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Tech Isn't Done, Just Mature
Dreyfus Premier Technology Growth Fund
Interview with: Mark Herskovitz

Author: Dave Jennings
Last Update: , :
After being decimated in a bear market, the Dreyfus Premier Technology Growth Fund has worked its way back to the tenth spot for five-year performance in the specialty tech category with an average return of 5.76%. Lead manager Mark Herskovitz believes tech has matured; yet opportunities remain, particularly in healthcare.

Dreyfus Premier Technology Growth Fund

A: I agree, and I'll raise another issue. Even if it is successful in terms of demand, itís a whole other story about whether it's going to be successful from a business point-of-view for the suppliers. Even if there is a lot of demand for devices that can connect through Wi-Fi, the problem is there are too many suppliers already. We had someone from Intel in here, and he was quoting one of the company executives. The guy saIdent, 'This is the first time in history something has become a commodity before it has become a standard.' It could be very successful, but it is going to be tough to make money as an investor. When something appears that is really growing, people have capacity. They have to produce something. I think it is a reflection of the overcapacity and the lack of growth in the traditional markets.

Q: What is out there in technology that might have a chance for broad application, by business or consumers, that could run counter to any consensus views?

A: Our view is that, on a secular basis and in most cases, what we think of as technology is mature. I don't see any Killer Apps in traditional technology. If you think of what has caused technology to grow during the past 15 years or so and ending in 2000, there are basically two things, and they were both networks. One was a data network and the other was a telephone or communications network. Fifteen years ago, the only computer networks in existence were terminals attached to mainframes. When you think of how many different generations of applications were in order for the networks to go from non-existent to being ubiquitous -- it was phenomenal growth. The other sector that grew rapidly was telecommunications. After 1996, we had analog cellular being converted into digital, a lot of carriers being added throughout the world, the greatest build out in new phone systems since telephony first became a commercial product 100 years ago. All that is done now.

Q: You've just informed the readership that they should view much of the technology industry as cyclical instead of as straight-out growth.

A: There is a very interesting book that provides a useful historical context to what has happened: Machines That Make Markets by a former research director at Franklin Templeton. What's happened in technology is not unique. You could look at what happened to canal stocks after the railroads came into existence, what happened to the railroads when the autos came into existence. Those are all forms of technology. I never bought into the idea that the Internet had a more profound effect on the economy than anything else. I think the railroads had by far a greater effect. Certainly the mass adoption of electricity had an extraordinary affect on productivity. There were stock exchanges and publicly traded stocks in all these eras. It's inevitable all these things that we consider electronic technology will become mature. This is what happens; nothing grows forever.

Q: If this is true, then what is the justification for having a tech fund?

A: The answer is that we're a stock market. If we're to protect you from the bad parts of what happened in 2000 and over the last couple years, you need to be diversified. On a cyclical basis, tech will provide extremely powerful returns to investors. You need to own tech in order to balance the other parts of your portfolio.

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