Looking beyond the technology-centric U.S. market is key to building a solidly diversified portfolio of tech stocks, according to Ian Warmerdam, manager of the $300 million Henderson Global Technology Fund Ticker:(HFGAX).
Mr. Warmerdam, who oversees more than $3 billion in the technology space from his base in Edinburgh, Scotland, chides U.S.-based tech fund managers for focusing too much attention on the local market.
“We spend a lot of time doing research in Europe and Asia, and that helps us take a completely global perspective,” he said.
The more-global perspective is illustrated by the fund's 35% allocation to non-U.S. companies.
By contrast, the average technology mutual fund has just 12% allocated to non-U.S. companies.
The fund, which was launched in August 2001, has generated an 8% annualized return since inception. And on a calendar year basis, the fund has outperformed both the tech fund category as tracked by Morningstar Inc. and the benchmark MSCI All-Country World IT Index every year.
Among the keys to its success, according to Mr. Warmerdam, is a long-term focus that relies heavily on ongoing themes.
“You will tend to not see us investing in bleeding-edge companies,” he said. “Our edge is in picking up the middle- and small-cap opportunities.”
One theme that the fund has focused on for the past few years is the general shift away from the use of cash for transactions.
As a result, the secular growth story involves electronic commerce, online advertising, data growth, connectivity and electronic payments, Mr. Warmerdam said.
“Right now, only 4% of all retail sales are conducted online,” he said. “There is a huge gap between perception and reality in this area.”
By not chasing the hottest dot in the tech space, Mr. Warmerdam said he is avoiding much of the volatility that most tech investors face.
“As technology develops, it tends to go through cycles of hype, much like the Internet hype in the late 1990s, and that's what we're seeing right now in the area of social networking,” he said. “But we're more interested when there is still a long-term growth opportunity that has been forgotten by the market.”
Mr. Warmerdam, who keeps the portfolio at between 40 and 60 stocks, will ride a solid name if it makes sense.
The 7.5% allocation to Apple Inc. Ticker:(AAPL), for example, is more than twice the size of any other position in the portfolio.
“We like Apple a lot, and we were buying it even before the iPod,” he said. “Apple represents a distinct exception in consumer electronics because of its strong ties to its customers.”
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