Register Log-in Investor Type

News

Allianz Technology benefiting profoundly from remote working investments

Technology sector trust, Allianz Technology (ATT), has reported interim results to 30 June 2020. It was an outstanding period for the fund, with technology flourishing over the pandemic. ATT’s NAV increased by 36.7%, while the shares delivered a return of 36.9%.

Benchmark beat led by remote working and stay at home

ATT comfortably beat its benchmark, with the Dow Jones World Technology Index generating a 22.4% sterling adjusted total return.

Walter Price, ATT’s manager, attributed the outperformance to the fund’s positions in beneficiaries of the remote work and stay at home environment, including software companies providing cybersecurity, workforce collaboration, and communication services.

The manager noted: “At our portfolio level, our position in cloud security company Zscaler was the top contributor during the period. The company delivered very strong growth and significantly exceeded consensus expectations across the board. The acceleration of demand is being boosted by the Covid-19 pandemic backdrop, with more enterprises shifting to a remote workforce for the foreseeable future and CIOs focused on fast-tracking a digital transformation. The combination of its Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA) products is what many enterprises are looking for as they migrate to cloud-driven deployments. Additionally, sales execution has meaningfully improved as the new Chief Revenue Officer, Dali Rajic, continues to transform the sales force. Zscaler is a first mover in cloud security that has essentially created a new market in the cybersecurity world with an innovative product umbrella and strategic focus, which should disrupt the competitive landscape for years to come. We believe the company continues to benefit from multiple tailwinds that should drive long term growth.

Our position in security software vendor Crowdstrike was also a top contributor. The company delivered earnings results well ahead of expectations, and management provided strong revenue and EPS guidance for fiscal Q2 and the full year. Fiscal Q1 revenue grew 85% year on year, and annual recurring revenue grew 88% year on year, demonstrating that the pandemic has not been a significant headwind and that the market shift to working from home appears to be a sustainable tailwind.

Other top active contributors included our overweight positions in Tesla, Amazon, and MongoDB.”

Underweight Apple position detracts

Walter also said that the fund’s underweight positions in Apple and Microsoft were among the top detractors from relative performance.

He added: “Our underweight holding in Microsoft, the largest position in the benchmark (14%), was also a top detractor from relative performance. While the personal computing unit has been impacted by supply chain-related issues, other segments of the company’s business appear to be benefitting from increased demand, such as Azure and Office. Overall, we believe Microsoft remains strategically the best positioned large-cap enterprise software company on a longer-term basis.” 

Outlook

In his outlook statement, the manager said: “In our view, the technology sector continues to benefit from strong tailwinds which should continue to drive attractive long term appreciation. There is no question in our minds that the present events around the Covid-19 crisis will spur the use of technology and change how we live and work in the future. As companies adjust budgets due to supply and/or demand disruptions, the need for companies to reduce costs should accelerate the move to cheaper and more productive solutions such as cloud, software-as-a-service, artificial intelligence, cybersecurity, etc. We are in a period of rapid change, where the importance of technology is key to the prosperity of most industries. Looking ahead, this environment is likely to provide attractive growth opportunities in many technology stocks.

We continue to believe the technology sector can provide some of the best absolute and relative return opportunities in the equity markets – especially for bottom-up stock pickers.”

[Many of the companies ATT holds, including Zoom and Microsoft, can take credit for what has been a much smoother transition to remote working than many would have imagined. We are seeing technological adoption being brought forward several years and if one of the legacies of COVID-19 is the permanent re-shaping of our idea of commuting to and working from offices, as many expect, then the themes ATT  pursues will have further to run.

ATT: Allianz Technology benefiting profoundly from remote working investments

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…