Nasdaq run fails to worry tech stock bulls Monday June 2, 4:03 pm ET By James Paton
NEW YORK, June 2 (Reuters) - If the bear market has bred a new generation of conservative, tech-leery investors, you wouldn't know it by talking to mutual fund managers.
Instead of cashing in their tech stock chips after a more than 20 percent climb for the Nasdaq (NasdaqSC:^IXIC - News) this year, many big investors are showing persistent faith in the sector, trusting the rally is but a prelude of what is to come.
Gustafson, trusting that Corporate America finally is starting to dish out more to replace computers and other kinds of equipment, said he added to his technology stakes in the last quarter and remains bullish on software companies.
At the end of April, software company Microsoft Corp. (NasdaqNM:MSFT - News), medical technology company Medtronic Inc. (NYSE:MDT - News) and Internet data network equipment maker Cisco Systems Inc. (NasdaqNM:CSCO - News) sat among his biggest holdings.
"Was the Nasdaq overvalued?" Gustafson asked. "Yes, but after an 80 percent decline," from a peak in March of 2000, the Nasdaq's ascent in 2003 "is a drop in the bucket."
Even investors who traditionally shun fast-growing stocks and plot a more conservative course warn that betting against the sector might not be wise.
Take Nicholas Gerber, who had more than a third of his $20 million Ameristock Focused Value fund in tech at last count, according to research company Morningstar Inc., with big positions in Tellabs Inc. (NasdaqNM:TLAB - News) and Gateway Inc. (NYSE:GTW - News)
"It's certainly not a time to go short," said Gerber, who also runs the $1.31 billion Ameristock Fund.
Still, if the economy fails to pick up in the second half of 2003 and corporate profits fall short of expectations, the Nasdaq could come off its highs and validate beliefs of those who bet against the market. Some stock strategists lately have expressed concerns about Nasdaq levels.
Others seem unfazed. Fritz Reynolds has racked up one of the best performances in the stock fund world this year, with a gain of 55 percent in his Reynolds Fund (Nasdaq:REYFX - News), thanks to the tech stock climb.
Yet, the long-time manager is hardly ready to pull out. Despite a huge helping of technology stocks -- more than 60 percent of his fund according to Morningstar -- he said he has no plans to scale back the holdings.
Semiconductor stocks, he added, still look particularly attractive.
"In any market, when things get better, there is typically no better place than tech," Reynolds said. "And in tech, there is no better place than semiconductors."