What's 'worrying' the man who ran the largest tech fund during dot-com bubble

  • Tech investor Paul Meeks says the recent relative outperformance of tech is ''somewhat worrying."
  • He says fundamentals aren't justifying stock prices.

The portfolio manager who ran the world's largest technology and internet fund during the dot-com bubble is warning that fundamentals aren't justifying stock prices.

Paul Meeks, who worked for Merrill Lynch during the boom and subsequent collapse, says he doesn't feel as much skepticism now surrounding technology stocks as he did then, but he's still concerned and has been bottom fishing.

"I do think the recent relative outperformance of tech is somewhat worrying. There are some very high prices out there for unfortunately a concentrated handful of stocks," Meeks said Monday on CNBC's "Trading Nation."

Meeks, chief investment officer at Sloy, Dahl & Holst, was referring to the "FANG" stocks — Facebook, Amazon, Netflix and Google parent Alphabet. The stocks make up 16 percent of the Nasdaq, and have had an average gain of 32 percent this year.

They're also a big portion of the Nasdaq 100, which started the week hitting a fresh all-time intraday high of 5,888.92. The index has jumped nearly 21 percent this year.

He also singles out Apple as a name that concerns him.

"I am an Apple owner, and I bought a little bit when it dipped 3 percent in a single session a couple of weeks ago down to $150. However, I do worry a little bit about the iPhone 8 ramp," said Meeks, who notes cloud companies are seeing better growth than Apple.

"That is one [Apple] I just hold here because I need to see that this is going to be a monster cycle versus just an incremental upgrade."

Apple shares, which have soared 33 percent this year, gave back 1 percent on Monday. The latest activity came as the iPhone maker kicked off its annual worldwidedevelopersconference hours after receiving a stock downgrade by firm Pacific Crest.

Despite his current cautiousness, Meeks considers technology a "premium-valued" sector.

"The companies that are coming public these days are real companies. They germinate much longer in private equity and with venture capital backing before they go public," he said. "With the transparency of the internet, we're getting a good view of their quarterly financial results even when they're private companies."

And Meeks is still looking for deals — mostly involving some of Wall Street's most unloved stocks.

He's been looking at cloud and video streaming company Akamai Technologies, which has cratered 66 percent since the dot-com bubble.

"I like to buy these tech companies when they're having a bad day. These guys have had a lot of bad days," he said. "Akamai has been around since the internet bubble was inflating — that's how long it goes back. They have one of the biggest content delivery networks."

He acknowledges that skittishness surrounding whether increased competition could handicap Akamai's business model is legitimate.

"There might be some share loss to their customers, but on the other hand they have such a voracious appetite for data storage that those guys will be fine," Meeks said.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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