Selling some Tesla, and why tech is not in a bubble | Summary and Q&A

TL;DR

Technology investments have shown high returns, but sustainability is uncertain due to varying valuations. Tesla's strong growth and competition in the EV market are concerns. Amazon and Alphabet are favored for their strong infrastructure and potential advertising rebound. Growing government regulations and taxes pose threats to the tech sector.

Key Insights

• ↩️ Sustainable high returns of 15 to 20% are targeted for the future, while extraordinary returns of 70% are rare.
• ✋ Valuations in the tech sector vary, with some sectors undervalued and others having high valuations due to long-term growth potential.
• 🧘 Tesla's stock appreciation is a result of its dominant position in the EV market, but competition may intensify in the long term.
• ❓ Amazon benefits from its advanced distribution system, while Alphabet is expected to rebound in advertising revenue.
• 😀 Government regulations and increased taxes are potential challenges that large tech companies may face.
• 🧑‍💻 The tech sector's dominance and profitability make it an attractive target for governments seeking a share of revenues.
• 😫 Large tech companies play an essential role in setting industry rules, and regulations may be modified to level the competition.

Transcript

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Questions & Answers

Q: Do you believe that the high levels of returns achieved in recent years are sustainable in the future?

While a 70% increase in portfolio value is exceptional, sustainable returns of 15 to 20% are targeted for the future. Consistent high returns like those achieved in the past are unlikely, but the aim is to maintain a solid performance.

Q: Is the tech sector currently in a bubble?

Valuations of tech companies differ. While some sectors are undervalued and have strong margins, high-growth companies have high valuations due to their long-term growth potential. Market cap or revenue-based valuation metrics often underestimate their true value.

Q: What is your view on Tesla's stock and its valuation?

Tesla has had a remarkable 2020, and its outlook for the next few years remains strong. With plans to double production in 2021 and a popular product lineup, Tesla continues to dominate the EV market. Trimming Tesla's stocks is primarily driven by taking profits after a significant run-up in value.

Q: Why do you favor Amazon and Alphabet over other famous tech companies?

Amazon's accelerated build-out of its distribution system during the pandemic gives it a competitive advantage in e-commerce. Alphabet's advertising revenue declined during the crisis but is expected to rebound strongly. Additionally, Alphabet's focus on shareholder returns and efficiency is appealing to investors.

Q: Is the potential increase in regulation a significant concern for the tech sector?

Large tech companies attract government attention due to their size and profits. Governments may seek increased tax revenue and impose regulations. While this poses a potential challenge for tech companies, it is essential for governments to establish the rules and maintain competition and fairness.

Summary & Key Takeaways

• The performance of Alliance Technology Trust in 2020 was impressive, but sustainable high returns cannot be guaranteed.

• Valuations of tech companies differ, with some sectors undervalued while high-growth companies have high valuations due to their long duration of growth.

• Tesla's stock appreciated significantly, and it is expected to dominate the electric vehicle market in the short term, but competition may arise in the future.

• Amazon benefits from its efficient distribution system, while Alphabet is well-positioned for a rebound in advertising revenue.

• Government regulations and higher taxes are a concern for large tech companies.