Anders Tandberg-Johansen, Head of Global Technology and Fund Manager of DNB Asset Management, with a fix on the tech sector
27 February 2015 The boom in technology shares enters its seventh year. A new all-time high on the Nasdaq is within reach in 2015. Even if the best figures are fundamentally underpinned compared to the dotcom bubble, expertise is called for when selecting shares.
The bull market on the Nasdaq is celebrating an anniversary. For six years, prices of technology shares, apart from brief interruptions, have been moving in only one direction, and that is up. Since 9 March 2009, the technology-oriented Nasdaq 100 has climbed from 1058 points to more than 4400 points most recently. The all-time high of 5,048.62 points, reached in March 2000 just before the dotcom bubble burst, is getting ever nearer. Due to a lack of investment alternatives and with the help of excessively high liquidity in the markets, the chances for new records look good.
In addition, unlike at the turn of the millennium, shares prices are now on solid foundations. It is no longer growth fantasies and castles in the air, but high cash flows, low debt levels and solid business models that investors have been demanding for years and that have come to the fore at companies. For instance, the average technology company in the S&P 500 Index holds 30 per cent of its assets in cash in the meantime. At the same time, managers are no longer sitting on their money but giving it back to shareholders in the form of share buybacks and dividends. A trend that is also set to continue in 2015.
The growth opportunities are being assessed more realistically by companies, yet are still high all the same. The companies in the MSCI World Information Technology Index are expecting a growth in operating profits of 16 per cent in the current year. Global shares, at two per cent, come to just an eighth of this.
“The targets are high but achievable,” says Anders Tandberg-Johansen, Head of Global Technology and Fund Manager at the Scandinavian firm, DNB Asset Management.
After the six-year boom, tech shares are no longer a bargain, but are still attractively valued in comparison. The price per earnings ratio based on the profits anticipated for 2015 is 17. Global shares with a P/E ratio of 15 are just below that, despite the much lower growth rates.
The older the bull market gets, the more expertise is called for when it comes to choosing technology investments. DNB fund manager, Tandberg-Johansen, tries to track down value that the wider market has not yet detected. Firms like the developer of online gaming software, Playtech, fall into this category with annual growth rates of 20 to 30 per cent. At the same time, Tandberg-Johansen also makes use of exaggerations. The fund manager is convinced that shares like Oracle or SAP are currently far too cheap. With the focus on research and development, he reckons that deficits in the cloud sector, for example, can be caught up. In addition, the growth in the US economy should provide impetus to spending in the IT sector once again. Oracle and SAP, which are aimed at companies, would benefit in particular.
Tandberg-Johansen's strategies have worked out recently. With an average annual performance of more than 20 per cent over a five year period, his fund lies above comparable fund providers.
-
