Gleeson, manager of the AXA Framlington Global Technology fund, says that focusing on defensives has been investors' best bet in recent years as the market has favoured safer, lower growth stocks that pay out dividends, due to the uncertainty over the global economy. However, as markets begin to normalise, Gleeson says that long-term growth investing will once again reward investors in both the information technology sector and the general equity market as a whole.
"In terms of investment style, growth has played out to be the best strategy over the long-run," Gleeson said.
"However, like all styles it can move in and out of favour and over the last 12 months [defensives] have certainly been in favour. I still think the fundamentals are intact for the companies I invest in and they have shown healthy growth, but at the same time the market has preferred [defensive] stocks."
"The companies that are showing a lack of growth and instead have been more interested in paying out dividends have been the ones which have been rewarded. They dominate the index, but I don’t invest in them because they are at the more mature end of the growth curve."
"It means that [defensives] are looking very, very expensive as they are at or above their historic valuation levels."
"However, there are signs of improvement in the economy, with better data coming out of the US and Europe, plus Chinese economic data also seems to be improving. Because of that, investors will start to be a little more confident about investing for the future, something you are obviously doing when you are buying higher-growth stocks," he added.
The manager says that this is not only the case in the information technology sector, but "the market as a whole".
He adds that across the S&P, for instance, defensives are trading at or above their 20-year average P/E ratios while growth stocks are still "significantly undervalued".
Gleeson added: "Basically, tech as a whole is seen as a more growth-cyclical sector, which is likely to do less well when there is market uncertainty."
"However, I would say that there is likely to be a shift in sentiment as investors and companies become more confident about the economy, which would mean that now is a good buying opportunity," he said.
Gleeson has managed the £221.6m AXA Framlington Global Technology fund since April 2007.
According to FE Analytics, it is the second-best performing portfolio in the IMA Technology and Telecoms sector over five years with returns of 118.09 per cent, comfortably beating its MSCI World Information Technology index benchmark in the process.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
However, due to Gleeson’s growth focus, the fund has underperformed the index and sector over the last year.
Gleeson says that has been a function of having very limited exposure to larger members of the index, which he says are showing next to no growth. For instance, he holds nothing in Microsoft, Cisco or Intel, and he currently has no exposure to Japan.
Although Apple is his largest holding – making up 6.4 per cent of his fund – he is still significantly underweight compared with the index, which has a 13 per cent weighting to the company.
"There has been a lot of uncertainty around the economy, so there has been a concentration of the more stable large cap names which just aren’t demonstrating the growth that they used to," Gleeson explained.
"But, as the market becomes more confident, I think I will be better rewarded for owning small and mid cap growth names," he added.
Gleeson says his investment approach is very much driven by bottom-up fundamentals, but with a top-down overlay that helps him and his team’s decision as to which themes they should focus on in the portfolio.
The manager says there are a number of themes he is playing in his fund. For instance, he holds a number of stocks that "enable productivity" whereby they help other companies become more cost efficient through the use of technology.
He also holds a number of stocks that focus on making the internet more available via mobile broadband and others that concentrate on improving cyber security.
Gleeson also has a degree of exposure to emerging markets. He admits that investing in this sector has not been easy recently, but he says that it is vital that his fund has access to the developing world.
"Firstly, there are an increasing number of companies that are located in emerging markets and their management teams want them to become multi-nationals. They have to compete with international business and to do that they use technology to make themselves more efficient and effective."
"Secondly, there is a growing middle class in those countries with growing wage levels, so their ability to use and pay for consumer products such as mobile phones is increasing," Gleeson added.
The AXA Framlington Global Technology fund has an ongoing charges figure (OCF) of 1.62 per cent and requires a minimum investment of £1,000.
Gleeson's comments echo those of FE Alpha Manager Barry Norris, who told FE Trustnet last week that he expects cheaper cyclical companies to start performing better than more resilient defensive names.
With this in mind, FE Trustnet will look at funds across a number of different IMA sectors that could benefit from this change if the managers are proved correct.