KUALA LUMPUR (November 2): According to Franklin Templeton Asset Management (M) Co., Ltd. CEO and country director Avinash Satwalekar, investing in US technology stocks this year has become a defensive move.
He said that investors tend to view US technology stocks as cyclical stocks, whose earnings and stock price performance fluctuate. However, this view has changed, because many technology companies are financially stronger than in the past. In the ongoing pandemic, they are also vital to maintaining economic activity.
Avinash said: “The defensive performance of technology stocks is an interesting development.”
Avinash also pointed out that the S&P 500 Information Technology (IT) Index performed significantly better than the broader S&P 500 Index. The IT index provided an absolute return of 37% to investors who had the first Covid-19 cases in mid-November last year. China, and September 30 this year. On the other hand, the absolute return of the S&P 500 Index over the same period was approximately 7.3%.
Avinash added: “If Amazon Inc is not classified under the current consumer discretion, the IT index will be higher.”
Avinash was the keynote speaker at the second session of The Edge-Citigold Wealth 2020 webinar series, introducing the investment prospects of the United States. The webinar was held on October 31st and this is the second part of the webinar series to be held in 2019. The next few months. More than 500 people participated in the event.
In his speech, Avinash said that investors tend to see the US technology sector as dominated by a few global giants. These giants include Facebook, Amazon, Apple, Netflix and Alphabet (FAANG), but there are others. Exciting companies deserve investor attention. This is especially true now, as large companies scramble to carry out digital transformation.
In this regard, he pointed out that cloud computing is the main technology of the present and the foreseeable future. “Cloud-based services have shown incredible growth, and there is no sign of slowing down, especially as we become more and more accustomed to storing data on desktop CPUs or large servers in corporate headquarters. When thinking.”
Avinash believes that one of the counters that benefited from digital transformation and cloud computing trends is ServiceNow. The New York-based company is listed in New York and provides cloud-based software that automates IT and employee workflows. The company’s third-quarter earnings results announced last week exceeded analysts’ expectations. The company reported revenue of $1.15 billion, an increase of 30% over the same period last year, while earnings per share were $1.21, an increase of 22.2% year-on-year.
Understandably, as the enthusiasm of technology stocks reaches or approaches record levels, valuations have come under strict scrutiny. In other words, Avinash recommends that investors evaluate the current valuations of technology stocks based on the long-term gains they may miss if they remain on the sidelines for a long time.
“Naturally, investors will be able to compare with the technology bubble of 2000. There is no doubt that compared to the S&P 500, the transaction price of technology is at a premium, and technology companies in the early 2000s had no real basic business. Today is not this. This situation.
“Most technology companies today have real business and growth trajectories. In addition, we are far from the valuation of the technology bubble in 2000.
“I believe the premium is reasonable because the long-term growth of the industry is stronger, and the company’s debt and capital levels are also higher. These all indicate long-term high-quality earnings and growth.”
He suggested that investors consider the long-term prospects of technology and make their investment prospects consistent with the long-term development, taking ServiceNow as an example.
“Eight years ago, when they actually lost money, we invested in them. If we don’t look back, we will lose 52% compound annual growth rate and 35% revenue growth rate.”
Another beneficiary of the pandemic is the healthcare sector, Avinash said. In addition to the pandemic, the global aging population is a long-term, long-term driver of healthcare innovation. In 2015, 15% of the U.S. population was over 60 years old. By 2030, this number will rise to 20%.
“In Europe, this proportion was 18% in 2015 and is expected to reach 23% by 2030. Even in China’s still relatively young population, by 2030, people aged 60 and over will account for 17% of the population. %.”
As the population ages, health-related expenditures are expected to increase as a percentage of total expenditures, Avinash said.
As a result, we will see an incredible focus on innovation in the biotechnology and pharmaceutical fields. New technologies will increasingly be integrated into the field of healthcare. As a result, many diseases that were previously considered incurable are now much better for patients. ”
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