Q: This is a concentrated fund that is subject to volatility due to its small number of holdings. Has it always been this way?

A: Let me make one clarification. It is true that the fund holds more large-cap stocks, but that is the result of our investment process. We've never sat down and decided to structure the fund based on the market capitalization of certain companies. We have a process to choose stocks that tends to result in larger companies; but again, my largest position right now is a $3 billion company, a mid-cap company called UTStarcom.

Q: The story about them is they do good business in China.

A: I was at their analyst meeting. They sold a system that is being expanded in Taiwan, also in Vietnam. They have some contracts in India. They have two other businesses that they're doing very well in. UTStarcom is the largest maker of soft switches and the second largest maker of Eflaps. The company is growing very rapidly. It has a very conservative management. They only report GAAP earnings. The company has grown sales in the last 12 months at about 60% and earnings at 90%. Yet, it is a very cheap stock, selling at 18 times next year's earnings and 20 times this year's earnings.

Q: How do you find such companies in technology?

A: What we're trying to do in our process is to identify areas where there is fundamental growth and the dominant companies in those areas that are growing rapidly. We've done an awful lot of work ever since we've become aware of UTStarcom and it's become our largest position.

Q: You own Linear Technology. Compared to Intel, it has an equally strong balance sheet and the ability to generate positive cash flow, yet it is often overshadowed.

A: I think the whole semiconductor business is obscure to most people. Linear and Maxim Integrated have large product lines; unbelievably high margins. The rap against them is that they're expensive, but they've always been expensive. We tend to buy and hold really good companies. That is one of the reasons why we've done better than our peers.

Q: The fund began in 1997 when it just started to ride the technology wave. How did you deal with the euphoria in 1999?

A: The euphoria was everywhere. In a situation like that, what was difficult for a money manger was that investors are very clear that they want you to invest into whatever category your fund is concentrating in. Had we been very strict on valuation during that period, we would have been running a money market fund. It was a very difficult time. In one respect it was positive, obviously, because shareholders had phenomenal returns. It was difficult to be strict on valuation because everything was very, very expensive. Those who were able to go short, like the hedge funds, were decimated.

Q: It seems now that investors are flocking to firms that do sell short, but the sentiment seems to have shifted again.

A: I think so. There's a tendency to follow momentum. At the trough, the behavior of investors is very similar to what it was at the peak. At the peak, everybody was long because that was what was working the most. At the trough, people were short more than is typical.

Q: You own Lexmark instead of Hewlett-Packard. Both make printers. Why Lexmark?

A: That is not because of the printing business, but despite of the printing business. Hewlett's printing business is wonderful. I would not sell it short. We have problems with all the rest of Hewlett. If they could have stayed as a printer company and gotten rid of the computer portion, it would have been much more interesting. Right now, the company is being valued just as a printer company. Everything else is either worth nothing or is a drag in terms of valuation.

Q: This would raise the eyebrows of the HP loyalists.

A: I said that to Carly Fiorina. She wasn't too happy, either. When they were pushing the Compaq merger, she came by our offices. She is a very gifted salesperson. She is extraordinarily persuasive, very articulate, and a very strong leader. After the meeting, we really gave consideration to her arguments. But, after reviewing her arguments and Walter Hewlett's arguments, we still weren't convinced that this merger was going to add any value. So far, I think I've been right.

Q: You have degrees in history and economics but you ended up managing a technology fund. How did this happen?

A: Everything you learn can be an advantage. I won't say if I had to do it over it would be a mistake to get an advanced degree in one of the sciences. I will say, though, that investing is very different from engineering. In engineering, there are fundamental principles that are accepted anywhere you go. For example, if you want to build a bridge, and you've gone to a competent school in the U.S. or wherever, you're going to learn the same fundamental things about force and stress and load. The thing about Wall Street is no technique has consistently proven to work. Otherwise, there wouldn't be so many different approaches. I think that is one advantage, having come from the liberal arts background, is that maybe the pattern of thinking is more flexible.

Q: Every little bell and whistle you hear about is not necessarily the next New Thing. Have you developed a thick skin to the hype?

A: I think it's also very important to remember that we're not investing in technology, per se; we're investing in companies whose product happens to be a technology product or service. We're interested in them as businesses primarily. There are many instances of companies having the best technology that are not the most successful business. Microsoft and Apple Computer may be the best-known example of that. For 10 years, maybe, there was not a whole lot of disagreement that Apple's operating system was better than Microsoft's. It made zero difference to Microsoft's success, because there were non-technology factors that were far more important in determining the behavior of buyers than the quality of the operating system.