On Wall Street, Amazon, Apple, Facebook, Google or Microsoft stocks have recovered, close to their historic highs. The very strong growth of their results in the first quarter is not unrelated.
The values of the five big tenors of the US technology sector are close to their highest historical record, and Apple is not far from the $ 1,000 billion mark of market capitalization (966.7 billion). Forgot the empty passage of March.
With the exception of Google (+ 5%) and Facebook (+ 6%), the titles of the famous acronym Gafam, posted double-digit price increases since early January: Apple (+ 11%), Microsoft (+14 %) and especially Amazon (+ 37%), with a market capitalization of 775 billion dollars, thus higher than that of the software company founded by Bill Gates (753 billion).
On Wall Street, one of the main reasons for the good performance of technology stocks is that their earnings growth is much higher than that of other major stocks. Broker Aurel BGC notes that the results of US large-cap companies (S & P 500) rose 25% in the first quarter, while technology groups (US) saw their results jump by nearly 40%, on the same period.
Graeme Clark, managing director of the Janus Henderson Global Technology fund, reports that the three US leaders in the consumer goods industry, Coca-Cola, Procter & Gamble, and McDonald, together have a net debt of 73 billion. dollars, while Apple, Facebook, and Google, they have, in contrast, a total net cash of $ 287 billion.
The financial health of Gafam is even brighter compared to other sectors of the coast. Their net cash represents on average 3% of their market capitalization.
All other major sectors, without exception, posted “negative” net cash: health (-11%), consumer goods (-17%), durable goods (-23%), materials (-23%), industry ( -25%), energy (-28%), telecom (-41%) and utilities (-70%).
Less expensive than we think
Janus Henderson’s manager also points out that, contrary to widely held belief, valuations of US technology stocks are more attractive than people think.
For example, Coca-Cola’s share capital is 18 times earnings growth of 201% estimated at 8% and Procter & Gamble’s growth is 16 times 7% growth.
The growth of Apple’s 2019 results (+ 14%) is valued 14 times, that of Facebook (+ 21%), 19 times and that of Google (12%), 22 times.
The high profitability of technology groups can be explained by the size of their research budgets.
Thus, in the forefront of the largest spenders in the world, in terms of research and development: Amazon ($ 20.9 billion), Samsung ($ 16.8 billion), Alphabet-Google ($ 15.9 billion), Volkswagen (14.3 billion), Microsoft (13.5 billion), Intel (13.1 billion), Roche (11.9 billion) and Apple (11.6 billion).
With € 2.949 billion under management, the Janus Henderson Global Horizon Technology Fund [Isin code: LU0572952280] posted an annualized performance of 16.3% over three years, 19.4% over five years and 14.7% over ten years.
For the past ten years, this represents a cumulative 196% performance of this large technology fund, while a broader index such as Morningstar’s Global Investment Fund sector (GIFS) has grown only 121% over the same period.
Major American and Chinese groups are the largest lines of this Janus Henderson fund: Microsoft (9.1% of assets), Alphabet-Google (8.4%), Apple (6.5%), Facebook ( 5.2%), Samsung Electronics (5.2%) and Alibaba (3.7%).