Newspaper article St Louis Post-Dispatch (MO)

Some Funds Aren't Loaded with High-Tech Issues

Newspaper article St Louis Post-Dispatch (MO)

Some Funds Aren't Loaded with High-Tech Issues

Article excerpt

A study last spring by Morningstar Mutual Funds, the Chicago fund tracking service, found that the average diversified U.S. stock fund had 16 percent of its assets in technology stocks, which have accounted for a huge share of the stock market's recent gains.

The top-performing and the most popular U.S. funds have been especially big investors in the technology market.

Some funds, including Fidelity Magellan and Founders Growth Fund, recently have begun to chip away at their technology holdings. But technology remains a major part of many funds. Magellan still has around 40 percent of its assets in tech shares.

So, fund investors could be in for serious - and surprising - losses when the technology sector endures its next correction, which should occur soon if history is any guide. During each of the past 10 years, tech stocks have endured a correction of at least 10 percent.

Morningstar recently followed up on those results by looking for funds that have solid performance records and relatively low technology exposure. The study looked for funds that are open to investors, have outgained the average U.S. diversified fund over three and five years and have less than 5 percent of their assets in technology stocks.

If nothing else, it's interesting to see how these low-tech funds have managed to flourish in this high-tech market. Not all of them have taken a low-risk road - and they may not offer a conservative haven in the coming months.

For example, some of the funds started out with technology stakes but have reduced them sharply as tech stocks have become more pricey. Warburg Pincus Growth and Income cut back from 40 percent to 3 percent in high-tech stocks.

The study also found that many of the funds have maintained a high concentration in financial-service stocks. In fact, the funds averaged a 23 percent stake in that sector. Such shares have done especially well in recent years - and as a result they may carry some risks of their own.

Other funds have done well by concentrating in sectors such as media and consumer staples (Longleaf Partners), utilities and foreign shares (Capital Income Builder) and health care (FranklinEquity Income). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.