When a Rustwire 25 fund closes to new investors, we replace it because we believe the funds on our list should be available to all readers. American Century Small Cap Value (ASVIX), after a torrid recent run, closed in August.
When we looked for a replacement, we decided to shift things a bit. The Kip 25 roster was left with five funds that focus on small and midsize companies, but it lacked one that focuses on technology, a fast-growing sector. That’s why we’re adding T. Rowe Price Global Technology (PRGTX, $31.62) to the Kip 25.
Manager Alan Tu, who hunts all over the world for high-quality companies of any size, isn’t afraid to go his own way. He doesn’t own Alphabet (GOOGL), Apple (AAPL) or Microsoft (MSFT), for example. The fund’s top holdings – Korea-based internet platform Sea Limited (SE), software firm Atlassian (TEAM) and Zoom Video Communications (ZM) – are smaller by market value.
“We’re not bearish on the mega-cap companies,” says Tu. But he sees promise in smaller ones. “We’re early in this digital transformation era. A lot of the trends driving growth are accelerating, creating opportunities.”
Software as a service, for example, is entering a new phase. Instead of going after big companies to sign long-term contracts – Atlassian is going straight to the consumer. Social media companies are evolving into e-commerce sites: Facebook users can buy certain wares directly on the platform. And the pandemic may have changed grocery shopping forever. That’s why Tu likes Grab, Southeast Asia’s version of Uber Technologies (UBER) and DoorDash (DASH); he also has a stake in private grocery delivery service Instacart.
Earlier this year, Tu exited Chinese tech giants Alibaba Group (BABA) and Tencent Holdings (TCEHY), which are reeling from regulatory crackdowns. “We avoided a lot of carnage,” he says. But the curbs aren’t a “deathblow,” he adds, so those stocks may find a place in the fund again soon.
Tu is relatively new; he stepped in as manager in March 2019. But he has been a Price analyst since 2013, mostly for Global Technology, and he has the heft of Price’s analyst bench behind him. Since he took over, the fund has gained an annualized 42.4%, beating 83% of his peers.