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Fund manager backs US tech despite pull back

Fund manager backs US tech despite pull back

A fund manager has backed US tech firms as a solid investment despite the fact the big names have underperformed the US stock market over the past year.

Malcolm MacColl, co-manager of Baillie Gifford’s Monks Investment Trust, said he was “not concerned” about the pull back from big growth tech names over the past six months, adding the slight underperformance felt more like “blowing the extra froth off the coffee” than anything more sinister.

Amazon is the trust’s biggest holding, accounting for 3.1 per cent of the fund, while 2 per cent is invested in Alphabet — the parent company of Google.

Microsoft and Facebook also feature in the trust’s holdings, accounting for 1.3 per cent and 1 per cent respectively.

Such companies have performed extremely well over the past decade, outperforming most stocks on the US stock exchange.

According to data from ICE, the New York Stock Exchange’s ‘Fang+' index — which includes Facebook, Amazon, Netflix and Google alongside five other tech companies — has returned 21.6 per cent over the past five years, compared with 10.63 per cent for the S&P 500 Index.

But their dominance has waned slightly and figures compiled by FTAdviser’s sister paper, the Financial Times, showed the Fang+ index lagged behind the S&P 500 index (the 500 biggest companies on the US Stock Exchange) over the past year.

Mr MacColl still backed the stocks, however, and even said he was “upbeat” and “excited” about the big names.

He said: “We think the big ones are in really good shape. My colleague went out to visit them recently and came back encouraged on each of them.”

Part of the reason for Mr MacColl’s enthusiasm was the specific plans each company had in the pipeline.

For instance, he thought the monetisation of the YouTube arm of Google was still a “great opportunity” for the company.

He said: “It’s still in the early stages of making that work but it will grow to be a big proportion of the growth within that company.”

Meanwhile Facebook was an exciting prospect due to its plans to embed a payment process on its Instagram platform — a way for the company to get involved with the growing ‘influencer’ market, he said.

Mr MacColl also thought Facebook was “back on the front foot” in terms of its own social media platform, claiming the company had countered the negative press it had seen in the past year.

Microsoft’s cloud computing platform — Azure — was allowing the company to move out the mobile arena and providing the company with “growth rates never seen before”, said Mr MacColl.

Overarchingly he argued big tech had become “part of the infrastructure” of society and social media “part of culture” and was therefore a solid investment choice.

The £2bn Monks Investment Trust has substantially outperformed its sector, the AIC Global Sector, over the past five years, returning 138 per cent while its sector returned 80 per cent.