Over the past three years, one of the top-performing technology funds has been the RCM Technology Trust fund (LSE: RTT). It has beaten its benchmark, growing by 62.7% over the past three years, compared with 53.6% for the sector average. It has also beaten the Dow Jones World Technology Index.
The fund is managed by Allianz Global Investors, with experienced manager Walter Price running it from his San Francisco office. This proximity to Silicon Valley enables Price to meet with firms around three times a week, allowing him to gain a “unique insight” into the industry.
His preference is for technology stocks with fast-growing revenues. But while he will tolerate high price/earnings ratios, he insists that a firm must at least be close to turning a profit. After creating a shortlist of around 100 shares, he works with his analysts to find those that offer the most potential.
For now, he thinks technology is dominated by two key trends. Firstly, the rise of mobile internet has been accompanied by a shift in online commerce from the web to software apps. Secondly, there’s the switch from software to services.
Instead of companies selling expensive software, they are reinventing themselves as service providers, renting out ‘cloud-based’ software on a monthly basis. While this will ultimately bring in more money, it will make short-term cash flow more volatile.
In line with these views, about 20% of the fund is in shares directly related to the mobile internet, such as search engine giant Google, internet radio station Pandora and mobile network specialist Aruba. Cloud computing firms, like Amazon, account for another 20%. He also invests in firms that aim to solve a specific problem, such as electric car firm Tesla.
| RCM Global Technology Trust top ten holdings | |
|---|---|
| Name of Holding | % of assets |
| Google Inc | 5.5 |
| Facebook Inc | 4.9 |
| Tesla Motors Inc | 4.5 |
| Sunpower Group Ltd | 3.4 |
| Amazon Com Inc | 2.9 |
| Aruba Networks Inc | 2.8 |
| Micron Technology Inc | 2.8 |
| Western Digital Corp | 2.6 |
| Pandora Media Inc | 2.5 |
| Alcatel Lucent | 2.1 |