“There are some areas for 2014 where we need to be cautious of the hype,” said Hawtin.
“Connecting wearable devices is going to be talked about a great deal, but in total we will only see around 100 million units this year. While that might deliver a lot of press coverage, it is insignificant compared to the number of smart phones or mobile phones in the world. We also think we are close to the tipping point on 3D printing names and we have seen profit warnings from two of the four main 3D printing companies. It will ultimately be a very interesting industry, but is going to develop much more slowly than people expect.”
Instead, Hawtin is keen on areas such as cyber security and storage.
“It is likely during 2014 that we will see more breaches of security and this will drive enterprises to spend more money on the security part of their IT budget. We have holdings in the fund in cyber security company FireEye and Fortinet, a more traditional security firewall business, and think it will be a very interesting area this year.”
The huge increase in the amount of data being created in the world today is being met by a need for storage in industry sub-segments that have gone through significant rationalisation in their own right, said Hawtin.
“At the same time as dynamic random access memory (DRAM), nanoflash and hard disk drives as industries have rationalised dramatically to create a more rational supply side, demand is taking off. This is creating an opportunity which the market hugely underestimates, even though these stocks have done very well. The storage area still offers a great deal of investment opportunity.”
Hawtin has also been seeking out stocks which exploit the concept of the ‘Internet of Things’ (IoT). He holds Alten, a leading edge IT consultant which focuses on the R&D part of the pipeline.” A lot of its project work is on IoT-type applications. Alten does a lot of the R&D work for companies like Rolls Royce which develop their IoT applications.”
He also warns that there could be as many as 150 million jobs lost to technology advances over the next 10 years.
“This is a significant and structural shift. The biggest shift we see is IT moving from being about the T for technology to the I for information, particularly in the big data (large and complex data sets) space. The growth in data and the way that can transform businesses is something we are really focusing on in the fund.”
