TCS Daily

How to Invest in Tech Stocks, Part Deux

By James K. Glassman - May 1, 2000 12:00 AM

Last week I told you about one way to invest in technology - buying into an index fund that mirrors the performance of the NASDAQ 100. It's now available as its own publicly traded security with the ticker symbol QQQ. And it gives you almost all the biggest names in tech - both information technology and biotech - in one investment vehicle. One of the virtues of this approach is that you can invest in high-tech without having to judge which of the major firms has the best technology.

Now, let's say you're still not sure which company will rule the tech world, but you've narrowed your focus to particular sectors, which you think offer great promise. Another great way to invest in technology is through one of the "HOLDRs" recently introduced by Merrill Lynch. These securities offer undivided beneficial ownership in 20 stocks in a given industry segment. HOLDRs are different from mutual funds in that the expenses for HOLDRs are very low and the investments are held in a trust which allows you to take possession of the individual company shares if you choose to do so. (This triggers a small fee of about ten cents per HOLDR.)

So if you're bullish on the future of biotechnology for example, but you don't know which company to choose, you might consider buying shares of Merrill's Biotech HOLDr (ticker symbol: BBH). By buying shares of BBH, you will acquire small pieces of Glassman Tech 30 members Amgen and Biogen, as well as up-and-comers like Celera Genomics. You've probably read about Celera's scientist Craig Venter and his effort to map the entire human genome. This HOLDR also includes Human Genome Sciences, led by Venter's one-time colleague and current rival, Dr. William Haseltine. Other biotech stars in the mix include Genentech, Immunex, MedImmune and Millennium Pharmaceuticals. If you believe in the future of biotechnology, this may represent an opportune moment to buy. Lately, biotech stocks have suffered along with the rest of technology, so Biotech HOLDRs, at a recent $133 per share, is trading well below its high of $244.

On the other hand, maybe you want to stick to Internet plays. You want a diverse portfolio of e-commerce companies, but you're convinced that business-to-consumer, or "B2C" websites are toast. You believe the future lies in business-to-business transactions, or "B2B." Merrill has a group of stocks for you, too. The investment firm recently launched B2B HOLDRs (ticker symbol BHH).

B2B HOLDRs includes Glassman Tech 30 companies Ariba and Proxicom, plus Commerce One, VerticalNet and CheckFree, among others. The largest BHH stake is in Internet Capital Group, a holding company which owns stakes in dozens of other B2B companies. So by buying Merrill's B2B HOLDRs, you can make a fairly broad investment in the future of electronic commerce between businesses. B2B stocks have been hit even harder than biotech lately, so from a high of $113.50 per share, BHH has fallen to a recent $38. If you're bullish on B2B, this may be your moment.

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