Longstanding fund manager Jeremy Gleeson is convinced there are still rich returns to be made from investing in the world’s established technology companies. This is despite the fact that the £1.2billion fund he runs – Axa Framlington Global Technology – has enjoyed a tremendous run of form in recent years, delivering three-year returns in excess of 250 per cent.
Although he admits that some of the valuations placed on specific technology stocks are now ‘egregious’ – and he is a bit nervous about market froth caused by next month’s US Presidential election – he believes there are still companies that have gone under the radar of investors.
Some computer chip component firms, for example, provide the opportunity to make money in the near future. This belief explains the fund’s holdings in US semiconductor companies Qualcomm, Microchip Technology and NXP. ‘Semi-conductors are the building blocks for much cutting-edge technology,’ he says, ‘be it the chips that go into 5G phones, or the drivers of greater automation in the home and at work.’
Gleeson runs the portfolio from his home in Northwood, NorthWest London, and has 64 holdings in the fund. They include technology giants Apple – its biggest holding by a country mile – Alphabet (owner of Google) and Amazon as well as other familiar names such as PayPal and Visa.
Despite the global badge, the fund is primarily invested in US stock market-listed companies with Gleeson preferring to concentrate on established tech firms. ‘We are not interested in blue-sky technology,’ he says. ‘We steer clear of early-stage companies and home in on businesses with a significant market share.’ Exposure to Chinese technology companies is minimal, at 1.4 per cent.
This year, new positions have been taken in communications technology company Zoom and cloud software specialist Okta. ‘We had a couple of meetings with Zoom’s management last year,’ says Gleeson. ‘We then bought the shares in March. Similarly, we had monitored Okta since the company went public in 2017 and joined the Nasdaq index. We then purchased shares in April.’ In recent months, the fund has also increased exposure to cloud specialists Twilio and Salesforce.
A holding in German semi-conductor manufacturer Infineon was sold because of its dependence upon an automotive industry hit badly by the economic disruption from coronavirus. Gleeson also disposed of the fund’s stake in online brand management specialist Yext.
While some market experts believe technology stocks are overvalued, Gleeson disagrees. He accepts that some companies do not warrant their inflated valuations, but believes the businesses he has invested in are not overpriced. ‘Many of the firms we hold – even Apple and Amazon – are not mature businesses. They are still in growth mode so their earnings are not yet at an optimal level. It’s the potential they offer that is exciting.’
The fund pays no dividend so is unsuitable for income seekers. Fund scrutineer FundCalibre likes the Axa fund, deeming it to be one of only two ‘elite’ technologyfocused funds – the other being Smith & Williamson Artificial Intelligence. It says that Gleeson’s ‘level-headed commitment to finding new opportunities with strong commercial potential makes the Axa fund an appealing option for investors seeking technology exposure’.
The fund’s ongoing annual charges are 1.57 per cent. The stock market identification code is 0659899.