We’re large-cap growth also. Lately, we have started to shift somewhat out of growth and into more value. We’ve changed our benchmark as a result. We used to be 50% S&P 500 and 50% [Standard & Poor’s Barra Growth Index], and now we’re going to be just S&P 500. When I first started, our benchmark for technology was like 13.9% of the S&P and [now] it’s like 23% to 24%.
Bill Thomason: Well, I think Dawn and I are in the nonsexy part of the business.
Paige: It’s gonna get a whole lot sexier.
Thomason: I mean, we have been in that nonsexy part of the business for two years, and I always said that I found some of the best value. I mean, it’s hard to say that value just wasn’t there [in] a lot of these good names that were just beaten down. One of the things that is driving the technology industry is PC sales and the Internet; but a lot of people [in Silicon Valley] are just so optimistic now about where we’re going with technology. That’s why I’m looking at some of the names that I’ve held for a long time, like Applied Materials. I bought Applied Materials at 22 when it was a value. It’s at 73 now. A lot of these names that we’ve held are starting to come back now.
Paige: Value, at this point, has been misconstrued to mean some beaten-down, crappy company. But, in this environment, since small-cap companies have suffered so greatly at the expense of or because of the flow of funds into large cap, you have a lot of good companies out there with explosive growth characteristics. We’ve got a lot of good companies in our portfolio that are by no means fallen angels or dogs. They’re just strong names that no one has had an interest in for the last 18 months, and it has been hell. Then, April and May, we saw that it felt like things were finally turning around.
Pearson: But, you know, the large-cap stocks have significantly outperformed small caps over the last several years and there has basically been one reason behind that: earnings. The large-cap companies are the ones who have been putting up earnings and the small caps haven’t. That’s why people have been buying the names like Cisco and the Microsofts of the world.
B.E.: So what is your earnings outlook for large caps in the months ahead?
Pearson: The earnings numbers [for the S&P 500] are going up. Six months ago, nine months ago, we were thinking that the S&P 500 might grow 7% to 8%. Now we’re talking double digits, 12% to 13%. If you look at what has been behind the [success of] the market the last few months, it has been a lot of large-cap companies reporting positive earning surprises.
B.E.: How do you define the new economy and identify the equity and fixed-income investment opportunities in this environment?
Craig Simmons: I have been in the new era camp for a long