USOct 19 2017

Artemis' Moore makes sideways grab at US tech stocks

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Artemis' Moore makes sideways grab at US tech stocks

Stephen Moore, who runs the £934m Artemis US Extended Alpha fund, is focused on tech shares for returns, despite valuation concerns.

Mr Moore’s fund has returned 88 per cent over the past three years, compared with 65 per cent for the average fund in the IA North America sector in the same time period.

Many fund managers are wary of investing in the US technology sector, either based on the valuations at which the largest tech shares trade, or because they argue rising US interest rates will punish businesses that don’t pay a dividend, as Amazon, among others, does not.

Mr Moore said the valuations of some technology shares are “concerning”, but that one way to profit from technological disruption is to buy companies in different sectors, at lower valuations, that benefit from the same trends.

He said he has bought shares in Prologis, a company that owns warehouses, and has Amazon as its largest customer.

Mr Moore said this enables him to profit  from the move to e-commerce, without having to buy shares at valuation levels with which he may not be comfortable.

The fund manager said: “There is an awful lot of excitement at present about technologies such as ‘big data’, artificial intelligence and autonomous vehicles. We believe investing in the undervalued companies that supply the memory which all of these advances use is the best way for us to exploit this technological change.”

A share he has bought for this is Micron Technology. He said the company manufactures products used in cloud computing, providing the “memory” for such technologies.

Mr Moore said: “The memory industry has a history of very poor capital allocation, always adding too much capacity, resulting in oversupply and eventually destroying pricing.

"In the past, this has resulted in frequent loss-making periods.

"But because of the significant consolidation that has taken place across the industry and the emergence of new high-growth markets for their products, we believe that pricing is likely to remain much stronger than is reflected in Micron’s current low price-to-earnings multiple.”

He is wary of investing in the US banks, despite their popularity with many of his peers.

He said the investment case for US bank shares is largely predicated on bond yields rising as the economy grows and inflation rises.

Mr Moore said bond yields haven’t risen as inflation has been consistently lower than expected, but the valuations at which bank shares trade have moved upwards.

John Greenwood, chief economist at Invesco Perpetual, said US policy makers have been saying for some time that the weaker than expected inflation numbers are the result of temporary factors,but with inflation continuing to be below target, such claims lack “credibility”.

He said he expects inflation to continue to be weak for years to come.  

Paul Stocks, financial services director at Dobson and Hodge in Doncaster, said he tends to use multi-asset funds for asset allocation, so any exposure he has to the US equity market is via those funds.

David.Thorpe@ft.com