A combination of lower valuations and changes in terms of how they are managed means large US technology stocks are worth looking at again, according to the guests on the latest FTAdviser podcast.
Andrew Bell, chief executive of the Witan investment trust said: “As the price of capital went up in 2022, a lot of the big tech companies did what more cyclical businesses do at that point of the cycle and laid off workers, with management running the businesses for profit.
"There was a period where interest rates were low and a rising tide lifted all boats, but not everything that comes in on a rising tide is desirable. But the tech companies, the earnings growth has actually come in.”
Also appearing on the podcast, Andrew Hall, global equity fund manager at Invesco, said: “We never really stopped looking at the big tech stocks, but one of the things that is changing now is that higher interest rates may mean that the challenger companies - many of which aren’t yet profitable - will struggle to raise capital, and that makes the incumbents stronger.”
Simon Doherty, who jointly runs the model portfolio service at Quilter Cheviot, similarly said he has never stopped having exposure to the sector.
He said: “Those companies did not become bad businesses overnight. But what did happen in 2022 is investors realised the consequences of having too much exposure in a portfolio to a very narrow range of equities.”
david.thorpe@ft.com