Baron Rothschild said ‘the time to buy is when there’s blood in the streets’ – but timing is incredibly important, isn’t it! The GFC lasted eighteen months before it started to turn. Recently, we saw our markets drop 38% in just four weeks and, whilst it has stabilised over the last two weeks, it may still be early days. However this could be a huge opportunity that may not be repeated. The question is, how do you work out when to buy and what to buy? We are introducing a new investment designed to give you exposure to the US tech sector. It has a mechanism that allows a patiently timed entry. If the market goes for a run now you won’t miss out on current lows, however, if we see another significant sell off over the next six months there is the opportunity to choose the lowest monthly close price as our entry value. Tomorrow, Patrick Nelson will be running a live online investor briefing to give you the details of the investment. Click here to book in. Where are the biggest opportunities? “The big tech companies are likely to remain relatively unscathed—and may even emerge stronger than ever—as they benefit from the work-from-home, play-at-home and deliver-to-home tailwinds.” Sung Cho, a portfolio manager on GSAM’s Fundamental Equity team said.

“Software will be critically important in the way we emerge from the downturn. Some companies, for example, are standardizing the way people are communicating. Other companies that support data centers, whose supply chains are intact, are relatively insulated from the downturn given that internet providers are expanding their data capacity daily to keep up with demand, “ GSAM portfolio manager Greg Tuorto said.

The Goldman team believes that some big US tech companies are poised to perform. They prefer companies in the category of software and services, and have gathered a list of 16 names they say offer “high and stable sales growth, high [return on equity], and trade at reasonable valuations.” The list includes companies such as Adobe, Dropbox, Mastercard, Microsoft and Visa. In regards to Covid-19’s impact on the tech sector, and which technology companies to invest in going forward, Analyst Brian Essex says, “We generally prefer companies with subscription and recurring revenue models which provide durable revenue and a high degree of visibility. We also prefer a high percentage of domestic revenue with large enterprise and/or (U.S.) government exposure.” A company’s survival and success during the crisis will depend on factors such as which product the business offers as well as the flexibility of the company to change its mode of operation. Will the product continue to be in demand during lock-down? Or is it something no longer viable such as hotels, restaurants and airlines? The tech sector is one that is likely to survive, even thrive, because it’s better positioned to adapt to the current situation. Tech products are still viable – people still use Facebook, Linkedin, Netflix, Zoom and many other tech services. The tech sector is already adept at working remotely, whereas others have only just now started to do it. Many employees in tech only need a computer and access to the internet to continue to do their work. The underlying companies of this investment include tech giants such as Microsoft, Apple, Visa, Adobe, Paypal and Mastercard that are likely going to be in the game long after COVID-19 is over.   Is it going to get worse? It’s possible that the market is going to keep falling, and that we haven’t yet seen the worst of this crisis. The optimiser mechanism of this investment allows a patiently timed entry. If the market goes for a run now you won’t miss out on current lows, however, if we see another significant sell off over the next six months there is the opportunity to choose the lowest monthly close price as our entry value. Click here to request the PDS.