One More Reason To Like Tech
Year to date, the IT component of the S&P 500 has
outperformed all other sectors and is currently up 13.7%. However, despite these
impressive gains (by current standards anyway) it would appear that there is
still plenty of dry powder left on the sidelines that has yet to make its way
into this sector.
A recent study conducted by Citigroup of the 50
largest actively managed mutual funds shows that the Technology industry is
grossly underrepresented in terms of top investment holdings. With the exception
of Microsoft, which is a Top Ten holding at
16 of these 50 funds, no other tech company within the top 25 S&P companies– by
market cap– is a Top Ten holding at more than five funds.
Specifically:
- Dell Computer is in the
Top Ten at at five funds; - IBM at
four; - Intel at
four; and - Cisco
Systems at two.
These findings are significant because as
business spending picks up in the months ahead (of which tech represents 50%),
many analysts and managers will be forced to increase their holdings of these
underrepresented technology issues, which in turn could contribute handsomely to
the appreciation oftech stock prices.