I am a self-diagnosed tech geek. I have been for as long as I can remember and was given a turbo-boost when I worked for a high-end home entertainment company while I was at university in Loughborough. I looked the other day and I had 28 devices linked to my Google Wi-Fi at home, which sounded a lot to me! Technology has changed beyond recognition since I was selling and installing CRT televisions from the likes of Loewe and surround sound kits from Bose. Technology used to be about those sorts of electronic products, dominated by Japanese names such as Canon, Sony and Panasonic. That’s what technology was all about.
What is technology now? It’s actually quite difficult to define. Investor index providers such as MSCI and FTSE gather companies together by what they do to create sector indices. What names would you expect to be in the MSCI World Technology Index? Amazon? Netflix? Facebook? eBay? Alphabet (Google)? Nope, none of them are. Technology is now so broad a theme that technology itself is now questionable whether it is a theme. So many companies and sectors are now technology enabled or disrupted that the technology sector is too narrow to focus on, in our opinion.
The ‘Big 5’ in the US; Apple, Alphabet, Microsoft, Amazon and Facebook now make up 21.78% of the S&P 500 (source; iShares as at 30 July). Those five companies generated an average annualised return of 24.8% for the previous ten years to 2019. If you think the rest of the S&P 500’s share price will rise by 4% per annum for the next ten years, then the ‘Fab 5’ would constitute 84% of the S&P 500. It’s not going to happen. They are great businesses and Microsoft and Amazon have a big advantage in cloud technology however they will not be allowed to grow that large and there are already antitrust movements in the US and EU. This is why we try and capture the broader technology themes through different structures and some of the most exciting technology companies are private, not public.
We still see so many investment portfolios that aren’t aware of this long term structural change. I’d urge you to have a look at your own portfolio and understand what exposure you have to this long-term opportunity. It is essential in our opinion that you invest with tech geeks across the world who specialise in understand technology trends and live and breathe the sector rather than focusing on the ‘Big 5’.
We use our independence, industry contacts and curiosity to seek out new ideas for our clients, which we think present opportunities aligned with their goals. If that sounds good, then get in touch for a no obligation chat.
Thanks for reading and