The Waddell & Reed Advisors Science & Technology Fund bounced back this year to become one of the top 10 performers in its category. Manager Zachary Shafran's decision...
The Waddell & Reed Advisors Science & Technology Fund bounced back this year to become one of the top 10 performers in its category. Manager Zachary Shafran’s decision to almost double his stake in Research In Motion contributed to the rebound.
Shafran had 9.5 percent of the $2.2 billion mutual fund invested in Research In Motion, maker of the BlackBerry e-mail pager, at the end of September, up from 5.5 percent in June. The company’s stock soared 281 percent over the past year as more people use BlackBerries to retrieve e-mails and make phone calls.
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“It has a killer application,” said Shafran, a BlackBerry user. “People like the idea of instant information.”
The Science & Technology fund has risen 14 percent this year, through Dec. 1, ranking eighth of 90 technology-focused funds tracked by Bloomberg.
In 2003, it rose 32 percent, trailing the average 56 percent return of its peer group.
The Columbia Technology Fund, overseen by Wayne Collette and Trent Nevills at Columbia Management Group, is the No. 1 tech fund this year through Dec. 1, gaining 19 percent.
Research In Motion is the biggest of 54 holdings in the Waddell & Reed fund. The 10 largest positions account for one-third of the portfolio. The Columbia fund, by contrast, had its $45 million spread over 172 holdings at the end of October.
Research In Motion said last month that the number of subscribers using its e-mail system exceeded 2 million, doubling the number in February. The Waterloo, Ontario-based company wants to sell its e-mail services through competing mobile-phone makers, and Nokia Oyj and Motorola are among companies that have offered or plan to offer phones with BlackBerry service.
“These guys at Waddell & Reed understood the story very well,” said Rob Sanderson, an analyst at American Technology Research in San Francisco, who has a “buy” rating on Research in Motion. “They bet big.”
The BlackBerry was introduced in 1999 in North America and it’s now for sale on more than 70 wireless networks in 30 countries in Europe, Asia and Latin America. The device sells for at least $199 in the U.S. It’s gaining in popularity with people who spend time out of their offices.
“I might get 30 or 40 voicemails in one day, and if you’re the 40th message, it could be conceivably hours until I get back to you,” Shafran said. “But if you send me an e-mail, I can see it right now, I can prioritize my messages and I can respond.”
Shafran, who has managed the Waddell & Reed fund for more than three years, said he has built a stake in semiconductor holdings as chipmaker stocks fell in recent weeks. He predicts that product inventories have peaked and will soon decline.
He added to his position last month in Analog Devices, the world’s fourth-largest maker of signal processors for mobile phones and electronics, and bought a stake in Xilinx, the world’s biggest maker of programmable semiconductors. Semiconductor holdings account for about 7 percent of the fund.
Semiconductor inventories worldwide rose a more-than-expected 38 percent in the third quarter as demand waned, according to iSuppli of El Segundo, Calif., in a report published Oct. 22.
Global shipments of semiconductors will increase 1.2 percent in 2005, down from a June estimate of 8.5 percent, the World Semiconductor Trade Statistics said early a month ago.
“While there are concerns out there, the business is actually OK and these excess inventories are starting to work themselves off,” said Shafran, who worked in sales at Piper Jaffray from 1988 to 1990 after earning a business degree from the University of Missouri at Kansas City.
Shafran had been shunning chipmakers in favor of health-care companies, whose 37 percent proportion of the fund is almost five times that of its peers, said Dan Culloton, an analyst at fund-research firm Morningstar.
Ten percent of the fund’s holdings at the end of September were in Cerner, the maker of computer software for hospital emergency rooms; insurer UnitedHealth Group; and biotechnology firm Genzyme. Shares of all three companies have risen at least 10 percent in the past year.
“The key reasons the Waddell & Reed fund has done better than a lot of tech funds this year are because it owns a lot outside the technology sector,” Culloton said.