Why I have sold tech shares and bought banks | Summary and Q&A

TL;DR

James Thompson, the full manager of Rathbone Global Opportunities Funds, discusses the outperformance of the fund and attributes it to growth investing and exposure to companies in technology, healthcare, and other sectors. He also shares insights on market valuations, the potential for European outperformance, the fading dominance of tech, recent portfolio changes, and positioning the fund for a post-pandemic economic recovery.

Key Insights

• 🪛 Growth investing has thrived in the last 15 years due to scarce widespread economic growth, driving investors towards companies like Amazon, Adobe, and Intuit.
• ✋ The U.S. market is seen as expensive but not overvalued, with a focus on high-quality, resilient tech companies deserving higher valuations.
• 😮 The market is currently seeking cyclicality and rising commodity prices, possibly due to extraordinary stimulus spending and a period of catch-up in traditionally undervalued commodity industries.
• 🧑‍💻 The dominance of tech and growth strategies is fading, leading to a more balanced investment landscape where certain speculative tech stocks may be risky.
• 🏦 Recent portfolio changes involve reducing technology exposure, increasing investments in reopening and reflation beneficiaries such as retail, banks, industrials, and transports.
• ⚖️ The Rathbone Global Opportunities Fund aims for a healthy balance between reopening and reflation stocks and traditional growth stocks.
• 👨‍💼 Thompson avoids deep value stocks, earnings turnarounds, deeply wounded businesses, and commodity stocks, maintaining a focus on sustainable growth.
• 🔬 Thompson personally invests in the Rathbone Global Opportunities Fund.

Transcript

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Questions & Answers

Q: What have been the main drivers of the outperformance of the Rathbone Global Opportunities Funds?

The outperformance can be attributed to growth investing, with successful investments in technology companies like Amazon, Adobe, and Intuit, as well as healthcare businesses such as Sartorius and Align.

Q: Are U.S. shares looking overvalued?

The U.S. market is seen as expensive but not overvalued, as it is dominated by high-quality, resilient tech companies deserving higher valuations. However, in the short term, the market is favoring cyclicality and earnings tied to rising commodity prices.

Q: Which market offers a cheap valuation?

The Russian market is cited as one with a cheap valuation due to its highly volatile and commodity-sensitive businesses. However, Thompson advises against buying Russian equities.

Q: Does the recent wobble in growth shares and technology stocks change your view on tech investments?

The dominance of tech and growth strategies is starting to fade, and a period of catch-up has been anticipated. While some speculative and unprofitable tech stocks may be dangerous, the overall tech sector is more balanced and plays a mission-critical role in our lives.

Summary & Key Takeaways

• Growth investing has driven the outperformance of the Rathbone Global Opportunities Funds, with success in technology companies like Amazon, Adobe, and Intuit, as well as companies in healthcare such as Sartorius and Align.

• The U.S. market is seen as expensive but not overvalued, with high-quality, resilient tech companies deserving higher valuations. Thompson suggests the Russian market as an alternative with a cheap valuation but highlights its volatility.

• The shift in market focus towards cyclicality and earnings geared into rising commodity prices may be driven by extraordinary stimulus spending and a period of catch-up in commodity industries.

• The dominance of tech and growth strategies is starting to fade, leading to a more balanced investment landscape. Thompson advises avoiding speculative and unprofitable tech stocks but believes that tech as a whole is not in a bubble.