Analyst: Axa Framlington Global Technology
Axa Framlington’s star technology manager Jeremy Gleeson talks to Nick Reeve about cyber terrorism and his holding in Apple
One of the most intriguing technology stories this year has been the ongoing trail of lawsuits involving Apple, the world’s most valuable company, and Samsung, Korea’s leading mobile phone manufacturer.
Until very recently both companies had been among the top 10 holdings of Axa Framlington’s star technology fund manager Jeremy Gleeson, but Mr Gleeson has since reduced his holding in Samsung in the £195.8m Global Technology fund given the “uncertain” final outcome.
“There is a lot more certainty around Apple,” the manager explains, adding that Apple was looking to force other companies to pay to use its technology, whereas Samsung had benefited from the use of Google’s Android operating system for free for its mobile phones. Google initially was hoping to make back money through the use of its internet search engine, but now Mr Gleeson believes both it and Samsung may have to reassess their arrangement to keep it viable.
Apple, however, remains Mr Gleeson’s biggest holding by some distance. According to the fund’s July 31 factsheet, the company behind the iPhone makes up 7.4 per cent of the fund, while second-biggest holding Qualcomm, a specialist in wireless mobile technology, is 3.9 per cent of the fund. Mr Gleeson has just celebrated his five-year anniversary of managing the product, having taken over from Nicholas Evans in July 2007. In that time he has grown it from roughly £60m to almost £200m, in part thanks to a sector-leading 73.9 per cent return since he took over to September 14.
One of the themes Mr Gleeson highlights in his portfolio is that of cyber-security. Over the summer he invested in the initial public offering (IPO) of Palo Alto Networks, which provides firewalls and network security for companies, although he has since divested of his holding following a sharp rally in the stock. The manager also holds Checkpoint, which provides similar services.
He says: “As more of our assets become digital there is an increasing risk of cyber attacks and cyber terrorism. Protecting assets and networks are becoming increasingly important and companies can’t do much themselves.”
In spite of selling out of Palo Alto quickly, Mr Gleeson foresees a steady flow of IPOs ahead – indeed, there have been several since the highly anticipated but so far disappointing $104bn (£64bn) flotation of Facebook in May. Since that date, Facebook shares have fallen from their float price of $38 to $22 as of September 17 – a 42 per cent decline.
“The anticipation after Facebook was that the IPO market might shut down,” the manager says. “In fact it paused for a little while but has certainly reopened. Generally speaking the IPOs have been of reasonably high quality.”
As well as benefiting from IPOs, Mr Gleeson’s fund has profited from merger and acquisition activity, particularly in the ‘software as a service’ arena. This is another theme the manager has been building up in his portfolio, buying stakes in companies which are effectively offering rental access to specialist software online. This helps reduce the high levels of cost often associated with buying in new software and hardware, and employing specialist consultants to make it all work.