In top 10 on Canadian High Tech 100 Index Hi
T.ATY is in the Top Ten on the Canadian High Tech 100 Index
BAY STREET BUZZ
High-Tech Yardstick
Thu, Aug. 31, 2000 11:14
By Thien Huynh
Source : https://www.canada-invest.com/news/baystreetbuz.html
BMO Nesbitt Burns thinks that its new Canadian High Tech 100 Index can lend a hand in guiding investors in the right direction.
The index represents the first time 100 purely Canadian technology stocks have been gathered together for a benchmark listing. Brian Piccioni of Nesbitt Burns was one of the creators of the list and thinks it is needed because other indexes such as the TSE 300 (TI300)was misleading investors, while the S&P 60 does not address the needs of an investor looking purely for a technology play.
“The idea came out of a comment by Duncan Stewart, a mutual fund manager from Tera Capital. His comment was that there was no relevant benchmark index in Canada. I think the problem with the TSE 300 is that you have a heavyweight like Nortel distorting things,” says Piccioni.
“To the best of our knowledge, there is no proper bench mark for the technology investor in Canada. Canadian investors have to look to the U.S. for a bench mark. But those lists have foreign content restrictions so you can’t really use a U.S. index as a true benchmark.”
The index in question is comprised of the top ranked Canadian technology companies as ranked by market capitalization. Some familiar names in the top five of the index includes Nortel (NT), Celestica (CLS), JDS Uniphase (JDSU), and BCE Emergis (IFM).
No biotech companies were included in the list because the firm already has a biotech index and didn’t want to double count. Dot-com /Internet type of companies were also excluded from the pure technology index because these firms are considered users of technology rather than creators of technology. Although the index’s creators looked over all the markets for potential candidates for the list, no CDNX companies made the cut because there was not enough historical information on those firms.
At this point, the index is just a list and there is no money associated with it. But the benchmark could be invaluable to investors who need a little guidance when diving into the volatile world of technology stocks.
“A rookie investor can use the same tools as a professional money manager. What a pro does is select a bench mark and compare his performance against it. So what a technology investor can do is look at our index and compare their results every quarter or at the end of the year. They can either see that they are out performing the index or falling behind. If they are falling behind, then they should re-think their investment strategy if a simple mathematical algorithm is performing better than them,” says Piccioni.
Investors should also be aware of the difference between interpreting the index’s performance compared to a technology fund. A fund has actual money invested in it while an index is usually just a benchmark listing. But there are index funds where every fund on the list is adjusted to match the particular index. For example, in the TSE 300 index fund, roughly 35 cents out of every dollar would be invested in the dominant Nortel. Most mutual funds make subjective decisions and put more money in stock than others, where as indexes are balanced out more evenly. For example, the BMO Nesbitt Burns Canadian High Tech Index has 8.618% exposure limit on large cap stocks. That means no stock will make up more than 8.618% of the index. Most mutual funds are not allowed to invest over 10% on a stock.
Glenn Doody of Standard & Poor MMSthinks that benchmark indexes are fine to help investors, but too many product indexes could cause problems.
“Indexes have two uses, one being a bench mark and the other being an investment product. One of the keys to indexes is that you want to make sure that there is adequate liquidity. One of the dangers is, the more indices there are, the more you diversify liquidity across different products and end up with a very illiquid index. Too many indexes can be adverse,” says Doody.
“What BMO Nesbitt Burns has done is create an index that is technology based and is a benchmark index basically for measurement purposes. They have capped the stocks that are heavyweights.”
The Top Ten on the Canadian High Tech 100 Index (with percentage weighting)
NORTEL NETWORKS (NT) 8.618%
JDS UNIPHASE (JDU) 8.618%
PMC- SIERRA (PMCS) 8.618%
CELESTICA (CLS) 8.618%
BCE EMERGIS (IFM) 7.439%
ALIANT (AIT) 5.329%
RESEARCH IN MOTION (RIM) 5.239%
ATI TECHNOLOGIES (ATY) 5.040%
CGI GROUP (GIB.A) 4.591%
COGNOS (CSN) 4.266%
Cheers,
G-News