Gleeson says the majority of growth in technology stocks in the past several years has been driven by consumer-focused firms – the likes of Apple – but he expects corporate-driven products to have a renaissance in 2014. The manager says the key to a technology rally is the sustainability of the recovery in the US, which is why the bulk of his portfolio is invested in the world’s largest economy.
“It has been a consumer-focused tech world but it could be businesses that drive growth in 2014. But it hinges on a recovery in the US,” he said.
“We’re reasonably optimistic that we’ve got a combination of a solution for the budget deficit and [quantitative easing] tapering in place, so we’re reasonably confident about the outlook for the sector in 2014,” he added.
FE’s head of research Rob Gleeson agrees with the AXA manager. He told FE Trustnet last year that as business sentiment improves, investment in technology will soar and the sector will continue to do well.
With this in mind, Jeremy Gleeson reveals three stocks he expects to see strong growth from in 2014.
Informatica
As the global economy moves to the next stage of recovery, Gleeson expects technology companies exposed to the corporate sector to start to rebound as firms feel more comfortable investing the piles of cash sitting on their balance sheets.
“It’s a good backdrop for companies to invest and one area they will invest in is their IT systems,” he said.
Informatica, a US-based company focused on data integration – including cloud data integration and master data management – is a “behind the scenes” tech company Gleeson expects to benefit from corporate investment.
“The trend or theme getting more traction is big data,” he said. “Companies can collect a huge amount of data and if they can analyse that data efficiently, it can help improve sales, profitability and customer experience.”
“[Informatica] is a bit of a heavy IT stock-pick. It’s not the obvious, easy to understand Apple, but it will benefit from companies starting to invest in an improving economic environment,” he added.
US-listed Informatica has gained 35.76 per cent in the last year. It was trading at $42.9 per share at the time of writing.
Dialog Semiconductor
Another theme Gleeson expects to play out in the coming year is the concept of the “internet of things”, where physical objects can be linked to the internet.
One example would be the Nike+ FuelBand, which is an activity tracker that is worn on the wrist. The band uses Bluetooth technology to automatically upload activity information to the internet and track that data.
However, Gleeson says these types of products need further technology to make them adaptable data collectors, and to do this they need companies such as German-listed Dialog Semiconductor.
“Its biggest claim to fame is that it provides several chips that get used in various Apple products,” he said. “But they are increasingly getting traction with other mobile handset providers, like Samsung.”
“At the moment it is very dependent on Apple, but increasingly showing it has the ability to diversify away from the company,” he added.
Gleeson says the fact the company already works with Apple, the leader in smartphone technology, gives him confidence the firm is the best in the field.
“In order to be in Apple products you have to prove you are best of class. So I firmly believe they have best of class products and best of class designers,” he said.
The firm has not seen strong growth over the past 12 months, picking up just 1.24 per cent. The stock was trading at €15 per share at the time of writing.
Criteo
French company Criteo combines the forces of big data and the power of the internet, which is why Gleeson is backing it.
The company makes software that helps advertisers place relevant advertising online in front of the right audience.
Gleeson says search engines such as Yahoo, which don’t have the in-house capabilities of Google, are likely clients for Criteo’s products.
It currently counts travel website Expedia, computer maker Lenovo and department store Macy’s among its client list.
“It’s about putting relevant adverts in front of people at the right time. It’s much more effective than bombarding adverts at them randomly,” he said. “It’s an area marketing departments are only just getting their heads around, so companies like Criteo will be able to step in and benefit.”
The French firm was only listed on the US stock exchange in October, but raised $250m in the first few days of trading. However, shares have since come off slightly and the stock was trading at $31.9 at the time of writing.
AXA Framlington Global Technology has gained 111.98 per cent since Gleeson took over in April 2007, compared with 96.68 per cent from the average fund in the IMA Technology & Telecoms sector.
The fund’s benchmark – The MSCI World Information Technology index – made 84.16 per cent over this period.
Performance of fund vs sector and index since Apr 2007
Source: FE Analytics
As Gleeson highlighted, the £215.5m fund invests primarily in tech stocks in North America. The region makes up 81.01 per cent of the portfolio.
The fund requires a minimum investment of £1,000 and has ongoing charges of 1.58 per cent.
