Global Technology strategy: The technology sector reported strong Q4 2020 results
- 12 March 2021 (3 min read)
Key points
- Market rotation with value stocks being favoured at the expense of growth stocks
- Strong results from Internet advertising platforms and digital payment companies
- Corporate earnings results and guidance for the year continued to be robust
What’s happening?
During February, the MSCI World index rose by 0.8%1 . The technology sector underperformed with the MSCI World Information Technology index declining 0.6%1 . [All index returns provided in GBP].
From a market perspective, corporate earnings results and guidance for the year continued to be robust, and have largely been well received by the market. We saw particularly strong results from cloud-based provider of sales and marketing software Hubspot, where the management team highlighted a demand acceleration for digital marketing solutions which should continue into 2021. Digital payment provider Paypal presented an upbeat tone during its analyst day, the company has seen engagement levels increase substantially over the past twelve months and plan to take this opportunity to accelerate the pace of launching new financial products and services.
Portfolio positioning and performance
The top performing stocks in the strategy during the month included Hubspot (cloud-based marketing and sales platform) and Alphabet, the holding company of Google. The latter reported better than expected December quarter results, driven by a rebound of advertising spend and operating leverage. We also saw strength from social media platform Snap after management communicated during its investor day its confidence that revenue growth should exceed 50%2 for several years.
Elsewhere, we also saw positive contribution from Applied Materials, a provider of semiconductor capital equipment used in the manufacture of silicon chips.
During February, we started a position in Alteryx, a software company focused on data analytics; and Entegris, a provider of materials handling solutions to the semiconductor industry. We sold our holdings in Cisco, the data communications equipment vendor, and in Ambarella, a semiconductor company that develops devices that can process images and video.
Outlook
Following a strong start to the month, markets then entered a period of increased volatility as attention was focused on the future direction of interest rates. As expectations of rate rises increased there was a rotation within the equity market, with value stocks being favoured at the expense of growth stocks.
These gyrations will happen from time to time, and no doubt as global economies recover from the impact of the pandemic, will be an event we experience again over the coming weeks and months. This doesn’t change our views on the secular growth opportunity that is present for the companies we are investing in and the fact that the fundamentals of these businesses remain strong.
In fact, as we draw to the end of the fourth quarter, 2020 earnings season we note that results from the technology sector remain strong.
At the time of writing, for those companies in the MSCI World Index (representing the broader market) that have reported their fourth-quarter numbers, 64% have reported better-than-expected revenues and 72% reported better-than-expected earnings. For the technology component of the same index, the results were 82% and 80%, respectively and for the strategy, these figures are 83% and 87%, respectively. (Source: Bloomberg)
No assurance can be given that the Global Technology Strategy will be successful. Investors can lose some or all of their capital invested. The Global Technology strategy is subject to risks including; Equity; Smaller companies; Currency; Industry sector or region; Changing technology; Emerging markets; Liquidity.
- Qmxvb21iZXJnIGFzIG9mIDI2LzAyLzIx
- Qmxvb21iZXJnIGFzIG9mIDI2LzAyLzIx
- U25hcCBJbmMuIGludmVzdG9yIGRheSwgMjMvMDIvMjE=
Not for Retail distribution
This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.
The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.