In 1965, Gordon E. Moore, a co-founder of Intel, published a paper in which he predicted that the number of transistors on a chip would continue to grow exponentially for at least ten years to come. Moore’s law, as it later came to be known, is now also widely used outside the hardware industry and large sectors of the technology sector refer to it in discussions about how new processes and companies are replacing the old ones at an ever-increasing rate.
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DNB Technology funds – why an investment can be attractive
In 1965, Gordon E. Moore, a co-founder of Intel, published a paper in which he predicted that the number of transistors on a chip would continue to grow exponentially for at least ten years to come. Moore’s law, as it later came to be known, is now also widely used outside the hardware industry and large sectors of the technology sector refer to it in discussions about how new processes and companies are replacing the old ones at an ever-increasing rate.A sector delivering superior returns
The digitization of society has been one of the most persistent trends of the past 30 years. Since 1990 the US Nasdaq technology exchange has outperformed the S&P500 by around 250% (January 1990 to May 2012). The success of the sector is partly due to its global reach and the innovative nature of its products. New and innovative companies can rapidly take market share from established businesses, as exemplified by the way in which Apple has displaced Nokia and Motorola. As demographic conditions change and more and more individuals and businesses get connected to the Internet, the addressable markets get bigger and bigger.
Our technology investing – Ten years of market leading performance
One of the funds managed by DNB’s technology team is DNB Technology (LU0302296495), a global equity fund investing in technology, media and telecom (TMT). The fund identifies under-valued companies, which will grow in line with mega trends, such as smart phones, cloud computing and the integration of social networks in digital media. DNB Technology’s average annual return since inception on August 16, 2007, has been 8.7% after charges (as at 31 May 2012). The fund has five stars from Morningstar.
A second fund, DNB TMT Absolute Return (LU0547714526), is a daily-traded, market-neutral, long/short fund which invests in the same sectors than DNB Technology. The fund is UCITS compliant. The average annual return since inception on October 20, 2010, is 4.7% after charges (as at 31 May 2012).
Examples of fund holdings
Google is currently the largest holding in both funds. The company has a PE ratio of 12 with growth in excess of 20%.
“The company is driven by the digitisation of advertising and also generates earnings from the rapid growth of video on the Internet, with YouTube at the forefront”, says manager Anders Tandberg. Another strong position in both funds is the network and data communications company, Cisco Systems.
Amazon is a good example of how the DNB TMT Absolute Return managers are able to reduce market risk by “shortening a company”. The company is traded at a PE ratio of over 40, with normal margins and growth which is just 10% higher than Google’s.
Over 10 years’ experience of working together
DNB has three analysts and managers working in its investment team in this sector. Anders Tandberg Johansen and Sverre Bergland have been working together for over 10 years. The third member of the technology team, Erling Thune, joined DNB in 2008.
Megatrend: mobile computing
“I think that the use of portable computing devices will continue to grow rapidly. The future winners will be the companies who can deliver good content to these devices, for example Google, as well as gaming and betting companies”, concludes Anders Tandberg Johansen.
» Fact Sheet - DNB Technology (LU0302296495)
» Fact Sheet - DNB TMT Absolute Return (LU0547714526)
» Read more about the portfolio managers
