Favourable valuations and growth in the games segment
(Oslo, 8 July 2013) Many technology shares are currently undervalued and offer investors favourable opportunities to enter the market. This is the opinion held by Anders Tandberg-Johansen, Head of Global Technology at DNB Asset Management. “The sector's price/earnings ratio (PER) excluding net cash items and debts is only 13,” the fund manager explains. “Some traditional companies from the industry such as Apple and Samsung can even be picked up much more reasonably.” Even at an ex-cash PER of not even 7 in the case of Apple and Samsung, the growth prospects of both companies are more than intact. Tandberg-Johansen anticipates an annual rise in the earnings per share of seven per cent in each case over the next three years.
Internet champion at a favourable price
Google will grow even more strongly, however, in his view, namely by 16 per cent a year. Even though investors have to pay 16 times the annual earnings for the stock in the Internet giant, in return they will also get shares in a company that holds an excellent position in all major growth fields. “Whether it involves smartphones and tablets, cloud computing, new games platforms, TV services or social networks, Google is part of it,” says Tandberg-Johansen. This is also shown by the fact, he says, that on the one hand Google equips the majority of smartphones with its own Android operating system, whilst on the other hand Google products such as Youtube, Google Maps and the Internet search engine are even used on the iPhone belonging to its rival, Apple, to a large extent. “You could therefore call the iPhone a Google phone with some justification,” according to Tandberg-Johansen.
Games producers as growth segment
In the fund that he manages, DNB Technology, he has currently weighted Google lower than its competitor, Microsoft, however. The reason: “Our investment strategy also includes acting in an anticyclical manner, when it is called for. The market has identified, in the meantime, how promisingly Google is positioned. Microsoft in contrast, despite its profitability in the corporate client sector and good growth potential, is undervalued.” Tandberg-Johansen's consistent investment strategy, based on a bottom-up analysis, has paid off so far for the shareholders of DNB Technology. Over a five-year period, the fund is at the top of its peer group with an average annual performance of 15.15 per cent. In the course of the current year, a plus of 18.96 per cent has been achieved – nine per cent more than the benchmark for the fund.
For the future, besides the technology giants mentioned, above all Tandberg-Johansen is targeting games producers like Activision, Ubisoft and Gameloft. “The introduction of the next generation of games consoles should benefit the producers of console games in particular,” the fund manager explains. “Gameloft, on the other hand, whilst being one of the world's biggest games producers, concentrates exclusively on mobile games, however. This target market too ought to continue its strong growth over the next few years.”
Anders Tandberg-Johansen is Head of Global Technology and Fund Manager of DNB Technology (ISIN: LU0302296495) at DNB Asset Management. He manages the fund together with co-portfolio managers, Sverre Bergland and Erling Thune.
Estimated eps CAGR next three years
Source: DNB 01.06.2013
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