Whilst it may take up to two years for some companies to fully recover there is plenty of growth left in certain areas of the market – namely cloud computing and mobile internet – according to manager of the RCM Technology Trust Walter Price. Price says a seismic shift in information technology infrastructure will become near ubiquitous, and believes the growing demand for mobile internet will boost the semiconductor industry in particular.
“Every 20 years or so you have a huge shift in enterprise and the next is cloud computing. At the same time semiconductors are the fuel and enabler of the internet and are only becoming cheaper to manufacture,” he said.
“Investors should expect acceleration in the adoption of this technology, and some high growth for the companies who provide and adopt it.”
Price says the phenomenon is currently evident in smaller companies who are adopting cloud computing for IT infrastructure to save costs and boost productivity.
However, the manager warns that the global shift will threaten the market for IT companies such as Oracle, which provide the expensive hardware that is the mainstay of the global economy.
“There’s a big revolution happening and investors should expect a big upturn in the productivity of companies but not expect a surge in IT spending for companies that adopt cloud computing.”
Price has headed up the £140 RCM portfolio since April 2007 but has been running technology funds since 1985. He is based in Silicon Valley, the heart of technological enterprise.
The manager holds US-listed Salesforce for direct exposure to cloud computing, making up 2.7 per cent of the portfolio. The stock is not held by any other investment trusts but is held by four open ended funds in the IMA universe – Invesco Global Technology, GLG American Growth, Pictet Digital Communication and AXA Framlington American Growth.
They all have between 3.7 per cent and 1.6 per cent of their portfolios tilted toward the stock.
All four funds have been severely affected by the April market correction and only one has made money since the beginning of the year: Invesco Global Technology.
Performance of funds in 2014
Source: FE Analytics
In one way or another, Price says he has almost 24 per cent of the trust invested in the semiconductor industry, including Taiwan Semiconductor Manufacturing.
The stock is hugely popular, with 87 funds in the IMA Universe and 11 investment trusts holding it in their top-10.
Some of the largest holders include eight Schroder funds, including Schroder ISF Greater China, which has a 7.99 per cent holding.
Other well-known funds with large holdings include Fidelity Emerging Markets, headed up by FE Alpha Manager Nick Price, JOHCM Emerging Markets, Invesco Perpetual Asian, Investec Asia ex Japan and Newton Global Emerging Markets.
Monks, Pacific Horizon and Scottish American Investment Company are among the trusts that have major stakes in the Taiwanese business.
Price is also bullish on the prospects for PCs perhaps surprisingly at the expense of tablet computers.
“People thought they were seeing the end of PCs with tablets the substitute instead of a compliment,” he explained. “We’re not looking at high growth but more like 2-3 per cent growth. That is a lot better than a 50 per cent fall.”
“This is creating some opportunities for companies that sell into the PC industry, including semiconductors.”
Since Price became manager of the RCM trust it has returned 124.39 per cent. FE does not have access to the trust’s benchmark, but by means of comparison, the FTSE World Technology index has returned 98.98 per cent.
Performance of trust and sector since 30 April 2007
Source: FE Analytics
However, the trust has suffered much worse during the recent market turbulence, falling 3.44 per cent year-to-date.
Price says value stocks make up about a third of the trust, with the rest split between medium to high growth stocks.
One of his largest value positions is Apple, which makes up 3.4 per cent of the portfolio. He says it has become a value stock in the past 12 months having been a growth stock previously.
The increase of tech stocks that pay a dividend shows the maturity of the sector, he says.
“You never thought you’d hear value and technology in the same sentence but these days you do. In the bottom quarter of the S&P 500 you will now find lots of technology names,” Price added.
According to AIC figures, the trust is currently trading on a discount of 4.4 per cent, and has ongoing charges of 1.32 per cent, excluding performance fee.
