/ TECHNOLOGY /
W
ith technology
constantly advancing
and playing an
ever-greater role in
our lives, the sector
may on the face of it seem like a
natural home for any investor
willing to bet on an individual
industry.
However, the astronomical
P/E ratios of companies such as
Amazon (479) and Netflix (371)
are enough to make any value
investor balk, and with memories
of the dotcom bubble still raw for
anyone unfortunate enough to be
dabbling with markets in the runup to the turn of the millennium,
many people are choosing to
steer clear.
While Monica Tepes, director of
investment companies research
at Cantor Fitzgerald, says this is
certainly understandable, she
says it could mean missing out
on some great opportunities.
“From a fundamentals
perspective, I think technology
is undoubtedly an area of
significant growth over the long
term, even in a global scenario of
lower growth,” she said.
Walter Price, manager of the
Allianz Technology Trust, agrees
with her and adds that now
wouldn’t be the worst time to buy
in to the sector.
“You’ve had a big re-rating of a
lot of the technology companies
and a big drop in their stock
prices in the first part of 2016,” he
explained.
“Over the next two or three
years, the movement towards
cloud computing won’t go away
– we think it is probably going
to accelerate. As people get
confidence and see the results of
trustnetdirect.com
“Technology
is undoubtedly
an area of
significant
growth over
the long term,
even in a global
scenario of
lower growth”
these companies, they’ll come
back. We think that if these
companies do execute, they could
go up 50 to 100 per cent.”
However, Tepes warns an active
approach in this market is vital to
avoid repeating the mistakes of
the past.
“While new technologies can
generate some of the fastest
rates of growth in the overall
market, technology indices are
dominated by older companies
that are slowing or declining,”
she explained.
“Benchmark investing can
therefore prove to be a value trap,
as the slowing/decline of the
large old incumbents swamps the
exponential growth of the much
smaller new challengers.”
Here are three tech-focused
trusts that analysts are tipping for
the future.
ALLIANZ
TECHNOLOGY TRUST
Winterflood named Price’s trust
as one of its picks of 2016 at
the start of the year, saying its
proximity to Silicon Valley gives
it an edge over its peers.
Price uses the example of Tesla
to highlight how his location
provides him with a competitive
advantage.
“This is a company
that’s trying to transform
transportation with electric
cars,”