Wired Index combines Old Economy, high-tech stocks
When the Wired Index Fund was first introduced in late 1998, the New Economy was hot. Now it's not. So this fund has changed with the times.
The Wired Index Fund, is designed to mirror the performance of the Wired Index which Wired Magazine created to mirror to a New Economy. When the fund first hit the market, its timing couldn't have been better: In 1999, the Wired Index Fund closed the year up over 68 percent. Then along came the year 2000 and many New Economy stocks began a swan song dive that has lasted into this year.
But trendy high-tech stocks aren't the only components of this 40-stock index. In it, along with various types of tech stocks, you'll find Old Economy stocks like financial services, auto, retail, entertainment and biological research companies.
"The Wired Index puts together some of the exciting companies that are out there long with older establish companies and some less well known," says Doug Blatch, who manages the Wired Index Fund from South Africa.
Earlier this year some of the companies in the Index changed which changed the fund's holdings as well. What follows is what he had to say about the fund:
Q: Is there still a New Economy according to Wired Index thinkers?
Blatch: Definitely. As far as Wired (the magazine) is concerned, they've always regarded the New Economy as being much broader than just technology. So technology is only one of the attributes of it. It (the New Economy) is really about more innovative businesses with good strong strategic management along and companies that are taking advantage of technology.
Q: Would you give me an example of a company in the Wired Index that represents the Old Economy?
Blatch: One from the Old Economy would be Enron. Enron started life as a traditional oil and gas pipeline operator and subsequently moved into being probably one of the premium market makers in commodities throughout the world. They've launched an online platform called Enron Online and that particular platform is likely the biggest B to B exchange in the world. Now here is a company that has completely reinvented itself using technology.
Q: The number of companies in the Index has not changed but some of the holdings have. Tell me about that.
Blatch: We changed three of the constituents. Out went WorldCom, Lucent and Globalstar and in came eBay, Millennium Pharmaceuticals and the WPP Group.
Q: What was attractive about the three new companies and why were the three old ones taken out?
Blatch: In terms of why the new ones came in, first of all we felt that we wanted more biotech exposure to the fund. We did have two bio tech companies in the fund prior to Millennium joining, but we felt that the news about the human gnome was such an enormous event in terms of pharmaceutical development and drug development going forward, that Millennium added additional firepower.
Regarding the others, WPP Group is a company with a global concern that consists of a number of different public relations companies, brand development companies and advertising companies. The reason why that belongs in the Wired Index is, in an information economy, it's becoming more and more important to distinguish one brand from the next. And, the ability to be able to leverage brands across different mediums, including the Internet, is something that this company does very well.
And eBay for the simple reason that it's probably one of the only companies that has arisen solely due to the Internet and yet it is perfectly sustainable from the Internet. It's been profitable from Day 1, now has over 29 million users, and their business is still growing.
As for why some of the companies exited, WorldCom for the simple reason that they split the company into two distinct parts which represented quite a major shift in the direction that company was taking. As far as Lucent was concerned, the company simply missed the boat in terms of fiber optics and they started focusing too much on short-term revenues vs. long-term growth, and the company paid dearly for that. And Globalstar had some very ambitious projects in terms of providing satellites and hand set communications and things just didn't really take off.
|TOP HOLDINGS||AOL Time Warner; Sony; Walt Disney; Wal-Mart; and Millennium Pharmaceuticals|
|PERFORMANCE||Year-to-date performance through June 6, down 11.37 percent. In 2000, the fund was down 16.08 percent and in 1999, up 68.7 percent.|
|TOLL-FREE NUMBER|| 800-915-6565|
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