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We Sure Hope You Own These

38 | By Michael A. Robinson

I get a lot of questions from you folks here at the Strategic Tech Investor.

And the single-most-frequently asked query is this one:

“Michael, what’s the best way to get started as a tech investor?”

I’ll grant you: As questions go, that’s probably the most basic one that you’ll find.

But I’m a firm believer in the theory that there’s no such thing as a stupid question.

Indeed, I actually view this as one of the smartest questions an investor can ask. And it isn’t just being raised by folks who are just starting out as investors: We’ve also heard from those of you who are trying to get a fresh start – and are attempting to rebuild your wealth after a personal financial wipeout.

A question this great deserves an equally terrific answer.

So today I’m going to tell you about the three very best “building-block” investments in tech – profit plays so powerful that every investor should put them to use.

Beginners can use them to put their financial futures on the launch pad.

And market veterans can use them to shoot their net worth into the stratosphere.

When you add in the fact that each of these three profit opportunities are a lot less risky than the leading tech highfliers – meaning they’re perfect for the up-one-day, down-the-next market we’re facing right now – the real question to ask is this:

“If you’re not holding each of these three tech profit plays, what are you waiting for?”

“Building” Wealth – Through Tech

Here at Strategic Tech Investor, we love high-quality tech stocks.

And we put a lot of faith in the building-block power of tech-themed Exchange-Traded Funds (ETFs).

ETFs offer broad access to some of the tech sector’s top performers – often for an initial investment of less than $100 – while also squeezing down the risk posed by holding individual stocks.

However, there’s a problem – or, more accurately, a challenge: Because most investors have the bulk of their wealth in restricted retirement accounts – such as a company 401(k) – they might not be able to funnel money into these powerful investment vehicles.

That’s okay, though, since there’s an alternative …

Three, in fact.

And each one is terrific.

I’m talking about three more-conventional mutual funds – each of which gave investors a gain that was twice that of the overall market. We refer to them in-house here as our three “Tech-Wealth Building Blocks” – and with good reason.

Our mantra here at Strategic Tech Investor is that “the road to wealth is paved by tech.” Well, if we say that great wealth is the ultimate destination of the journey we’re trying to help you take, then these three funds are like an “Investment EZ-Pass” that will make this trip as fast, safe and hassle-free as possible.

So let’s take a look …

Tech Wealth Building Block No. 1: Rydex Series Trust Internet Fund (MUTF: RYINX) – Recent Price $71

Most people see the Internet as a great way to shop, peruse the news and grab videos, movies and music.

I see it as a license to print money.

After all, with no factories to build and no machinery to install and maintain, sector leaders can generate almost-obscene amounts of cash.

And with its portfolio of roughly 40 stocks, RYINX has it all: Search engines, software and media, and even some of the companies whose hardware makes the Web work.

Priceline.com Inc. (NasdaqGS: PCLN), a proven name in online travel, and Baidu Inc. (NasdaqGS: BIDU), the largest search engine in China with a roughly 75% market share, are only two of the powerhouse stocks that make the Rydex Series Trust Internet fund so appealing.

Other noteworthy holdings include:

  • Google Inc. (NasdaqGS: GOOG), the global search leader that’s also a catalytic force driving the mobile wave. This Internet giant brings an expansive market cap of $380 billion, a profit margin of 21.6%, and a return on equity (ROE) of 15%.
  • Amazon.com Inc. (NasdaqGS: AMZN), the widely known ecommerce leader with a record of predictable growth. With a market cap of $160 billion, margins remain thin but the stock gained 84% over the past two years. The company has more than $6 billion in net cash.
  • Netflix Inc. (NasdaqGS: NFLX), the king of online streaming video whose most recent results were a staggering 20% above Wall Street expectations. With a market cap of $24 billion, the stock returns 11% on equity and generated more than $2 billion in free cash flow last year.

With holdings like these, it’s no wonder that RYINX more than doubled the market return over the past year – returning 34.5%, compared with the Standard & Poor’s 500 Index gain of 15.8%. BUY.

Tech Wealth Building Block No. 2: Ivy Science and Technology Fund (MUTF: WSTYX) – Recent Price: $50

In addition to a strong performance – its one-year return is 35% – this fund offers a way to invest in such big-tech trends as software, advanced computer memory systems and LED lighting.

For instance, WSTAX holds Aspen Technology Inc. (NasdaqGS: AZPN), a software firm whose offerings help manufacturers control costs, boost supply chain efficiency and widen profit margins. Aspen has won a number of industry awards and returned 46% to investors over the past year.

The Ivy Science and Tech Fund also holds Microsoft Corp. (NasdaqGS: MSFT), maker of the world’s dominant PC operating system (OS) and a leader in computer gaming. The shares of “Mister Softy” gained nearly 33% last year, almost double the gains of the S&P.

Some of WSTAX’s other major holdings include:

  • Micron Technology Inc. (NasdaqGS: MU), the leader in advanced memory systems for computers, networking gear and tech-laden “connected cars.” With a market cap of $24 billion, Micron offers investors a profit margin of 16% and an ROE of 20%.
  • Cree Inc. (NasdaqGS: CREE), the frontrunner in the LED lighting market – by a wide margin. And Cree’s hefty lead is showing up in its financial results: The company recently reported that its quarterly earnings were up a whopping 74% on a year-over-year basis. Cree has a market cap of $7 billion. It also has more than $1 billion in cash on hand with no debt.
  • Alliance Data Systems Corp. (NYSE: ADS), a provider of database- marketing services and data analytics that is displaying some enviable financial results. With a market cap of $11 billion, ADS has return on equity of roughly 77% and operating margins of 26%.

Tech Wealth Building Block No. 3: T. Rowe Price Health Sciences Fund (MUTF: PRHSX) – Recent Price: $60

PRHSX is one of the top funds offered by the respected T. Rowe Price Group Inc. (Nasdaq: TROW), and we like it because this fund holds a bunch of high-profit-margin biotech firms.

We also like the exposure we get to such cutting-edge-science plays as Incyte Corp. (NasdaqGS: INCY). This provider of genomic-technology platforms for disease research posted gains of 243% last year.

Other holdings in T. Rowe’s health-sciences fund include such top biotech names as:

  • Alexion Pharmaceuticals Inc. (NasdaqGS: ALXN), the first developer of Soliris, a drug used to treat ultra-rare blood disorders. This proprietary compound helped power the $30 billion market cap Alexion to a profit margin of 16.3%, and an ROE of 11.6%.
  • Biogen Idec Inc. (NASDAQ: BIIB), which recently won European approval for its multiple sclerosis drug Tecfidera, giving it access to one of the world’s largest markets for MS treatments. The approval follows first year U.S. sales of almost $1 billion. With a market cap of $72.8 billion, Biogen has a profit margin of 26.8% and an ROE of 23.9%.
  • Gilead Sciences Inc. (NasdaqGS: GILD), owner of products that fight HIV/AIDS – as well as liver, heart and respiratory diseases. The company also has products that target parasitic infections and blindness. With a market cap of $125 billion, Gilead as an ROE of 30% and a 28.55% profit margin. Gilead shares doubled last year.

We’ve labeled these three profit plays as “Tech Wealth Building Blocks” -after careful consideration.

For new investors – or veterans looking to rebuild their net worth – these funds offer exposure to some of the best growth trends in tech, as well as the companies doing the best job capitalizing on that growth.

The funds also offer instant diversification – especially important to folks who are getting into the market for the first time, or who might be moving back into stocks after a net-worth-robbing financial setback.

And, as the term implies, these “Tech Wealth Building Blocks” allow folks with only small amounts to invest the chance to amass a substantive net worth – even if it happens only a few dollars at a time.

Even better: If you’re a new tech investor, I recommend creating a disciplined investing regimen that has you put in the same amount of money on a regularly defined schedule – whether it’s weekly, monthly or even quarterly. Do that and you’ll be surprised at how quickly your net worth begins to grow.

And have some goals. That includes having a dollar-amount goal – you know, something like “I intend to be a millionaire by the time I’m 40.”

But have a purpose for that goal … whether it is a new house, college for your talented son or daughter, or the money you’ll need for retirement. Numerical targets are nice, but tangible goals – like a house – give you something to visualize as you save and invest.

And those goals you can picture – your dreams – are what really makes the whole investing effort worthwhile.

Over the long run, these funds will take you as far as you want to go. And we’ll stick with you, too – for as long as you want the help of the Strategic Tech Investor.

For us, it’s having all of you for our audience that makes this twice-weekly visit worthwhile. So we’ll continue to take occasional breaks from our stock recommendations to offer strategies like these that we believe will keep you on that tech-paved pathway to wealth.

See you Friday.

[Editor’s Note: Given the wild market swings we’ve been seeing, Michael has been working on a report in which he shares his best trading strategies. If the volatility continues, look for that Strategic Tech Investor report very soon. In the meantime, if you found this strategy piece worthwhile – and also see value in STI’s continued twice-weekly free reports – then Michael would like to hear from you. Please feel free to post your comments below.]

38 Responses to We Sure Hope You Own These

  1. Alice says:

    I too like your strategy of the three funds. Each is diversified and the 3 are another form of diversification. So many opportunities to avoid a single bet.
    And, I liked your information on the contents of the funds Thank you.

  2. Bonnie says:

    I am just discovering you and am excited about what you are offering to us. I am encouraged by what I have just read and am going to follow your suggestions as much as I can. I am trying to play catch-up. Perhaps I am being foolish at my age but I keep hoping. I am also passing this to my son and grandson. Thanks so much.

  3. Laraine Sloane Newsome says:

    Reading through the report quickly I didn’t see any charge. If this is true you must really be one of the good guys, exactly what beginners need. Of course if I find something different when I take more time I may give you a different opinion. Regardless, Thank you. I’ve been inquiring about “Independent, fee- only advisors” to advise me as I attempt to be successful in this endeavor. I lost $7000 several years ago, but I didn’t ask the right questions or perhaps expected too much from the “Edward Jones” group. Any recommendations?
    More thanks. LSN

    • Jeff says:

      I purchased mutual funds in the name of 3 Franklin Funds (don’t have them memorized) as my Edward Jones rep advised me for investing in these “long term” growth funds. I really want to invest in some of the stocks I see “advise” by reps for Money Map, but unfortunately funds are locked up. Do you have any advise for a new client of Edward Jones?

  4. Peggy Hoffer says:

    Why a mutual fund and not an ETF? I’ve moved away from mutual funds in to ETFs over the past 8+ years. Are you recommending them because of fees or ???? So you recommend a trailing stop? 8%? 10%?

    And I’d still like to know where you stand on MELI and PCYG (both of which hit my trailing stops and I sold).

    • William Patalon III says:

      Dear Peggy:

      Thanks for the comment. Let me address your queries in order.

      First, Michael very clearly addressed the very point you raised about ETFs vs. mutual funds. Michael said that he wanted to tackle mutual funds in this piece because there are still some retirement plans that don’t include ETFs. But basically all retirement plans allow mutual funds. Go back and read this a bit more carefully, and you’ll see what I’m saying.

      In fact, we did this very same column — but from the ETF perspective — last year. But lots of folks followed up and wrote in to say that they couldn’t buy those through their retirement programs, which is why we came back and did the same strategy column … but from a mutual fund perspective.

      As far as having an “agenda” for recommending mutual funds — which you’re clearly alleging here … not sure why you’d ask that. We wouldn’t derive any benefit from doing so. We have no relationships with the fund companies. We’re a financial publisher. Not a fund company or financial planner.

      Michael’s sole purpose in crafting this column was to provide a helpful strategy and answer a question that we get here a LOT (and believe me, as the executive editor here, I know that for a fact). This was intended to be a helpful “service” story, plain and simple.

      Again, Michael did this very same strategy piece — but with ETFs — last year. If you are interested, I would be happy to find that story, and post a link to it at the end of Michael’s column. Wouldn’t be a problem at all.

      Third, you asked for updates on MELI and PCYG. As a free newsletter, we don’t run a “portfolio,” with ongoing stock tracking, recommendation updates and formal “Sell” recommendations. Even so, we believe — and the response we get from readers underscores this — that we’re providing a great deal of value in what we do provide.

      In fact, people are often stunned when I tell them just how many folks it takes to produce this twice-weekly publication, and how much we actually invest in it in terms of both people’s time (including mine) and other company resources. But we think it’s worthwhile … you folks are a superb audience, and Michael has developed a pretty loyal (and large) following. And if we’re helping people … well, that’s the best outcome of all….

      If you’re looking for a more-complete service offering, take a look at his new Nova-X Report or Radical Technology Profits. I’m not trying to sell anything here … but we do find that folks over time start really liking Michael’s work, thinking and recommendations a lot, and end up in the same situation that you are … wanting a more-robust newsletter.

      If a move like that isn’t for you, that’s fine, too. In that case, just keep tuning in … as you know, Michael does circle back and cover some of his earlier topics on a reasonably regular basis.

      I hope this helps. Michael was unavailable tonight, and it really looked like you wanted answers to these questions. We do care about you all, so I thought I’d pinch-hit and hopefully provide the answers you’re seeking.

      And let us know if you want us to find that other (ETF) column. I think we could find a way to post a link to it somewhere here.

      Respectfully;

      William Patalon III
      Executive Editor
      Money Map Press LLC

      • Michael says:

        Please post the link. I have a 401(k) with a trading window which allows the purchase of ETFs. I know in previous columns he has recommended investments in SKYY, FPX, or FBT, but I would like to see if that article you reference has any additional recommended ETFs.

      • Stephen Mandell says:

        I love your work.
        I acted on your October 1, 2013 The Day That Made You Rich article:
        The SPDR S&P Software & Services Fund (NYSE: XSW).
        The First Trust NYSE Arca Biotechnology Index (NYSE: FBT).
        And the First Trust IPOX-100 Index (NYSE: FPX).

        My “Full Service Broker” would not “allow” me to purchase XSW,
        But FBT and FPX are doing fine.

        FBT FIRST TRUST AMEXBIOTECH ETF up 26.81%

        FPX FIRST TRUST IPOX 100 IND FUND up 10.12%

        Up Steadily and just below their highs since purchase on Nov 7, 2013.

        Thanks.

        SteveM

    • William Patalon III says:

      Dear Jim:

      Thanks for the comment.

      Michael did this very same strategy piece — but with ETFs — last year. If you are interested, I would be happy to find that story, and post a link to it at the end of Michael’s column. Wouldn’t be a problem at all.

      Respectfully;

      William Patalon III
      Executive Editor
      Money Map Press LLC

    • William Patalon III says:

      Hi Ray:

      As I mentioned to Peggy above, Michael did the ETF version of this column last year. But lots of folks said that their retirement plans didn’t include ETFs, or didn’t have much of a variety (that may have changed some since then, of course). But we figured we’d come back and do the mutual fund version of this for those folks.

      If there’s interest, I’m sure we could go back and dig up that earlier column, and post a link to it somewhere with this column.

      Just let us know.

      Respectfully;

      William Patalon III
      Executive Editor
      Money Map Press LLC

  5. Cheryl says:

    I feel Michael’s twice weekly reports offer huge value for me and I am sure for the other readers. I follow his suggestions as best as I can with my limited investment knowledge. I am a recent subscriber and new to investing strategies (verses buy and hold) Michael gives me faith and hope that I will be able to build and exceed funds lost.

    I would enjoy reading answers to questions posted but, I am not sure how to find them?

    Please keep the advice coming…

  6. Harvey says:

    > And let us know if you want us to find that other (ETF) column.

    Yes, please can you post the link to the ETF column ? I have an aversion to mutual funds πŸ™‚

    many thanks
    Harvey

  7. Tin Nyo says:

    You neglected to say that RYINX, WSTYX and PRHSX are closed end funds. Only those who were fortunate enough to have owned them originally when they were offered can purchase more if they want to own more. They can no longer be purchased by the public in general. If you do not already own them you cannot purchase them as new investors.
    Should anyone knows, please show me how one can buy into these funds if you do not own them already? Tin Nyo

  8. Junito Tindan says:

    I loved Michael`s weekly reports ,provides me a huge advance knowledge of today trend in business, especially in tech sector now and the future. It`s like; the next revolution of technology now and the generation to come. I am also one of the recent subscriber and new to investing strategies.
    It`s really worthwhile .Will using this idea in my investment in the near future. Micheal gives me more trust , faith and hope that I will be worried free in my retirement plan in the future.to come. Good day & more power.

  9. Stan Yamada says:

    This information has been very helpful. It gives plenty of information on where there are good places to invest retirement money.

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