Ryan Jacob, the dot-com portfolio manager notorious for having lost 90 percent of client assets during the market collapse in 2000, has come full circle. The determined fund skipper, who is now buying value stocks, is back with a vengeance as Morningstar now rates his no-load fund the No. 1 technology fund for the last three- and five-year periods.
Registered Rep.: You've added value stocks to your portfolio — rare for a technology fund. Why?
Ryan Jacob: Investors in our sector are so short-term oriented that it causes certain companies to trade well below what we think the intrinsic value is. It adds to our performance, and also gives us a little more diversity and downside protection.
RR: What other changes have you made since the tech wreck?
RJ: We used to have very low turnover relative to our peers; now we're above average. We've taken criticism for it, but I think we're in one of the sectors where turnover is a good thing. Things change very quickly, so it's a way to minimize volatility, as well as take profits and cut losses sooner. We also used to own 20 to 30 stocks, but now we own 40 to 50 stocks. It's another way to mitigate volatility, and manage risk better.
RR: What do you look for in a stock?
RJ: On the growth side, we look at companies that operate in very large markets, in businesses with barriers to entry, that are expanding their market share and that have well-run management teams. On the value side, companies that have a lot of cash relative to market capitalization, trade at very low price to sales and have a unique product or technology.
RR: What are you buying now?
RJ: Our largest holding is Sohu.com, the second largest Internet portal in China; it's trading a little bit cheap. Google's probably right behind Sohu. We think Google — even though the stock has done relatively well — is very reasonably priced.
RR: For the No. 1 tech fund, your flows aren't that impressive. What gives?
RJ: When you're looking at mutual fund flows, I think it's less about your individual performance and more (especially with sector funds) about whether your sector is in or out of favor. Among the S&P sub-sectors last year, the second worst performer was technology.
