Even during the past year, as the tech-stock landscape has swung wildly from peak to vale, value investing could have reaped a fortune for someone who did it right. Value investing has dropped out of favor quickly over the past few months. Even the venerable Sage of Omaha, Warren Buffett, has been lambasted by critics for his failure to get into technology stocks, which he has avoided because he says he can't understand them and they're too expensive. Another mighty value player, hedge fund manager Julian Robertson, was forced to close the funds under his management because of his poor performance the past few years while the rest of the market took off. And nobody cares about how expensive they are.
Value investing is low-tech and out of fashion.
Or maybe not. The Firsthand Value fund has made a killing by buying up cheap technology stocks that have been battered by the market for what manager Landis believes to be unwarranted reasons. The valuations on these stocks might look good compared to that of their peers, but few of them can be called cheap by any means. The key to Firsthand's success at value investing, says Pearlman, is to start with the technology and then analyze the stocks. Among those companies, we'll often find one with a dominant market share that will go into the Leaders fund.