John Pullar-Strecker says technology will be among first sectors to benefit from recovery
Aberdeen Technology has around two-thirds of its portfolio in semiconductor stocks and software and services companies in the belief that these should be among the earlier sectors to benefit from economic recovery.
Celebrating its 20th anniversary this month, the unit trust, managed by John Pullar-Strecker, is also underweight in PC hardware on the back of tough pricing conditions in the sector.
Launched on 1 February 1982, the fund has produced average bid-to-bid annual growth of 17.63% and a total return of 2493.9% to 18 February, according to Standard & Poor's. An investment made in the portfolio three years ago would have fallen 11.2% to 13 February on an offer-to-bid basis.
The fund, launched as Prolific Technology, originally had Alan Torry as the manager. Pullar-Strecker took over management of the portfolio after Torry left in 1998 to join SG Asset Management. The fund was renamed Aberdeen Technology in the wake of Aberdeen's takeover of Prolific in 1997.
Pullar-Strecker divides the technology part of the market into six main areas: software and services, telecoms, internet stocks, semiconductors, biotechnology and medical equipment, and PC hardware. He focuses on medium to large-cap companies and holds between 60% and 80% in US companies, with between 20% and 40% in other world markets.
He said: 'It looks like the fundamentals have bottomed out for the global economy, although the market is volatile. Things are going to remain bumpy for the next three to four months. We like the software and services sector as a low level of capital investment is required in these businesses and it was one of the first areas to suffer during the downturn. Also, semiconductors are early cycle stocks. It is one of the first sectors to fall during a downturn and one of the first to recover.'
Pullar-Strecker is cautious on the telecoms sector, where he sees more risk than reward. Aberdeen Technology is around three-quarters invested in the US, with around 10% in Europe, 2% in Japan, 4% in the Pacific ex-Japan region and 4% to 5% in cash.
Pullar-Strecker said: 'Technology is a high beta sector and what is needed for it to do well is a global economy that is improving. The sector tends to suffer when the economy has a downturn.
'However, companies will continue to spend on IT because of the need to cut costs. They have to become more efficient because of global competition. We think that will continue.'
Pullar-Strecker is running the portfolio with 72 stocks at present but typically manages the fund within a range of 65 and 90 stocks.
He added: 'The bottom line is that we are confident about the long-term prospects for technology. There are lots of different areas but what we are lacking right now is a major development. We have had the mobile phone, internet and CDs. We are in an in-between period at the moment.'
Aberdeen Technology has an AA rating from Standard & Poor's.
Over five years it is third out of five funds in the Technology and Telecoms sector on growth of 58.59%, according to figures from Standard & Poor's. Over one year, it is ranked eight out of 26 on a fall of 46.53%.
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