DNB Technology - Portfolio Manager's commentary 01/2014

Welcome to DNB Asset Management and a review of one of the most successful technology funds globally in 2013. I’m sitting here with the portfolio managers Anders Tandberg-Johansen and Sverre Bergland. And can I start with you, Anders, it has been a very successful year for you and your team. Congratulations.

Thank you for that. It was a very good year for us and we were up almost 15 per cent compared to the index. So we are very happy with 2013.

We will look at specific stocks a bit later but are there sectors or themes that were more successful than others in the past year?

I think that on our part, the borderline between Internet and mobile Internet was very good for us and then also the gaming stocks and some of the sub-suppliers in the semiconductor supply chain.

One of the stocks that were your best performers was Opera Software, a stock that you owned for a very long time. Sverre, could you say a bit more about this stock?

Yes, it was a very strong stock last year it was up 160 per cent  and it was one of our largest positions going into the year. They have a very strong position in mobile Internet and that has had a very strong development in that period. So it was a very strong year for that whole group and that stock in particular.

IBM, a very unpopular stock.

Yes, the sentiment turned very negative on that stock actually two years back in time, so it has been a bad performer both in 2012 and in 2013. Specifically last year, they missed numbers and people started to focus on the cash flow rather than the earnings per share, and that cash flow has been weak for over four years now. So that played very much into our thesis on that stock.

Apple that you guys bought into during the summer. What were the triggers you guys were looking for during the year on Apple?

I think that when looking at Apple, we were generally focused on valuation on a merely opportunistic scale. G oing into year, Apple was a bit on the high side both on valuation and estimates. When we came into to the early summer, the stock price melted and given the high percentage of cash, net cash compared to the market cap, we thought that the reward was very favourable for Apple and we thought that estimates were more reasonable. So that was the reason why we bought into Apple to a larger extent in the year.

A stock you guys have been talking very nicely about for a very long time is Nokia. And that finally came back in 2013.

It has been a troublesome stock in 2012 but we were happy that we got paid in 2013 on the stock. I think the main points there in 2013 were that they finally got their networks division to perform and they had sold the loss-making hand-held business to Microsoft. In addition I also think some analysts rethought their thinking on the valuation of the intellectual property.

Dell, what can we expect in 2014?

I think for 2014 we expect quite active M&A markets. What we see in anecdotal evidence of late is that the companies that are actually buying other companies are increasing in value and that has not been the case historically. I think we are well positioned for that. We own several very interesting smaller midcap stocks which could be targets in this environment.

What are the most important triggers to look for in 2014? You can say one thing each, starting with Sverre?

I think mobile Internet will continue to be a very, very strong theme. I would like to mention three things within there: that’s e-commerce, it’s payment, online payment, and also the day-to-day work of people starts to be more and more done on mobile devices.

We have done a lot of extensive work in 2013 on the TV, both on the media and the technical solution side. I think our eyes are going to be kept on that on 2014 as well. I think there are going to be some big losers and big winners in that space.

Is there still good reason to own technology in the year to come?

If you look at the risk premium, at this point in time it is still good, around four per cent, and we have lots of good ideas going into the New Year. And our statement is that we will add 5 to 10 per cent on top of the index a year, which we have historically made, so I think this could be a very good year.

Thanks to both of you.