Shakeout predicted in high-tech stocks Caution is urged by a Price manager

November 30, 1995|By Bill Atkinson | Bill Atkinson,SUN STAFF

A top fund manager at T. Rowe Price Associates Inc. said yesterday that she sees a shakeout coming among technology stocks, because too many companies have been taken public too quickly.

Lise J. Buyer, vice president of the company's $2.2 billion Science & Technology Fund, said investors who stick with technology stocks for three years should fare well, but those looking for quick profits with relatively new companies could be disappointed.

"In the short term, I would urge caution," Ms. Buyer said in a telephone interview from the company's annual investment and economic outlook seminar for the news media in New York City.

Ms. Buyer said investment bankers and venture capitalists are bringing too many technology companies to the market, and the public is buying the stock with little information.

"All you need is an idea and a slide show," she said. Some of the companies, she said, are "going to turn out to be houses of cards."

She warned that investors should be aware of the volatility associated with technology stocks, echoing a rare July 17 letter that the fund's manager sent to investors advising caution.

"It has been such a heady market," she said. "It is just reasonable to assume we will continue to have volatility."

Yet, Ms. Buyer said, science and technology stocks should continue rising because corporations and consumers have a voracious appetite for the latest and best products.

"I am more optimistic about what lies ahead in technology than I have been in 10 years in this business," she said.

Ms. Buyer is encouraged because, as technology evolves, companies must upgrade their computers and software to keep up with the competition. Consumers, too, are gobbling up computers, software and cellular phones.

She said Microsoft Corp.'s introduction of Windows 95 single-handedly gave technology stocks a boost because it is fueling sales of computers and related equipment.

"Clearly, consumers were roaring into the sector," she said. "Money was just pouring into the sector."

Price's Science & Technology Fund jumped by nearly 53 percent for the first nine months of the year, and it is up 386 percent over five years.

It is the lure of such big returns that has attracted millions of investors into mutual funds. The mutual fund industry's assets grew to $2.7 trillion in October, up 20 percent over last year.

George J. Collins, T. Rowe Price president and chief executive, expects a cooling off in the growth.

"Overall, we believe that industry assets should continue to grow in the future, but not at the levels experienced in recent years," Mr. Collins said.

By year's end, T. Rowe Price expects to offer a global stock fund to take additional advantage of growing overseas markets. It's also planning to have its own Web site on the Internet's World Wide Web, where it will offer educational investment information, as well as interactive programs on retirement planning, and tips on diversifying assets. "It is a step you have to take to serve the shareholder," Mr. Collins said.

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