‘Elon Musk is always a concern’ – Allianz Tech Trust trims Tesla stake
21st November 2022 09:22
by Sam Benstead from interactive investor
New lead fund manager Mike Seidenberg shifts the portfolio to be more focused on valuations.
The new lead fund manager of the £1 billion Allianz Technology Trust has made several key changes, in what he calls “evolutionary not revolutionary” adjustments.
Mike Seidenberg, who took the reins of the tech trust in the summer, has cut Tesla from around 5%, a top 10 position, to less than 2.5% today on grounds that the stock was too volatile. Seidenberg has worked at Allianz since 2009.
Previously the trust was managed by Walter Price for 15 years. It has been a top performer, returning 856% over the past 15 years, ahead of its main competitors Polar Capital Technology (LSE:PCT), up 824%.
Seidenberg said: “I’m a big Tesla fan but it was a massive overweight for us. I looked at the business model, which I wholeheartedly believe in, but Tesla shares had appreciated to about 5% of the trust and I wanted a smaller position in such a volatile name.
“If I thought our investors had a 10-year time horizon on our fund, I would have probably had no problem having as large a position as we did, but it was really around risk control and understanding that this has been a particularly volatile year in the stock market. It’s still one of our largest active overweight positions, but I want to take it down from an absolute size perspective.”
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On Elon Musk, and his recent takeover of Twitter, Seidenberg expressed his doubts about the entrepreneur but argued that he was a visionary business leader.
“Elon Musk himself is always a concern – but Tesla is such a good product. When you drive one, you realise just how they have melded electronic vehicles and technology in such a beautiful way, for lack of a better word.
“They're constantly focusing on cutting costs for buyers and improving the product. If Musk dropped dead tomorrow, would I reconsider owning this stock? Probably. He’s one of those few people you come across in your career. He’s a rainmaker. He really thinks about the world differently.
“One of my team thinks that buying Twitter is part of a bigger digital play by him that fits into Tesla, that fits into, like, the universe – I personally don’t see it yet. As long as he doesn’t spend an incredible amount of time on Twitter then I am not concerned. He's brought in a lot of really strong lieutenants into his business.”
The overarching shift in the portfolio has been from a more growth-oriented approach to focus more on cheaper, well-established shares. This is “evolutionary not revolutionary” he notes.
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Nevertheless, the portfolio is still more expensive than its benchmark, the Dow Jones World Technology Index. Allianz Technology has an average price-to-earnings ratio of 23 compared with 18.7 for the index. Seidenberg is paying up for growth, however, with forecast earnings growth of the portfolio over the next 12 months at 18.2% compared with 8.2% for its benchmark.
Seidenberg said: “We have gone from higher growth to more value oriented. The portfolio from 2020 is materially different to what it is today – lots more ‘growth at a reasonable price’, such as payments giants Visa (NYSE:V) and Mastercard (NYSE:MA), and cyber security stocks.”
“Visa and Mastercard are very profitable businesses, but they are not going to grow 40% a year. What we value here is the very predictable growth rates,” he said.
He also added more cyber security stocks and specialised semiconductor stocks. Top positions include Palo Alto Networks, CrowdStrike and Taiwan Semiconductor Manufacturing Company.
Another big change from Seidenberg was to cut his stake in Chinese shares, such as by selling out of Tencent Music Entertainment. “You can’t underwrite China,” Seidenberg said.
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