Investing for a recession and a recovery
With the country coming to a grinding halt in March, UK GDP (a measure of the total value of goods...
Jeremy Gleeson has been managing the AXA Framlington Global Technology fund for the past 12 years.
It’s a fund that really captures the imagination of investors, and one which touches almost every aspect of our lives: from our mobile phones to our online weekly shop, from our pizza delivery to our home security.
So when Jeremy came to our offices last week to film a video interview, we also took the opportunity to talk about some of the tech stories making the headlines, and his views on the possible impact of the US elections.
“No I don’t: different people want different things. A young family may well get Disney, or those that want specific content like the Marvel or Star Wars franchises, but teens and younger millennials are likely to favour Netflix still.
“Importantly, as those teens and younger millennials leave home, they are likely to take up their own subscriptions. To me, the risk is greater for the ‘package’ sellers like Sky and Virgin.
“Netflix has gone a bit quiet at the moment, but I’d hazard a guess that that is intentional – it has proven itself to be a shrewd marketer and doesn’t advertise during big sports tournaments like the Rugby World Cup.
“Instead it saves the spend for afterwards when it will be more rewarding. Managements knows there is no point trying to get people to fight over the remote control when there is a pool decider or a semi-final or a final at stake.
“Disney isn’t really a tech stock. And its challenge is that it has a lot of moving parts: TV content, theme parks, movies, merchandise – and it always feels like one part is not firing on all cylinders. It has a good pipeline this year – Frozen 2 is coming out, as is Star Wars and another Avengers movie. But next year is weaker.
“Amazon is the same but different. 90% of its revenues are still from its retail business, 9% from cloud computing and 1% from advertising. It’s a lot easier to get your head around.”
“Apple is interesting. It usually has a major upgrade of the iPhone one year, followed by a minor one the next – like 4 to 4s, 5 to 5s, etc. This year’s 11 is a minor one, with the big one – 5G – expected next year.
“5G phones have already been launched by other companies, but I don’t think this matters – there is no 5G network yet to use them on!
“Memory prices have fallen a lot in the past year and this price reduction has been passed on to customers across several products. So it feels like they are getting cheaper, even if the phones aren’t really.”
“My biggest challenges today are the macroeconomic environment and governments. US/China trade wars are not helping, because of the uncertainty they cause. People are putting off making decisions.
“It’s the same here in Europe due to Brexit and the health of the Chinese economy – as Germany and other European countries export a lot of products there. The automotive industry especially is feeling the pain. And the knock-on effect of this is that semi-conductor companies are also hurting. If fewer cars are sold, fewer of their components are sold too.
“We also have the anti-trust debate and regulatory issues caused by the Facebook-Cambridge Analytica data scandal. This is likely to be amplified in the next 13 months or so, as the US election race begins in earnest. One of the Democrat candidates is very anti big tech companies and Trump, who should be pro business, is also taking pot shots at larger tech firms like Amazon. It doesn’t help that lots of Trump supporters work for traditional retailers and are feeling the pain of Amazon through job losses.
“But at the end of the day, it is hard to see how they could justify saying that companies like Amazon have hurt the consumer: they use a large variety of retailers, have given better clarity on pricing and are saving consumers time.”
“It really helps that we have an opened planned office and I can talk to analysts on different sectors. Understanding what an industry will do next, and what tech companies may benefit, is crucial.
“We share information and ideas and attend each others meetings. For example, Dexcom, a healthcare stock was in one day talking about their blood-sugar monitoring systems for diabetes. It’s helpful for me to hear their story, because it is all interconnected: devises contain sensors and they communicate with devices, for example. Glucose is continually monitored and data sent to a phone, too. This is really important, especially when a patient is sleeping, as it can help reduce the risk of hypoglycemic coma – an alert is sent if there is a problem.
“It’s such an all-encompassing area that I am open to ideas from any area.”
“Yes! My colleagues often ask me to fix their PCs and home is quite tech heavy. We’ve just had a new kitchen put in and the oven, washing machine and tumble dryer are now on linked to wifi.
“We have the Sonos app which means we can play music anywhere in the house, we have the Nest thermostat and home security cameras. We have lots of things.
“Alexa has been put in the cupboard in disgrace though – ever since my kids started asking her to play ABBA non-stop and then found out she could burp….”