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By Greg Carlson | 05-24-2010 12:41 PM

Tech's Potential Underappreciated

Artisan Mid Cap manager Andy Stephens says institutional investors might have forgotten about technology stocks, but there are compelling reasons to own them today.

Greg Carlson: Hi, this is Greg Carlson. I'm a mutual fund analyst with Morningstar. I'm joined today by Andy Stephens, the manager of Artisan Mid Cap Fund and Artisan Opportunistic Growth. He's also a co manager on Artisan Small Cap Fund. Andy, thanks for joining me today.

Andrew Stephens: Thanks for having me here, Greg.

Carlson: Andy, one of the notable things about this fund, which resides in Morningstar's mid-cap growth category, is that is has a pretty sizable allocation to tech stocks these days, which is fairly unusual compared to its history. Can you talk a little bit about the rationale for that in the areas that you're interested in within the sector?

Stephens: I guess we've never really thought about it from the top down and said we want to be this much in technology. It's just a couple of things, I think. One, we've found a number of very interesting trends in the world that we think are best manifested in some of these companies. Two, I think that tech has become almost a bad word, and it's a very distrusted area of the market. So I think relative to the benchmarks and to a lot of our peers, what we think is a very manageable sized weighting has begun to look quite large.

But the trends that we're looking at and what we think you need going forward are real secular drivers or things that can propel the profit cycles of these businesses beyond just a recovery in the economy. We think those are best found in innovative companies. When you add all that up, I guess we end up with a little bit of a bigger weighting in technology.

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