Welcome to the latest update from the Trust's portfolio managers
January 2023
- The strategy is managed by a deeply experienced portfolio management team who have over 70 years of collective experience managing technology strategies**
- High conviction concentrated portfolio
- Winner of the Investment Week Investment Company of the Year Award (Specialist) for five of the past six years from 2017 to 2021.*
Monthly Fact Sheet
Welcome to our latest monthly fact sheet, featuring data and commentary as at 31.01.2023
Portfolio Overview
The Allianz Technology Trust’s NAV total return was 7.35% in January, compared to the Dow Jones World Technology Index return of 9.10%. During the month, stock selection and industry allocation detracted from relative performance.
Contributors
Our underweight in Microsoft Corp. was a top contributor in January. The company reported earnings results that were better than feared, particularly with Azure cloud growth at 38% year-on-year. Although the results were decent, management called out a more cautious environment with respect to near-term customer decisions due to macro challenges. Longer term, the company sees strong growth opportunities driven by the increasing importance of technology in today’s business world. Microsoft has a large and diverse business that should be well-positioned, but we continue to monitor its execution as competitive threats persist. We maintain an underweight position relative to the benchmark’s large weight in the stock.
Meta Platforms Inc. was also a top contributor. The company reported a solid quarter and provided promising comments around guidance, expense control and operational efficiency. Management’s commentary around the “reels” service was also positive as they will make an effort to monetise this service going forward, potentially becoming an additional steady source of revenue. It appears that Meta is making a meaningful effort to become more nimble and efficient, which is music to investors’ ears. In terms of our portfolio investment case, at the current valuation, we see significant upside potential if the company is more disciplined with expenses going forward.
Other top contributors included overweight positions in Taiwan Semiconductor Manufacturing Co., Ltd., Hubspot, Inc. and Netflix, Inc.
Detractors
Aspen Technology, Inc. was among the top detractors after the company reported earnings results that fell short of expectations. The reported results were complicated by a number of acquisitions the company has done over the past year. However, over time, we believe these acquisitions have the potential to enhance the company’s overall business model and offers multiple options for future growth. Additionally, the environmental awareness of many of Aspen’s petrochemical customers and the spend needed to achieve their goals should result in a secular tailwind for the company. We see an opportunity for Aspen to accelerate growth and generate significant free cash flow over the next year.
Datadog Inc. underperformed in January as recent channel checks indicated slower near-term demand. Due to the challenges in the macro environment, customers are looking to optimise their cloud environments and rationalise spending with monitoring tools. Despite these challenges, Datadog remains a leader in the observability and data analytics space, and we see a large opportunity for the sector.
Other top detractors included an underweight in Nvidia Corp. and overweight positions in Paycom Software, Inc. and JD.com, Inc.
Market Outlook
Our expectation is that the recent decline in technology stocks could translate to an attractive opportunity for long-term investors as the technology sector is likely to continue benefiting from secular tailwinds which should, we believe, drive capital appreciation over time. While the Covid appears to be increasingly in the rearview mirror, the use of technology accelerated as a result of the crisis and may have permanently changed how we live and work and has translated to a further embrace of technology usage. Having said this, we are cognisant of the scrutiny on IT budgets and the potential challenge in the near term. In addition, many companies remain challenged to find workers to meet customer demands and are likely to further leverage technology-based solutions to improve productivity of limited staffs. As companies need to reduce costs and improve productivity, particularly in light a potentially uncertain macroeconomic outlook, we expect to see accelerating demand for innovative and more productive solutions such as cloud, software-as-a-service, artificial intelligence, cyber security, etc. We are in a period of rapid change, where the importance of technology is key to the prosperity of most industries. We believe that this environment is likely to provide attractive growth opportunities in many technology stocks over the next several years.
At the end of January, the portfolio remained overweight to software and IT services stocks, thanks to their attractive bottom-up stock potential, relative to the benchmark. Conversely, the portfolio is underweight in technology hardware and interactive media stocks, where near term prospects were less attractive. We continue to believe the technology sector can provide some of the best absolute and relative return opportunities in the equity markets — particularly for bottom-up stock pickers with proven long-term selection capabilities.
For the latest portfolio breakdown, performance and investment insights from Silicon Valley, please visit www.allianztechnologytrust.com.
*Past performance does not predict future returns.
**From 25 July 2022, discretionary portfolio management services formerly provided to Allianz Technology Trust PLC (the “Company”) by Allianz Global Investors (“AllianzGI”) have been delegated to Voya Investment Management Co. LLC (“Voya IM”). All members of the former AllianzGI Global Technology Team transferred to Voya IM and continue to manage the Company’s portfolio. It is anticipated that there will be no change to the investment process. AllianzGI will remain the Company’s AIFM (Alternative Investment Fund Manager), providing company secretarial, administration and sales and marketing services.
Fact Sheet
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Allianz Global Investors GmbH
199 Bishopsgate, London, EC2M 3TY
Freephone (UK calls only): 0800 389 4696
Email: [email protected]
www.allianztechnologytrust.com
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