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5 Buy-Ranked Technology Mutual Funds

More often than not the technology sector is likely to report above par earnings than other sectors as the demand for technology and innovation remains high. However, technology stocks are considered to be more volatile than other sector specific stocks in the short run. In order to minimize this short-term volatility almost all tech funds adopt a growth management style with a focus on strong fundamentals and a relatively higher investment horizon. Investors having an above par appetite for risk and fairly longer investment horizon should park some of their savings in these funds. Below we will share with you 5 buy-rated technology mutual funds . Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) as we expect these mutual funds to outperform their peers in the future. Fidelity Advisor Electronics I (MUTF: FELIX ) seeks capital growth. FELIX invests a major portion of its assets in companies involved in operations related to technology domain. FELIX focuses on acquiring common stocks of companies throughout the globe. Factors including financial strength and economic condition are considered before investing in a company. The Fidelity Advisor Electronics I fund is non-diversified and has returned 10.8% over the one-year period. Stephen Barwikowski is the fund manager and has managed FELIX since 2009. USAA Science & Technology (MUTF: USSCX ) invests a lion’s share of its assets in equities of companies that uses scientific and technological advancement and development to enhance their return. USSCX may invest a maximum of half of its assets in foreign companies. The USAA Science & Technology fund has returned 17.3% over the one-year period. As of January 2015, USSCX held 175 issues with 7.66% invested in Apple Inc. Janus Global Technology D (MUTF: JNGTX ) seeks capital appreciation over the long run. JNGTX invests a majority of its assets in companies that are expected to benefit from technological advancement. JNGTX invests in companies having impressive growth prospects. Though JNGTX invests in companies located in different countries including the US, JNGTX may focus on a particular country during unfavorable environment. The Janus Global Technology D fund has returned 6.7% over the one-year period. JNGTX has an expense ratio of 0.88% as compared to category average of 1.50%. Columbia Global Technology Growth Z (MUTF: CMTFX ) invests a large chunk of its assets in companies related to technology sector. CMTFX invests a minimum of 40% of its assets in foreign companies. Though CMTFX invests in companies irrespective of their market capitalizations, CMTFX may invest a sizable portion of its assets in small cap companies. The Columbia Global Technology Growth Z fund is non-diversified and has returned 12.4% over the one-year period. As of May 2015, CMTFX held 115 issues with 5.17% invested in Apple Inc. Fidelity Advisor Technology T (MUTF: FATEX ) seeks long-term capital growth. FATEX invests heavily in companies that carry out operations including providing and manufacturing products related to technology industry. FATEX invests in both US and non-US companies. The Fidelity Advisor Technology T fund is non-diversified and has returned 6.6% over the one-year period. FATEX has an expense ratio of 1.37% as compared to category average of 1.50%. Original Post Share this article with a colleague

5 Questions On Risk In Concentrated Equities Today

By Mark Phelps & Dev Chakrabarti As equity markets cope with fresh volatility from China to Europe, managing risk is a top priority. In our view, concentrated portfolios stand up to scrutiny on risk – even in today’s complex market conditions. Concentrated portfolios are a popular way to capture high conviction in equities. But many investors worry that by focusing on a small number of stocks, they may be more vulnerable when volatility strikes. These five questions can help gauge whether that’s really true. 1. Is a concentrated equity portfolio more vulnerable to a market correction than a diversified portfolio? Not necessarily. Based on our experience – and academic studies – we believe that concentrated portfolios can actually cushion the damage in a market correction. Since concentrated managers have much more to lose than managers of diversified portfolios if a single stock underperforms, they tend to be much more focused on the earnings risk of individual holdings and of the portfolio. Our research on US equity strategies supports this notion. We followed up on the famous study by Cremers and Petajisto* and found that the median concentrated US equity manager, with 35 or fewer stocks in a portfolio, incurred less severe losses than diversified portfolios in down markets. This made it easier to recoup losses on the way back up. As a result, concentrated strategies posted stronger three-year returns than traditional active and passive strategies over the 10-year period studied (Display). And during the worst three-year period, the portfolios of concentrated managers declined less than other active and passive portfolios. 2. Why isn’t a concentrated portfolio more vulnerable to market surprises? Portfolios with small numbers of stocks by definition have a high active share and diverge from the benchmark substantially. This can be a good thing when surprises rattle the market. Benchmarks give investors exposure to volatile sectors, especially in down markets. For example, both energy and financials are sectors that are notoriously unstable. So constructing a portfolio that is less exposed to those sectors would tend to protect against vulnerability in those markets. In the oil-price shock of the last year, a diversified portfolio with weights that are closer to the benchmark is more likely to have greater exposure to the energy sector than a concentrated portfolio. And in financials, many pure banks are too risky for a concentrated portfolio, in our view, because it’s simply too difficult to forecast earnings that are tied to the uncertainties of the future rate environment. 3. Does that mean a concentrated portfolio will miss out on a big sector recovery? It’s true that volatile sectors do lead the market at times. But over the long term, we believe it’s better to focus on a few select holdings that provide alternative ways to gain selective exposure to a sector recovery. For example, some financial exchanges or asset management firms have much lower capital intensity than pure banks – and offer better return potential driven by secular trends in their industries, in our view. Focusing on stocks that have shown consistency of earnings through good and bad periods is a more prudent path to generating long-term returns than taking big sector overweights, which may be prone to instability. 4. How can regional risk be managed in a global portfolio with so few stocks? While concentrated managers always focus primarily on stock-specific issues, monitoring regional exposure is important. Stock-picking decisions must also ensure that the sum of a global portfolio’s parts is balanced and appropriately positioned for macroeconomic conditions. Today, the US is enjoying a relatively strong demand environment while coping with the effects of a stronger dollar on exports. Conversely, Japan is deliberately weakening its currency in an effort to kick-start the economy and spur wage inflation. A concentrated portfolio can reflect these trends by focusing only on those US companies exposed to a consumer recovery with solid revenue growth and Japanese exporters that are putting their cash to work for shareholders. This can help create a natural currency hedge – without using derivatives or shorting. And when currencies shift, a concentrated portfolio can take advantage of changing dynamics by tilting a portfolio with a few strategic changes instead of turning over large numbers of holdings. 5. What’s the biggest risk to a concentrated portfolio today? Turmoil in the Chinese markets along with the recent escalation of the Greek debt crisis and the potential for contagion across Europe are, of course, the most significant risks for any global equity manager today. However, we think one of the largest challenges for concentrated allocations today, is how to incorporate downside protection, given the market moves earlier in the year. Defensive segments of global equity markets, such as consumer-staples and income stocks, are expensive. So they may not be as effective in protecting performance during a down market. In concentrated portfolios, where a small number of defensive companies play a vital role in risk management, this could erode the buffers against volatility. Identifying defensive growth companies can help resolve this problem. For example, business services or companies supplying consumer staples have more attractive valuations and can deliver long-term growth – and downside protection, in our view. Similarly, we’d prefer stocks with stable and consistent growth that have attractive policies on returning cash to shareholders as an added feature over pricey stocks that offer income as a primary feature. *Cremers, K.J. Martijn and Petajisto, Antti. “How Active Is Your Fund Manager? A New Measure That Predicts Performance,” March 31, 2009 The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. AllianceBernstein Limited is authorized and regulated by the Financial Conduct Authority in the United Kingdom.

Stocks Are Not Milk – So Don’t Invest Like They Are

I want to warn you about stock splits today – and to save you from getting bamboozled the next time a company splits its stock, like Netflix (NASDAQ: NFLX ) is scheduled to do next week. If you have ever gone grocery shopping, you might think you have a good understanding of stock splits. For example, I’m sure you have noticed that four one-quart containers of milk will cost you more than a one-gallon container. The milk company is able to create value by dividing the original gallon into smaller containers. But what works in the supermarket does not work on the stock market, despite the fact that many investors behave as if they believe it does. They become elated when they hear that a stock they own is about to split, because, like in our milk example, they believe that the sum of the parts will be worth more than the whole. Or they decide to buy into a stock because it is going to split, believing, again, that four quarts is worth more than one gallon. I have always found this behavior curious. After all, what’s the difference between owning 100 shares of a $100 stock and 200 shares of a $50 stock? There is no difference. Your total investment is worth $10,000 either way. The only reason to think otherwise would be if you believed that a stock would appreciate at a faster rate after a split than it would have without a split. However, there is no evidence to support this line of thinking. When managements are asked why they split their stock, they inevitably say that the price of the stock had gone up too high, making it unaffordable for many investors. By saying this, they are implying that there would be greater demand for the stock if only the price were lower. Those of us who studied Economics 101 would agree that for most goods, there is a relationship between price and demand. In general, the lower the price, the greater the demand. However, stocks are not like milk. You can’t create value out of stocks simply by dividing them into smaller units. A stock split changes the price per share, but it does not change the price of all the shares in aggregate. In other words, a stock split has no impact on the company’s market capitalization. If the company were in play, do you really believe the acquirer would pay a larger premium simply because the target split the stock? Of course not. Having said that, I must admit that there are times when stock splits make sense. For example, several decades ago, before there were discount brokerage firms, trading costs were extremely high. Furthermore, investors paid a penalty if they bought (or sold) less than a round lot (i.e., 100 shares). As a result, there was a significant monetary incentive to trade at least 100 shares at a time. That’s no longer the case. Trading commissions have been driven down significantly. If you can’t afford to buy 100 shares of a $1,000 per share stock, there is nothing preventing you from buying 50 shares or even 10 shares. For that reason alone, there is much less of a need for corporations to split stock. So are there any good reasons for a company to split stock these days? Sure. A stock split would make sense if the stock price were so high that even one share were unaffordable. Berkshire Hathaway Class A (NYSE: BRK.A ) shares sell for more than $200,000 each. There aren’t many investors who can afford that. It would certainly make sense for Berkshire to split the stock. The problem is that Warren Buffett, the chairman and CEO, vowed long ago to never split the shares. Yet, at one point, he realized he had a problem. So in order to avoid breaking his vow, he simply created a new “Class B” (NYSE: BRK.B ) type of share. For all intents and purposes, the creation of the Class B shares was equivalent to splitting the stock. Here’s another good reason for a split. Apple (NASDAQ: AAPL ) initiated a 7-for-1 stock split in June 2014, when the stock price was near $700 per share. That’s nowhere near Berkshire territory. Most investors could easily afford to buy 10 or even 20 shares of a $700 stock – so why the split? The answer became clear a few months after the split, when Apple was added to the Dow Jones Industrial Average. Unlike most market indexes, the Dow is not capitalization-weighted. It is price-weighted. In other words, the higher the price, the greater the impact on the index. There was no way the folks at Dow Jones were going to include a $700 stock in the index. By splitting the stock, Apple brought the stock price down to a level that was comparable to several of the Dow’s other components. The split made Apple eligible for membership in one of the most prestigious market indexes. Finally, there is one other valid reason why companies might want to split their stock. A stock split can be an effective way for management to signal its optimism to the market. It’s one thing for the CEO to state that he or she is bullish about the company’s prospects. It’s a completely different thing to actually signal that optimism by splitting the stock. In this case, a stock split is like putting your money where your mouth is. Management would not be likely to initiate a split if it thought the company was about to run into a rough patch. Here’s my advice on stock splits. Don’t buy a stock just because the company announces a split. A split might cause a brief rally, but there are more important factors that will have a stronger impact on the stock price over the long term. Perhaps this is best exemplified by recent events at Netflix. The company announced a 7-for-1 stock split right after the market closed on June 23. Not surprisingly, the immediate reaction was euphoric. The stock surged significantly higher in after-hours trading. Yet, by the end of the following day, shares of Netflix were trading lower, and they have continued to drift lower ever since. It turns out that Carl Icahn had liquidated his entire position in the company, suggesting he thought the shares were no longer undervalued. That’s more important than how many quarts are in a gallon.