Value Mutual Funds Find Surprising Success in Tech Rally

Strategic Insights -

Technology stocks have been leading the U.S. stock market rally since midyear, with the Nasdaq composite index surging 21 percent from July 21 through last week. This resurgence has benefited value mutual funds, which have traditionally been hesitant to invest in tech stocks but have now found success in this sector. Several prominent value fund managers, including those at Longleaf Partners, Oakmark Select, and Legg Mason Value Trust, have seen significant gains in their funds, with returns of up to 28 percent since July 21.

Key Takeaways:

  • Value mutual funds have been successful in the recent tech rally, with some funds experiencing gains of up to 28 percent since July 21.
  • The Nasdaq composite index climbed 21 percent from July 21 through last week, outperforming the Standard & Poor's 500-stock index and the Dow Jones industrial average.
  • Several prominent value fund managers, including those at Longleaf Partners, Oakmark Select, and Legg Mason Value Trust, have seen significant gains in their funds.
  • The Longleaf Partners Fund's largest holding is Dell, the personal-computer maker, while the Oakmark Select Fund has good-sized stakes in both Dell and Intel.
  • The Legg Mason Value Trust, managed by Bill Miller, has a long history of beating the S&P 500 and has been an object of controversy among value purists for its investment in growth stocks like Google and Amazon.com.
  • Experienced value investors are no longer doctrinaire, and are willing to invest in emerging industries like technology.
  • The recent tech rally raises questions about whether this group of stocks is ready for an extended star turn and whether the global economy will benefit from such a cycle.

Statistics:

  • The Nasdaq composite index surged 21 percent from July 21 through last week.
  • The Standard & Poor's 500-stock index generated a 13 percent total return for the same period.
  • The Dow Jones industrial average gained 14 percent for the same period.
  • The Pin Oak Aggressive Stock Fund has a largest holding of Cisco Systems.
  • The Fidelity OTC Portfolio has a largest holding of Google.
  • The Longleaf Partners Fund has returned 19 percent since July 21.
  • The Oakmark Select Fund has returned 16 percent since July 21.
  • The Legg Mason Value Trust has returned 15 percent since July 21.
  • The Seligman Global Technology Fund has returned 23 percent since July 21.

Sources:

  • Bloomberg
  • David Pauly, fellow Bloomberg columnist
  • Richard Parower, manager of the Seligman Global Technology Fund
  • Longleaf Partners Fund
  • Oakmark Select Fund
  • Legg Mason Value Trust
  • Pin Oak Aggressive Stock Fund
  • Fidelity OTC Portfolio
  • Standard & Poor's 500-stock index
  • Dow Jones industrial average
  • Nasdaq composite index