The Polar Capital Technology Trust reported a near 20% hike in assets over the last six months, and the team claimed the valuation of tech stocks was simply a reflection of quality rather than any forced momentum.
The share price was also up by more than 20% according to the trust’s half-year results, standing at £11.44, up from £9.47 in April 2017.
The team noted many in the industry focused on the downside risks within the tech sector and the surging value of the likes of bitcoin, but argued there will still be opportunities in 2018.
“Our sense is that the 1990s parallel is too easy while over-exuberance appears contained to a few emerging areas such as cryptocurrencies and blockchain where remarkable returns have been driven by the long-term promise of technologies that remain nascent today.
“Rather than signalling a return to bubble-like conditions, we see this excitement as normal fare for a sector where adoption often apes Gartner’s so-called hype-cycle where heightened expectations are usually followed by disillusionment as mainstream adoption takes much longer than originally forecast,” it said in the report.
The tech sector’s premium valuation against the broader market was also justified, according to the Polar team.
P/E hit 19.1x, but the sector recorded earnings growth of 19.7% in Q3 alone, the team said.
“Put differently, if the technology sector were excluded the blended earnings growth for the remaining 10 S&P 500 sectors would fall from 6.2% to just 2.8%.”
Despite modest reacceleration in markets, the team said global growth remained at a level seemingly insufficient to spoil the current ‘Goldilocks’ investment backdrop with growth “just about right” – enough to keep earnings estimates ticking higher, but not too much to accelerate the pace of rate tightening.
