CONFERENCE CALL: Hold the wire for the year’s hottest tech area

Two favorites of media star Garrett Van Wagoner, who runs the $3 billion Van Wagoner Funds in San Francisco, are cellular phone makers Netro Corp. and Phone.com Inc., although he’s equally bullish on developers of e-commerce software for businesses and consumers, like Ariba Inc., BlueStone Software Inc. and Interwoven Inc.

Mr. Van Wagoner made his remarks earlier this month at the annual adviser conference hosted by TD Waterhouse Group Inc. a few blocks from its Waterhouse Institutional subsidiary in San Diego.

Agreeing with Mr. Van Wagoner was Kevin Landis, who manages $5.2 billion in the San Jose, Calif.-based Firsthand Funds. Mr. Landis warned, however, that an exception was satellite companies, which have become “the least exciting area of wireless investing,” because they are far more expensive to run than companies that shoot signals off towers and mountaintops.

“Terrestrial wireless is far richer,” he said, citing as flavors of the month, RF Micro Devices Inc. and TriQuint Semiconductor Inc., which make the transceivers and such that go inside cellular phones, industrial radios and other wireless communications equipment.

As technology stocks were fueling the Nasdaq, yet another investment strategist was touting his optimism. One way of looking at the market is to compare it to Japan’s Nikkei in 1989 when it crashed at the end of a long bull run. Some folks worry the U.S. market has reached its peak too, but not Jon Ender, executive vice president and chief investment strategist of Chicago-based ABN Amro Asset Management.

The U.S. market is selling at an overall price/earnings ratio of 30 to Japan’s 1989 ratio of 60, he said. Even more important, he noted, the U.S. rate of return on equity is 2? times what Japan’s was in 1989.

“Can we fall next week?” asked Mr. Ender. “Yes. There’s no year in which the market hasn’t fallen at least 10% at some point. But I don’t think we’re in grave danger.”

He added: “All circumstances, including low inflation in Europe, attractive relative valuations here and improving sentiment in the U.S. toward global investing, are improving.”

Investors can’t, and likely don’t, expect 20% returns indefinitely, he said. Still, “[investors’] hypersense of acrophobia isn’t justified.”

While Mr. Ender was optimistic about the stock market, advisers got a splash of cold water in their faces in other discussions about the future of their businesses.

The author of a widely read study of the industry and the president of its main trade group discussed what changes advisers need to make to stay competitive.

Cut prices, start selling

They should cut prices and start marketing themselves more aggressively to potential customers. “Until now, we’ve operated in a mostly riskless environment,” said study author Mark Hurley, president and chief executive of Undiscovered Managers LLC in Dallas. With the raging bull market of the ’90s, he said, “we’ve had a free ride. Over the last few years alone, our universe of clients has grown 400%.”

That, however, is changing, he said. “Your margins are getting compressed. Bigger competitors are beginning to tell your clients they’ll do more for less.”

To survive, said Mr. Hurley, “[advisers] are going to have to develop an expertise that the big gorillas can’t develop.”

They will also, he said, have to reduce their fees from an average 0.75% to 0.50%.

Financial Planning Association president Roy Diliberto agreed advisers must cut costs and specialize, but added that simply treating clients better than competitors do will go a long way.

“You can select any number of fine men’s stores that sell the same clothing,” explained Mr. Diliberto, who also is president of RTD Financial Advisors in Philadelphia. “But you’ll go back to the one where you’re shown the most concern and attention. It’s not all about being a niche player.”

Related Topics: Technology Update