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Allianz Technology Trust focused on winners for the next decade

Themes play an important part in the strategy especially in identifying the sub-sectors and companies that will continue to grow.

Allianz Technology Trust PLC -
Cloud computing is set to dominate the tech space for years

Prior to the chaos of the past week, Allianz Technology Trust PLC (LON:ATT) was the best performing London-listed investment trust over both five and ten years.

It reflects the fact that for decades technology has consistently been among the best performing sectors.

Walter Price, the trust’s investment manager, is in no doubt it will be the among best in the coming years as well.

“I cannot see why anyone would not have tech as a key part of a portfolio.”

“For a growth investor, it is one of the best options.

“I tell my children to buy tech growth stocks and put them away.

“Don’t worry about the fluctuations as the ones that work will make up for the rest.

“That’s what we do in the [Allianz Tech] portfolio.”

Based in San Francisco, Price has a clear growth-led, stock-picking philosophy and indeed describes his team as growth junkies 

“We run a technology trust for people who want to invest in the technology and believe in the space.

Growth for the decades

“We look for companies that are aren’t just going to grow for a few quarters but for a decade.”

Technology keeps reinventing itself and finding new or lower cost ways of doing things, he explains and ATT wants to have the best companies in the most attractive sectors.

For example, of one his team used to be in tech sales and still has contacts among that community in the San Francisco area.

“He talks to other salespeople about which are the hot companies and where you can you make the most money selling products. 

“That's a great way to spot the emerging companies.”

Themes play an important part in the strategy especially in identifying the sub-sectors and companies that will continue to grow.

“We try to meet many companies in the sector to figure out which is currently the leader, which is the best management team and which has the ability to realise this potential.”

Management key to delivery

Management is very important, he adds.

“There are a lot of good growth ideas and technology that will never amount to opportunities for investors, but a great management team can start with a good idea and then add to it.

“They ask, what's the next problem we can solve for you? and once they have the trust of their users they utilise that to build a great company.”

Most of portfolio companies are growing revenues at more than 20% a year, he says, and are likely to continue to do so for the foreseeable future.

Cloud computing is the favourite theme at present and accounts for 40% of portfolio including substantial positions in Microsoft and Amazon – the two companies dominating the area.

“They are building the world’s infrastructure for the next 30 years,” says Price and at a time when companies are switching to artificial intelligence and cloud-based systems he sees no reason why their recent growth surge should stop.

Cloud computing and security 

Companies will just load systems onto that architecture and for Microsoft especially Price says he is ‘feeling really good about the business right now’.

Security is another favoured theme and seen as a big growth area.

It’s a huge issue, says Price.

“Malware attached to files, identify fraud- if you do not have modern software you will be hacked.

“It's so lucrative you're getting the best criminals in the world in this area.”

On traditional investment yardsticks, companies such as cybersecurity specialist Crowdstrike might look expensive but everything changes with the shift to the cloud, Price says.

Crowdstrike will be a leader in next wave of the security business, he believes, with revenues potentially rising from hundreds of millions currently into the multi-billions.

Of course, technology companies and the trust have not escaped unscathed from the recent coronavirus, oil price-inspired market rout.

Tech's share of market to rise

ATT’s share price has retreated 27% from 1,970p in February (a five-year high) to 1,430p currently but if like Price you believe that technology investing is the best long-term option, that suggests an opportunity.

“Technology accounts for 30% of the market today and I think it's going to be are a higher percentage in five or 10 years.

And as its importance grows in the market that will throw up lots of opportunities, he adds.

“Let us do the hard work and pick the stocks”.

Quick facts: Allianz Technology Trust PLC

Price: 1602 GBX

Market: LSE
Market Cap: £572.75 m

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