The Nasdaq is back, and so are mutual funds investing in tech stocks.
With global uncertainties calming down and second-quarter corporate earnings for technology companies looking good, tech stocks are starting to hit their stride.
It’s a guessing game on where tech stocks will go from here, but the latter stage of the business cycle — which we’re arguably entering — typically favors growth-oriented stocks over value.
Investors minimize their risk of missing out on the tech stock rise through diversification, which is where these three tech-friendly mutual funds come in.
Mutual Funds for Tech Stocks: Fidelity Select IT Services (FBSOX)
Minimum Initial Investment: $2,500
The performance of a mutual fund investing in tech tends to dip into other overlapping sectors and Fidelity Select IT Services (FBSOX) is a prime example of this style and strategy.
Fidelity normally invests at least 80% in securities of companies engaged in providing information technology services. What that means is that the fund will typically hold stocks that are considered tech in a conventional sense — such as one of the top holdings, Cognizant Technology Solutions (CTSH), which provides IT and consulting services.
But FBSOX will also hold stocks that have overlapping interests, such as top holdings Visa (V) and MasterCard (MA). While instinct tells us these are financial stocks, they could be thought of as technology companies in the sense that both Visa and MasterCard’s business is in electronic payments.
This broad investment approach to the technology sector has proven successful for Kyle Weaver, the fund manager for Fidelity Select IT Services since 2009. The fund is ranked in the top 1% of the technology category for the past three months, year, five years and 15 years.
Mutual Funds for Tech Stocks: T. Rowe Price Global Technology (PRGTX)
Minimum Initial Investment: $2,500
Investors craving a mix of domestic and global technology stocks might like T. Rowe Price Global Technology (PRGTX).
The current macro environment of U.S. growth and strength on the U.S. dollar compared to foreign currencies looks to continue for the foreseeable future, and PRGTX is reaping the rewards.
The recent allocation of PRGTX included roughly 20% foreign stocks, most of which are in the Greater Asian region, with the remainder in U.S. stocks.
Top holdings include Google (GOOG), Amazon (AMZN) and Workday Inc (WDAY). Chinese stock holdings — such as Alibaba (BABA) — have put a dent in recent returns, but PRGTX is still ahead of over 80% of its tech-stock peers YTD and has similar dominance in long-term returns.
Mutual Funds for Tech Stocks: Columbia Seligman Comms & Info (SLMCX)
Minimum Initial Investment: $2,000
If you’re looking for a pure play in tech stocks in a well-managed mutual fund, Columbia Seligman Comms & Info (SLMCX) is a standout.
A majority of top-rated mutual funds investing in tech stocks invest in other sectors, such as financials and biotechnology, but CCIZX pulls off impressive returns with more than 90% of holdings in the technology sector.
CCIZX beats roughly 90% of technology sector category peers year-to-date with a 9.3% gain. Fund manager Paul Wick has helmed CCIZX for more than 15 years and receives full credit for the longer-term returns, which are also significantly ahead of the tech sector.
Note: The A-class shares for this fund have a front load of 5.75% but can be worth the expense, especially if used as a long-term holding. Investors may qualify to buy other share classes without loads.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.