Wild Tech Swings Not Scaring Rothschild From Valuation Hunt
(Bloomberg) -- Technology companies are still an attractive bet for Rothschild Wealth Management’s Kevin Gardiner, unfazed by the whipsawing of global tech shares in recent months.
It’s not the flashy social media or e-commerce firms that grip his attention. It’s conventional technology companies involved in research, development and manufacturing that can be true bets on innovation, Gardiner, global investment strategist at Rothschild, said in an interview in Hong Kong. Gardiner labeled Ireland the "Celtic Tiger" in 1994, forecasting more than a decade of surging economic growth for the country. Rothschild Wealth Management managed $54 billion as of March 2017.
Once a high-flying one-way bet, technology shares have contributed to wild swings in global markets this year. Social media giant Facebook Inc. plunged as much as 21 percent from its February peak amid its data scandal, while in March Tencent Holdings Ltd. posted its first back-to-back monthly drop since 2016 as its biggest investor sold part of its stake.
“We see it, I understand it and I’m not surprised by it," Gardiner said of tech shares’ volatility. “I don’t particularly like advertising revenue as a business model so I’m not too troubled by the latest episode. If I look at the valuations of some of the boring old tech names -- some of the semiconductor manufacturers in Asia and in the U.S. -- these are not expensive stocks."
Taiwan and South Korea are among regions Gardiner prefers because of their links to international trade and exposure to technology stocks. He declined to name specific companies.
The discount has been widening in favor of the firms Gardiner likes. The global semiconductor index now trades at about 12 times estimated earnings, about one third lower than the multiple on the infotech gauge that includes Facebook.
“If you think markets are going to trend higher, you need a very good reason not to be overweight the technology sector," said Gardiner. “Unless you think we’re running out of things to invent, you should be biased towards technology as a long-term growth story. There’s a lot more to technology than just the social media group."
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