Industry experts say invest in Gulf technology, as industry hits 15-year low
The second half of the year is the right time to invest in technology stocks as the valuation in the segment is close to 15-year lows, industry experts told Gulf News.
“In the last few years, tech stocks have bottomed and begun to inch higher. Business usually picks up in the second half when new gadgets are rolled out ahead of the holiday shopping season and businesses or governments are forced to spend money on information technology by year-end,” said Amy Ils, senior vice-president for equity research at Lombard Odier. Lombard Odier is one of the largest Swiss independent private banks by managed assets and the oldest in Geneva. Of all the sectors, “technology stocks are the most profitable yet riskiest”, Ils said. Unlike other sectors, she said large technology stocks are much more likely to post amazing growth in a very short span of time or, by the same token, crash and burn.
Right now, the biggest example is Apple which has grown to being one of the largest companies around in just a few years thanks to its iPhone and iPad offerings.
Technology stocks are volatile because new technologies often have “very high profit margins”, Ils said. “They are driven by the success of their products as digitisation is taking place. I am optimistic that in the long-term investment [3-5 years], technology sector will be the space to watch out for.”
Most of the tech stocks are held by older individuals, but many of these individuals simply do not understand technology. Warren Buffett for one has gone to the extent of declaring that he will not invest in technology because he does not understand the industry.
“There is definitely a changing of the guard. The industry laid low for a while. But the sleeping giant has arisen,” says Abby Joseph Cohen, senior investment strategist at Goldman Sachs. “This is a very attractive time to invest,” she said.
New investors have enough time to handle the risk of the technology market, making these stocks “perfect for young investors”, Ils reckons.
Of course, you still have to “analyse a company’s fundamentals and not let your personal opinion get in the way of your investment”, she adds.
From a valuation perspective, she said technology shares are no longer extravagantly valued, and have appreciated in line with fundamentals this cycle. Still, it is important to be discerning as not all tech firms are created equally. Potential winners are those that have strong balance sheets and niche players that offer personalised business or consumer services that will appeal to the growing demands of the younger generation.