Your super and tech stock
Superannuation | 25/09/2018 |
5 min read
On August 2, 2018, Apple became the world’s first company to reach US$1 trillion in market value. It took 42 years to get there from humble beginnings in an LA garage, but a handful of younger technology companies collectively known as the FANGs – Facebook, Amazon, Netflix and Google - are already nipping at its heels.
What do they have in common? Well aside from the fact Equip invests in all of them, they've used innovative technology to create new markets, often beginning with a single product or service. Think Apple’s early desktop computers, Amazon’s online book retailer, Netflix’s streaming service, Facebook’s social network and Google’s search engine.
According to Forbes magazine, these tech giants have become such a part of everyday life that their products or services are regarded almost as utilities; as essential to modern living as power or water. They have also used technology and digital transformation to redefine customer experience in a way that is leaving traditional companies behind.
While their products and services may be cutting edge, their investment appeal is old school. Legendary investor Warren Buffett has been a major Apple shareholder for some time. He is known to look for stocks with reliable, long-term earnings at an attractive price with a strong ‘moat’. A moat might be a brand name, key products or high barriers to exit. Switch your iPhone for another brand for example, and you lose the countless apps you downloaded.
China unleashes BATs
While Apple and the FANGs are US-based, they face stiff competition in the global tech stakes from China’s BATs. Baidu, Alibaba and Tencent may not be household names in Australia, but they deserve to be on investors’ radar because they are a dominant market force not just in China but increasingly elsewhere as well.
Hong Kong-listed Tencent Holdings is known as China’s equivalent of Facebook. Tencent was the first Asian company to reach the US$500 billion stock market valuation mark. It’s WeChat social media platform recently reached an eye-popping one billion members and it’s also involved in online gaming, music, e-commerce and smartphones.
Alibaba (China’s Amazon plus eBay) is the world’s biggest retailer. It’s New York Stock Exchange (NYSE) listing in 2014 was the world’s biggest and this year it became the second Asian company to be valued at more than US$500 billion.
Baidu (China’s Google) is the second most widely used search engine in the world. It’s also moving into mapping, artificial intelligence and autonomous vehicles. And these are just the biggest of many emerging Chinese tech stocks.
Opportunities and challenges
The tech giants are also beginning to expand into new business areas such as cloud storage, music and video streaming. Some are also growing by acquisition, with Facebook buying What’s App and Microsoft buying LinkedIn.
But size doesn't necessarily deliver success. Facebook’s share price recently fell 19 per cent in a day. The sell-off was partly due to concerns about the company’s ability to deal with privacy issues, although flat-lining user numbers were also a concern. China’s BATs also face challenges from the worsening trade dispute with the US.
So how can Australian investors participate in the dynamic technology sector without getting burnt?
Getting down to business
Diversification is the key to investing in the world’s leading tech stocks, while minimising the risk of individual companies performing poorly. The simplest way to gain exposure is via a traditional managed fund or an exchange-traded fund (ETF) which can be bought and sold on the Australian Securities Exchange (ASX) like individual shares.
For the broadest exposure there are global technology funds. A popular way to access the FANGs plus Apple, Microsoft and others is to choose a fund that tracks the Nasdaq 100 Index. Although the US-based Nasdaq exchange is home to a wide range of companies, it is well known for tech stocks.
Investing your super in the future
Your super also benefits from the global technology boom. Equip invest in all the world’s leading tech stocks including Google, Tencent, Alibaba and others. Depending on your investment allocation, e.g. overseas shares, your super will form a part of this pooled fund. You can learn more about how we invest your money here.
As Equip’s Troy Riek, Executive Officer Investment Performance, notes, “Equip has held significant technology stock via the International Equities market, and their share price performance has been excellent. Stocks such as Amazon, Google, Facebook and Netflix have been changing and shaping how we live our everyday lives, and Equip members have been benefiting from that change.”
Log into your Equip account to review and adjust your investment options. Learn more here.
This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383. MySuper Authorisation Number 33813823017672 (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).