The performance of tech stocks amid the market chaos caused by the coronavirus pandemic has been notable, with the performance of the giants of the sector Apple, Microsoft, Amazon, Alphabet and Facebook often single out by market commentators.
By David Eiswert, portfolio manager of the T. Rowe Price Global Focused Equity fund
Lam Research, a provider of cloud-based communications and collaboration business solutions, is up 267% over five years and has returned 2.6% YTD.
We have high conviction in the technology sector, as this is an area where rapid market share shifts mean growth companies are plentiful regardless of the broader macro environment.
After-effects from the coronavirus outbreak could also result in lasting behavioural changes, with more people working remotely and payment methods skewing more digitally.
We also have a sizeable exposure to semiconductor stocks, which we anticipate should benefit from content growth in automotive and industrial end markets, as well as investment in data centres and artificial intelligence.
The recent market volatility allowed us to pick up the company. We remain bullish on semiconductor names, as we believe the industry will be relatively insulated from the current crisis environment and should still benefit from powerful trends over the next one to two years.
This is due to accelerating DRAM and NAND demand, broader 5G rollout, as well as higher capital intensity in logic, foundry and memory.
Alibaba and JD.com
By Jacob Mitchell, portfolio manager and CIO of Antipodes Partners
Alibaba is up 9.8% over five years and 3.7% YTD. JD.com 76.2% over five years and 61.6% YTD.
Chinese e-commerce is largely an oligopolistic market, with both Alibaba and JD.com well placed. In our assessment, the market is undervaluing two aspects of the case.
Firstly, the opportunity for these two giants to take share among the roughly one billion Chinese living in Tier 3 and below cities, where online adoption lags the top tiers by a third, as well as the new retail or omnichannel opportunity.
The future of retail will involve the convergence of data rich e-commerce platforms with offline retail. These omnichannel initiatives address a target market that is five times larger than online retail but are one-fifth as profitable.
Organised channels for fresh grocery sales are hugely underdeveloped compared to those in the US, where established super/hypermarkets account for more than 90% of sales.
In China, wet markets - the Asian equivalent of farmers markets - still account for more than 70% of fresh grocery.
Given the Covid-19 outbreak likely originated in a Wuhan wet market, China will now permanently modernise its fresh food supply chain.
Alibaba and JD.com are deploying multiple strategies to attack this opportunity, including partnerships with offline players.
By Saïd Tazi, portfolio manager at SYZ Private Banking
French cosmetics brand L'Oréal has returned 69.8% over five years and 4% YTD.
The term "tech" is no longer fit for purpose. Tech is not a sector anymore; in many industries, company growth is now constrained by the degree to which tech exists in business models - across every sector. For example, even a cosmetics firm like L'Oréal has a strong tech component.
The company's e-commerce channel is growing very fast and, importantly, it has known how to attract younger generations with apps using augmented reality for make-up.