Ian Cowie: it’s not too late to profit from tech
Our columnist is a long-term backer of tech stocks, and positioned to take advantage of the artificial intelligence theme having staying power.
29th August 2024 10:11
by Ian Cowie from interactive investor
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After the graphics processing unit (GPU) microchip-maker NVIDIA Corp (NASDAQ:NVDA) reported quarterly earnings yesterday and before the technology giant Apple Inc (NASDAQ:AAPL) (AAPL), unveils new iPhones next month, investment trusts offer exposure to future-facing businesses at deep discounts today. Now that science fiction has become commercial fact, it makes sense to consider taking a stake in tech funds.
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Better still, for those of us whose cerebral hardware dates back to the 1950s, the Association of Investment Companies (AIC) “Technology & Technology Innovation” sector enables us to participate in digital developments we might scarcely understand. Artificial intelligence (AI) really can beat natural stupidity.
Never mind the generalities, how’s this for something specific? One of my longest-held investment trusts happens to be the top-performer in the AIC technology sector over the last year and five years but remains priced -9.7% below its net asset value (NAV), which is nearly twice the -4.9% average discount for all investment trusts.
Polar Capital Technology Ord (LSE:PCT) delivered total returns of 43% over the last year, after 118% over five years and 533% over the past decade, according to independent statisticians Morningstar. Believe it or not, that last eye-stretching number was not quite good enough to earn pole position over 10 years.
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That honour was earned by PCT’s smaller rival, Allianz Technology Trust Ord (LSE:ATT) with total returns of 42%, 117% and 606% respectively, over the same three periods. Despite such delightful digital performance, ATT remains priced -8.3% below its NAV.
Cost-conscious investors might also be pleased to see that both these top-performing tech funds are competitively priced. PCT levies ongoing charges of 0.8% on total assets of £4.1 billion, while ATT deducts 0.7% from its £1.5 billion fund.
Never mind the macroeconomic statistics, what about this small shareholder’s personal experience? PCT shares that I transferred away from a paper-based broker in September 2013, when they were priced at £4.33 each, cost £30.60 today.
With such sparkling capital growth, I can learn to live without income here. Neither of these technology trusts pays any dividends.
What’s under the bonnet? PCT’s top 10 underlying holdings are mostly digital “blue-chips” or large and relatively long established businesses, led by Nvidia; the software giant Microsoft Corp (NASDAQ:MSFT); the Facebook and WhatsApp firm Meta Platforms Inc Class A (NASDAQ:META); plus Apple.
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Exactly the same four tech giants lead ATT and in the same order, which may explain why these two trusts have had such similar returns for several years. Interestingly, both these big trusts also hold the semiconductor and security business Broadcom Inc (NASDAQ:AVGO), as well as memory and data storage company Micron Technology Inc (NASDAQ:MU).
Lower down the batting order, but still in its top 10 assets by value, ATT diverges further away from the mainstream with exposure to the semiconductor wafer fabrication firm Lam Research Corp (NASDAQ:LRCX) and the voltage control company Monolithic Power Systems Inc (NASDAQ:MPWR). Neither is a “household name” today, but who knows what the future might hold?
Which brings us back to where we began. Even if you have never seen a GPU and wouldn’t be able to say how AI differs from machine learning, investment trusts provide professionally managed exposure to increasingly important aspects of commercial reality.
Don’t be a latter-day Luddite, like the perennial pessimists who told me I was mad to buy Apple shares in February 2016, for the equivalent of $23.75, allowing for a subsequent four-for-one stock split. They cost $227 this week and have been my most valuable holding for years.
Newish technology and investment trusts bring the world within reach. The only question is whether each of us has the cerebral software, or mindset, to participate in these opportunities.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
Ian Cowie is a shareholder in Apple (AAPL), Microsoft (MSFT) and Polar Capital Technology (PCT) as part of a globally diversified portfolio of investment trusts and other shares.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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