Cyber-security and cloud computing boosts tech sector
Cloud computing appears to be the new emerging investment theme
Investors’ views on the technology sector have turned more positive as businesses move into ‘the cloud’ and our reliability on technology to manage our day-to-day lives increases.
But technology stocks have still been slow to recover from the effect of the dotcom bubble bursting in 2000-02.
On March 10 2000, the Nasdaq – which is commonly used as an indicator of the performance of technology companies – peaked at 5132.52 in intraday trading, closing the day at 5048.62. In the year following, the index saw its value halve before finally hitting the bottom of the bear market on October 10 2002, with a closing value of 865.1.
As at September 14 2012, the Nasdaq stood at 2460.4 – almost half of where it was at its peak in March 2000. However, for those that have timed the market perfectly, this equates to a return of 184.66 per cent since its lows, according to FE Analytics.
Of course, timing the market so precisely is almost impossible, but that isn’t to say that some fund managers in this area haven’t benefited from the recovery in tech since 2002, with many of them looking beyond the typical technology giants and obvious smartphone or social networking themes.
Cloud computing, data management and security, to name but a few, are all areas that have developed at a breakneck – and lucrative – rate.
Jeremy Gleeson, manager of the Axa Framlington Global Technology fund, tells Investment Adviser on page 47 that a common theme in his fund is that of ‘cyber-security’ – an ongoing issue as more people move into the digital age.
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.”
For Conor McCarthy, manager of the MFM Techinvest Technology fund, data management is also a long-term investment theme. He refers to the “absolute deluge of data that is being exponentially created everywhere”, creating opportunities for the likes of Actuate Corporation, a provider of business intelligence, analytics and reporting software to corporates.
Cloud computing – or innovations that enable IT to be used remotely – are a third plank in the latest phase of the tech revolution. Matthew Griffin, managing director and a member of the team managing the BNY Mellon American fund, explains: “Mobility and agility are key concepts in the next phase of computing innovation. More workers will report to virtual offices, with locally installed applications becoming obsolete, and will require sturdy mobile products that can connect to and use any available internet connectivity.
“Being able to extract data effortlessly from ‘cloud’-based applications will be an important component of agility. Even individual users are expected to come to favour online storage over, say, flash drives to access their data.”