DNB Asset Management takes part in the tenth anniversary of Google Switzerland
4 June 2014. Technological innovations change the world and create demand. At the same time, companies working in the IT segment require a high level of investment. Investments postponed during the crisis years can now be recouped thanks to attractive company profits. Established players that have a solid starting position, such as Google, are the companies that have benefited the most from the acceleration in growth. Such is the message from Sverre Bergland, portfolio manager of DNB Technology. With its technology funds, which also comprise a long/short offer, DNB Asset Management has long had a foothold in the German-speaking region. This is proven not only by the cash inflows, but also by the investor and start-up day hosted by Google Switzerland, which set up this joint event with DNB to mark its tenth anniversary.
The Internet giant Google is one of those well-established top companies that offer almost unlimited possibilities in terms of long-term investments. While individual overvalued social media platforms and highly innovative 3D printing firms have to accept the expected corrections, the ‘old techs’ remain on top form. Based on this, Google Switzerland presented itself confidently to interested groups of investors who were invited by DNB Asset Management to the start-up and investor day in Zurich. As Patrick Warnking, the head of Google Switzerland, explained, the focus of innovation is on added value for the user. The major challenge lies in continuing to develop technologies, for example in the field of voice recognition, and keeping escalating costs in check. ‘In Switzerland, we are continuing to develop cutting-edge Internet technologies for users and companies – and have been doing so successfully for the past ten years now,’ says Patrick Warnking. The potential of Internet technologies is huge – but five billion people around the world are still not yet online.
A culture of innovation is the key to success
A culture of innovation is particularly prized at Google Switzerland, continues Warnking. Every employee has his or her own individual business plan, colleagues advise each other and a culture of constructive criticism is central. The key technologies are mobile applications and semantic connections.
Technical innovations change the world in many respects: Sverre Bergland, portfolio manager of DNB’s technology fund, cites the example of Google when talking about how new technologies can also create new business fields, increase productivity and economic growth and change the political landscape. Disruptive technologies generate as many winners as they do losers. As these developments usually take shape over a period of months, he says, investors have enough time to adjust and identify winners or losers against the changing context.
No sign of a technology bubble
Sverre Bergland thinks that the key players today are distributors of content, naming Google once again as an example. They have enormous potential in developing countries in particular thanks to the proliferation of smartphones. The much-anticipated technology bubble appears to be restricted to a few overvalued stocks that have crashed within an extremely short period of time. The ‘old economy’ players, in contrast, are to be recommended for long-term investments because of their great potential, continues Bergland. Google, for example, is able to cast a wide net thanks to Android, TV, YouTube, Chrome and future offers such as Google Glass, robotics, connected homes and self-driving cars, promising consistent long-term yields for investors. As well as Google, shares in eBay, Samsung and NETGEAR are also experiencing pleasing returns.
PER 2014 adjusted for net cash/debt positions EPS CAGR in the next three years
Source: Bloomberg, March 2014, top ten holdings of the DNB technology fund
Upswing in momentum thanks to increasing company profits
One of the most striking features of the current economic cycle is the notable recovery of US company profits in an economic climate that has developed rather positively. Such companies have managed to increase their profits above expectations by managing their outgoings very conservatively. On the investment side, this will result in an investment backlog over the next 12 to 18 months. This cyclical upswing in global investments particularly benefits the technology sector: the stronger the profit position of a company, the more it will invest in IT as standard. This means that not only companies are gradually catching up from the setbacks they have experienced since 2008, but also that online sales, including mobile shopping apps and payment systems, are increasing in importance because the demand for these has been triggered directly by consumers.
Making progress with two strategies
The technology funds from DNB hold an increasing appeal for investors from Switzerland, Germany and Austria. Their investments have now exceeded the 100 million euro mark. In figures: DNB Technology (ISIN: LU0302296495) has an average annual performance of 11.63%, making it the top-performing fund in its category. Over the past year, it achieved a gain of 39.17%, which is 13.42% more than was achieved by the fund benchmark. The heterogeneous environment with partly opposing trends is also an attractive investment universe for long/short approaches, something that the management team of the DNB TMT absolute return fund (ISIN: LU0547714526) uses to its advantage. Over the long term, it is working towards positive absolute returns independent of market conditions by investing in long and short positions in the technology, media and telecommunications sectors. Both funds are managed by Anders Tandberg-Johansen together with co-portfolio managers Sverre Bergland and Erling Thune.
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