Alpesh Patel on the Markets
Let’s look at the biggest and most exciting technology sub-sectors to see what I mean. “Big data” plays, you would think, would be a good place to start. Wrong. Take the returns of those in business intelligence within this sector. Most have provided a negative return over 12 months, including companies such as SAP, Actuate and Qlik. Some data management companies, such as CommVault, have also seen falling share prices. Surely enterprise storage within big data is doing well? Nope. Fusion and Quantum are both down. Of course, even in such sectors some do well, like EMC, or MicroStrategy and Verint. But for me the majority are “steer clear” plays. I’ll give one more example where reality and perception diverge, and then some lesser known tech sectors which you should investigate. Smart Grid, where consumers can manage electricity consumption smartly thanks to digital intelligence and analytics, is much hyped and much vaunted. Technology infrastructure plays like Silver Spring Networks and PowerSecure stink. So does Smart Meter maker Itron.
“My favourite overlooked tech companies are in minimally invasive surgery, but not those in robotic surgery as they’ve not done well.” So which technology sectors are worth examining? In my view Chinese internet stocks are worthy of further investigation. The subsectors I like are the portal companies like Qihoo, YY and Bitauto. Also in this sector the e-commerce companies like Vipshop and Ctrip and the gaming players like Shanda Games and KongZhong are attractive. Even the subscription networks like SouFun are leaping ahead. Or take the opposite technology extreme – the modern warfare sector. Within that the subsectors doing really well are command and control companies like General Dynamics, L-3, Exelis and Harris. Advanced aero companies too like Lockheed, Northrop and Orbital Sciences are performing admirably.
My favourites in this sector are missile defence and smart bomb companies Alliant and Raytheon.
Given the boom in the sector you’d think that robotics companies in modern warfare would also be reaping the rewards. But back on the downside those, and the simulation tech companies, are not doing well. On to fracking companies. You may have thought with all the legal and political problems it was all over. Well, every company, from the chemical and proppant providers, to fluid logistics and contract drillers, services and equipment companies, is booming. Key examples are RPC, Pioneer Energe, Kirby and US Silica. My favourite overlooked tech companies are in minimally invasive surgery, but not those in robotic surgery as they’ve not done well. In particular I am looking at microsurgery companies like Conmed, ArthroCare, NuVasive, Staar and Globus. Speaking of overlooked, digital dollar firms, but only those in card networks (Amex, Visa, MC), processing (Total System Services, Global Payments and Vantiv) and in solutions, like WEX, Xoom and QIWI, are worthy of a further look. Take another look at tech in Chinese solar too, and couch commerce companies (MakeMyTrip – I am a shareholder) and Vipshop. So you see, tech is all around, but it’s the companies that you generally don’t hear about that do the best. I’ll leave you with this: nuclear technology – love it. Especially instrumentation companies like Curtiss-Wright and Flowserve to fuel management companies like Thermo Fisher and US Ecology. But I don’t like the uranium mining companies – given how well those in fuel management and in instrumentation do by comparison. Alpesh B Patel - www.investingbetter.com
88 | www.financial-spread-betting.com | June 2014