latames
No bubble for tech, but can their mega-growth last?

No bubble for tech, but can their mega-growth last?

10-09-2020 | Visión
Tech stocks are not in a bubble that was pricked this week, though their staggering growth may not be sustainable, says Robeco investor Michiel Plakman.
  • Michiel  Plakman
    Michiel
    Plakman
    Portfolio Manager Robeco Global Stars Equities
  • Fabiana Fedeli
    Fabiana
    Fedeli
    Global Head of Fundamental Equities

Speed read

  • Tech giants dominate the market with super-high valuations
  • Front-loading growth into stock prices may not be sustainable
  • A rotation into cyclicals seen as economic recovery gains traction

Equities that had reached new market highs took a tumble after doubt was cast on the efficacy of a potential vaccine for Covid-19. Hundreds of billions of dollars were wiped off values in a three-day rout, led by the tech giants that now dominate the global market.

The coronavirus pandemic has greatly benefited the FAANG grouping – Facebook, Apple, Amazon, Netflix and Google – which have risen in value by up to 70% so far this year. Lockdowns and working from home have led to a huge rise in digital activity, ranging from conference calling and home entertainment to e-commerce and cloud computing.

Apple’s market cap of USD 2 trillion is higher than the GDP of Italy, and also larger than the entire value of the UK’s FTSE 100. The FAANG grouping combined with Microsoft’s market cap has a total value of more than USD 7 trillion, and has accounted for the vast majority of all stock market returns this year.

Conozca las perspectivas más recientes
Conozca las perspectivas más recientes
Suscríbase

A correction rather than a bubble

“I don't think we're in a bubble, but I do think valuations are very high, and there has clearly been a correction this week,” says Michiel Plakman, portfolio manager with the Robeco Global Equities team. “I do think there are fundamental underpinnings to their values, especially since the start of Covid-19, where we've seen a significant shift towards more e-commerce and working from home.”

“The only issue we have here is that we're really front-loading some growth; the growth that might be expected for the next one or two years is really being condensed into a shorter time period. So that may not be sustainable.”

The world has changed

“We are concerned that the levels of growth we're currently seeing in the tech stocks are too easily extrapolated into the future, and that people think the situation will remain as it is once the coronavirus crisis is over. We still have to wait and see.”

“But the world has changed: people are spending much more in terms of e-commerce by having stuff delivered to their homes, and less on the high street, travel, or going out for dinner and staying in hotels, and so on.”

“We're slowly moving to normalization, but getting a workable vaccine is still way off. Even when we get a vaccine, we need to vaccinate hundreds of millions of people to create a safety net. That will take a lot of time. Moving towards normalization will probably take much longer than people think.”

Potential for growth

Plakman says a big issue for the tech sector is where future profits will come from; how can you grow when you’re already worth USD 2 trillion?

“A lot of the technology shift will stay,” he says. “We've moved from one PC per household to maybe three or four laptops per household. We're moving to 5G. The question for the technology sector is, has the Covid-19 been an adrenaline shot in the arm, and how can they continue to grow, particularly when regulators are looking closely at what they are doing.”

“They may have to start eating into each other’s businesses, where Amazon starts doing adverts and Alphabet starts selling from warehouses, for example. There may be some overlap over time, and they are all likely to get deeper into streaming media, gaming or payments. None of these spaces are new, and any new markets will need to be very large to move the needle.”

Start of a rotation

As the world recovery from the Covid-19 fallout begins to take hold, the wider market is likely to see some sort of rotation out of the “nosebleed valuation” tech stocks into the more cyclical companies, says Fabiana Fedeli, Global Head of Fundamental Equities at Robeco.

“Tech stocks were probably being far too richly valued and were due for a pullback, which finally came this week,” she said in an interview with Bloomberg TV. “This is a correction. But I think the key thing for investors is what's going to come next.”

“I feel that this is the start of a rotation of the market into more cyclical stocks. We got to nosebleed valuations in tech stocks that were definitely discounting the growth rates that we saw during Covid-19 going forward. In reality, once you start looking at the possibilities of earnings growth in the second and third quarter of next year, the comparisons become much more difficult, and we will see growth rates coming down.”

Cyclicals are benefiting

“There are now a lot of more cyclical stocks out there which are benefiting from an improvement in the economic activity pick-up, and these have been underperforming significantly until now. I think investors are going to start picking more from those stocks.”

“At Robeco we have started to put some of the money to work in the more cyclical stocks, particularly in industrials, and in specialty materials and consumer staples in Europe. We particularly like the European markets because obviously they have lagged until now. There are a lot of cyclicals where valuations really discount all the ills of the world.”

“Last but not least, we're increasing the sustainability profile of our strategies, and targeting more sustainable stocks. Stocks with a strong sustainability profile are likely to do far better in these markets.”

Logo

Información importante

Los Fondos Robeco Capital Growth no han sido inscritos conforme a la Ley de sociedades de inversión de Estados Unidos (United States Investment Company Act) de 1940, en su versión en vigor, ni conforme a la Ley de valores de Estados Unidos (United States Securities Act) de 1933, en su versión en vigor. Ninguna de las acciones puede ser ofrecida o vendida, directa o indirectamente, en los Estados Unidos ni a ninguna Persona estadounidense en el sentido de la Regulation S promulgada en virtud de la Ley de Valores de 1933, en su versión en vigor (en lo sucesivo, la “Ley de Valores”)). Asimismo, Robeco Institutional Asset Management B.V. (Robeco) no presta servicios de asesoramiento de inversión, ni da a entender que puede ofrecer este tipo de servicios, en los Estados Unidos ni a ninguna Persona estadounidense (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores).

Este sitio Web está únicamente destinado a su uso por Personas no estadounidenses fuera de Estados Unidos (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores) que sean inversores profesionales o fiduciarios profesionales que representen a dichos inversores que no sean Personas estadounidenses. Al hacer clic en el botón “Acepto” que se encuentra en el aviso sobre descargo de responsabilidad de nuestro sitio Web y acceder a la información que se encuentra en dicho sitio, incluidos sus subdominios, usted confirma y acepta lo siguiente: (i) que ha leído, comprendido y aceptado el presente aviso legal, (ii) que se ha informado de las restricciones legales aplicables y que, al acceder a la información contenida en este sitio Web, manifiesta que no infringe, ni provocará que Robeco o alguna de sus entidades o emisores vinculados infrinjan, ninguna ley aplicable, por lo que usted está legalmente autorizado a acceder a dicha información, en su propio nombre y en representación de sus clientes de asesoramiento de inversión, en su caso, (iii) que usted comprende y acepta que determinada información contenida en el presente documento se refiere a valores que no han sido inscritos en virtud de la Ley de Valores, y que solo pueden venderse u ofrecerse fuera de Estados Unidos y únicamente por cuenta o en beneficio de Personas no estadounidenses (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores), (iv) que usted es, o actúa como asesor de inversión discrecional en representación de, una Persona no estadounidense (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores) situada fuera de los Estados Unidos y (v) que usted es, o actúa como asesor de inversión discrecional en representación de, un inversión profesional no minorista. El acceso a este sitio Web ha sido limitado, de manera que no constituya intento de venta dirigida (según se define este concepto en la Regulation S promulgada en virtud de la Ley de Valores) en Estados Unidos, y que no pueda entenderse que a través del mismo Robeco dé a entender al público estadounidense en general que ofrece servicios de asesoramiento de inversión. Nada de lo aquí señalado constituye una oferta de venta de valores o la promoción de una oferta de compra de valores en ninguna jurisdicción. Nos reservamos el derecho a denegar acceso a cualquier visitante, incluidos, a título únicamente ilustrativo, aquellos visitantes con direcciones IP ubicadas en Estados Unidos.

Este sitio Web ha sido cuidadosamente elaborado por Robeco. La información de esta publicación proviene de fuentes que son consideradas fiables. Robeco no es responsable de la exactitud o de la exhaustividad de los hechos, opiniones, expectativas y resultados referidos en la misma. Aunque en la elaboración de este sitio Web se ha extremado la precaución, no aceptamos responsabilidad alguna por los daños de ningún tipo que se deriven de una información incorrecta o incompleta. El presente sitio Web podrá sufrir cambios sin previo aviso. El valor de las inversiones puede fluctuar. Rendimientos anteriores no son garantía de resultados futuros. Si la divisa en que se expresa el rendimiento pasado difiere de la divisa del país en que usted reside, tenga en cuenta que el rendimiento mostrado podría aumentar o disminuir al convertirlo a su divisa local debido a las fluctuaciones de los tipos de cambio. Para inversores profesionales únicamente. Prohibida su comunicación al público en general.

No estoy de acuerdo