Allianz Global Investors’ Walter Price has rotated his portfolio away from companies whose earnings will likely be negatively affected by the coronavirus-enforced lockdown towards those expected to benefit from the measures.
Price noted that while many tech companies will see growth slow into 2021, others, such as gaming firms and Netflix, are "seeing growth rates accelerate during this time". The same can also be said for those enabling remote, secure work like Citrix, Z Scaler, Zoom, Ring Central, Google, Cisco, and Microsoft.
As a result, Price said he has rotated the £624m Allianz Technology Trust (ATT) "out of some positions in the companies where we expect negative earnings surprises and into stocks in the favourable areas above".
Price added the trust has also "raised some cash", though accepted shareholders will be keen not to see high levels of dry powder on the trust's balance sheet.
"Mostly we have refocused on the companies that we think will be benefited by this traumatic event and will emerge stronger on the other side of the crisis," Price said.
Price believes the cloud computing companies ATT owns to continue to grow through the crisis, meanwhile, due to their subscription models.
Price noted the crisis will have a "drastic" impact on earnings for some tech companies, with a stress test of advertising revenues at a leading online platform suggesting 2020 revenues could decline by as much as 20% from current estimates.
"In this market environment, when companies estimate lower earnings for the next quarter, their stocks fall sharply," he continued.
However, for those companies that see slower growth in 2021, Price noted that they would by then have started to grow their sales pipeline once again.
"For example, Salesforce.com's stock bottomed in 2008 long before the growth rate in its revenues bottomed," Price reasoned.