar. This approach might not work for purists, but the fund has managed to beat its average peer over the last one- and three-year periods. Its health care holdings helped it lose only 6.6% last year as health care stocks topped other sectors.
In addition to these funds, you might check out the no-load
Firsthand Technology Value fund or the
Firsthand Technology Leaders fund. Both funds would have made our list if it weren't for expense ratios topping 1.90%.
Both have tech guru and
darling Kevin Landis at the helm, and their stellar performance might make you forgive their above-average expense ratios. The Tech Value fund's 48.1% five-year annualized return tops all funds for that period. The Tech Leaders fund's 57.8% three-year annualized return beats more than 90% of its peers. Both funds lost money last year, but less than their average peer. The Tech Value fund lost a little more than 24%, while Tech Leaders lost 10%.
If you like index investing, you might also check out the
Nasdaq 100 Trust Shares
. This is a bundle of the biggest nonfinancial
stocks. The Trust Shares, which trade on the
American Stock Exchange
like a stock, give you access to tech bellwethers with low expenses. Of course, this investment doesn't give you much access to smaller, younger, emerging tech leaders. For more details on the Trust Shares and exchange-traded funds, or ETFs,
check out this primer.
If you're curious about what stocks were tops with the funds that did make our list, here's a peek. We tossed the four funds into a pot and sifted out their cumulative top 10 holdings. It's kicked off by network security-software maker
Check Point Software
, and networking shops
, set to merge with fellow networker