Tech Crash: 4 Funds to Diversify

Dear Rich Lifer,

The forever bull market continues. 

And even with value stocks coming back, the record highs are still mostly propped up by the most popular tech names…

Amazon (AMZN) and Apple (AAPL) are both up double-digit percentages, and other major tech names, including Facebook (FB) and Alphabet (GOOGL), rose at today’s opening. 

Since the beginning of 2019, these Big Tech companies have registered gains of 125% to 245%. Altogether, Apple, Microsoft (MSFT),, Facebook, and Alphabet’s Google account for almost 22% of the S&P 500 index.

But some analysts see a day of reckoning ahead for Big Tech.

Today, we will explore why Big Tech stocks may be at risk for losses and take a look at some funds you should consider to diversify your portfolio. 

Perfect Storm? 

There are a few trends that lead us to believe now is the time to broaden your portfolio outside the Big Five. 

For one, it appears the appetite for risk is waning. There has been an increase in selloffs in speculative corners of the market, such as cryptocurrencies, meme-stocks, and SPACs (special purpose acquisition companies). 

Combine this with fears of inflation and higher interest rates, and you have the perfect storm for the Big Five to become much more sensitive to market movements. 

And if these factors result in tech stocks faltering, the whole market will feel the effects. According to Goldman Sachs, if these Big Five stocks decline by 10%, in order for the S&P 500 to keep trading flat, the bottom 100 stocks in the index would have to rise by a collective 75%.

If your portfolio is stuffed with tech stocks, you’ll be on weak financial footing when market corrections eventually happen.

Scott Opsal, director of research at Leuthold Group, believes that because the market is so saturated with tech stocks, the time is now for investors to diversify into a wider array of value-oriented and smaller stocks.

So what funds should you consider? Here are a few options…

Funds That Offer Diversification 

The Akre Focus fund (AKREX) is a concentrated fund that has never owned the Big Five and has just 13% of its assets in any kind of technology company.

The tech stocks it does invest in are mostly software companies with extended positions for future growth, including Constellation Software (CSU.Canada), Adobe (ADBE), and CoStar Group (CSGP).

The fund is managed by John Neff and Chris Cerrone and includes 20 well-managed companies that are considered strong businesses that reinvest in themselves. Mr. Neff commented, “We’ve generally focused on smaller businesses with ostensibly longer runways with which to compound.”

AKREX holds onto its investments for years and has only a 4% turnover. It also has an average annual return of 18% over the past decade, beating 84% of its peers. 

Another fund that holds none of the Big Five is the $10.1 billion Primecap Odyssey Growth fund (POGRX).

This fund attempts to include companies with above-average earnings growth. This has put POGRX in the bottom third of other large growth funds, with a 19.6% annual average return over the past five years.

However, because the fund sticks with companies that can perform in the long haul, it has become quite popular. 

POGRX also sets itself apart by investing 18% of the fund outside the U.S. and 30% of its assets in healthcare, with its top 10 positions including  Eli Lilly (LLY), Biogen (BIIB), Abiomed (ABMD), and Amgen (AMGN). Its average price/earnings ratio is 20, cheaper than the ratio of 29 for the large growth category. 

If you are worried about straying completely away from the Big Five, you could consider the Cambiar Opportunity fund (CAMOX). This fund recently began holding shares of Amazon in 2020 but is mostly concentrated and consists of only 40 stocks. 

The fund focuses on  industry winners that boast strong, long-term demand prospects and pricing power that differentiate it from its peers. And because of its 16% average annual return, CAMOX has beat out 94% of other similar funds.

CAMOX focuses mostly on the financial sector, which is poised to grow in the current economic environment. Some top funds include JPMorgan Chase (JPM) and Charles Schwab (SCHW). 

It also has recently focused on companies that have not fully reopened, and thus, have the ability to make significant gains. Examples of these companies in the fund include casino operator Penn National Gaming (PENN), food distributor Sysco (SYY), and  Uber Technologies (UBER). 

And if you are even more hesitant to ease away from tech stocks, you should take a look at  Jensen Quality Growth (JENSX), which focuses on companies that generate 15% return on equity for 10 consecutive years. Top holdings include Alphabet, Microsoft, and Apple, but co-manager Eric Schoenstein holds a third less than in the Russell 1000 Growth index.

Mr. Schoenstein says he tried to be conscious of overconcentration, in case the momentum of the markets reverses or regulations put tech companies at risk. 

JENSX’s 17.3% average return over the past five years puts it in the top 35% of large-blend funds tracked by Morningstar. 

All of these funds are worth exploring further, and now is not the time to hesitate. Take your financial success into your own hands by doing your own research to determine which fund is best to add diversity to your portfolio.

To a Richer Life,


The Rich Life Roadmap Team 


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