The MFO Screener: Technology Funds

We were wondering whether there were any “safe” Technology Funds to consider for the potentially turbulent years ahead. We thought we’d start by asking “who did well during the last two crashes?” and seeing if anyone avoided the worst of the bloodshed in both 2000-02 and 2007-09.


To do that, using MultiSearch tool, we selected “Science & Technology” funds from the fund “Category” (upper left) then picked “Display period” to “Down Cycle 4: 2000-2002.” Click! (…on “Submit Search” button.) We sorted the resulting list to show the smallest Maximum Drawdown and, as a double-check, sorted again for the smallest Ulcer Index. The difference is that the Ulcer Index incorporates both the size of the Maximum Drawdown and the funds’ Recovery period.


We then repeated the screen for “Down Cycle 5: 2007-2009.” To make the comparison simpler, we clicked on the “Show/Hide Columns” option (top-right of the results table) and hid everything except the handful of data points that interested us.


Here’s the comparison of the top performers in both time periods. Remember: we’re just focusing on risk-management (aka minimizing painful drawdowns) in this screen.


Fund 2000-02 Risk Rank (Out of 32) 2007-09 Risk Rank (Out of 53) Notes
Fidelity Select IT Services (FBSOX) 1 2 $1.9 billion in assets, M* 5 Star, 0.81% e.r., ten managers since 2000
ICON Information Tech (ICTEX) 2 39 $54 million, M* 3 Star, 1.40%, the winning manager – Craig T. Callahan – left in 2003, returned in 9/2015
Waddell & Reed Advisors Science & Tech (UNSCX) 3 3 $3.5 billion in assets, M* Bronze, M* 4 Star, limited availability
Ivy Science & Tech (WSTAX) 4 1 $6.1 billion in assets, M* Bronze, M* 4 Star, no load/no transaction fee at Schwab
Columbia Seligman Communications & Information (SLMCX) 6 4 $4.2 billion in assets, M* 4 Star, same lead manager since 1990, load-waived shares widely available
Fidelity Select Software and Computer Services (FSCSX) 5 12 $3.1 billion in assets, M* 5 Star, seven managers since 2000


A couple things stand out. First, Waddell & Reed and Ivy share the same manager – Zachary Shafran – and he’s been around for the entire period. Columbia Seligman, likewise, has had the same manager – Paul Wick – since 1990. Shafran follows a strategy akin to Guinness Atkinson Global Innovators (IWIRX): he looks for companies that use technologies in transformative ways, rather than just in “tech companies.” As a result, he diversifies well beyond the usual tech names. Mr. Wick has a more traditional approach but his team has undergone worrisome instability in the past couple years. Second, the Fidelity funds might be worthwhile tests of “the Levis hypothesis.” Levi Strauss made his money during the California gold rush not by looking for gold, but by selling essentials to the gold prospectors. Both of the Fido funds target the recurring income streams generated by IT services rather than the “strike it rich” potential of the IT hardware firms.


At the opposite end of the spectrum we see about the same thing: the funds that imploded early were pummeled again.


Fund 2000-02 Risk Rank (Out of 32) 2007-09 Risk Rank (Out of 53) Notes
Red Oak Technology Select (ROGSX) 30 27 Small fund, M* 4 Star, part of the family that started with White Oak, ferocious upside in rising markets.
Rydex Internet (RYIIX) 31 38 Tiny fund, 500% annual turnover, portfolio of ultra-growthy stocks
Jacob Internet (JAMFX) 32 53 Ryan Jacob. What a blast from the bubble of the late 1990s!