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Are tech stocks set for a major crash?

14 April 2015

Allianz's Walter Price reveals to FE Trustnet his concerns and hopes for technology stocks.

By Daniel Lanyon,

Reporter, FE Trustnet

Where are you currently finding your best ideas?

“I think 2015 is the year that cloud computing goes mainstream. I have recently taken my position in Amazon up. That company will do well in 2015. Security is the other major thing. It represents about 19 per cent of my portfolio. People need to make a lot more investments in security enterprises and so it will be a good year for those stocks.”

Can technology stocks continue to rally?

“I am expecting that 2015 will be a more volatile year than 2014 and 2013. I think this year will be the year of the cloud and while it has been an incremental positive for hardware and software companies, this year it will have a negative impact on some of those companies. Some of the big enterprise companies will start to see that impact. It will be good for those who are on the right side of history and a more difficult environment for the some of the bigger companies.”

Could there be a material sell-off in the near term?

“The NASDAQ is close to all-time highs but this environment is quite a bit different to 15 years ago when you had multiples in the 100s. Today you have multiples that are less than the average tech stock.”

“If I look at the largest tech stock by market capital – Apple – could it sell off, yes, but Apple has $80bn of cash and has said it will use it buy back stocks and increase dividends.”

Are you finding any value in emerging markets?

“We have not been investing in India because valuations are too high. We like the companies and the growth rates but the price you pay is too much.”

“In the case of China you have Alibaba which is growing at 30 to 40 per cent and is on 30 times earnings. It is basically a better Amazon with 2 million businesses that are trying to grow their businesses. We are starting to see it operate in other markets such as Russia and Brazil too.”

What is the next big technology trend?

“The next big trend is the sharing economy. You have seen companies such as Uber and AirBnB talking about sharing lodging or transportation and basically having a lower cost model. There is innovation there and the internet allows them to connect customers with providers. It is a new way of doing things, which is what I am looking for.”

 

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Walter Price

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