This is when the firm has reached its “break point” in terms of innovation, according to Bolko Hohaus, executive vice president at Lombard Odier Investment Managers.
By market cap, 75% of the constituents of the Morgan Stanley IT Universe – also known as the Tech Index – are behind their break points. The best years for investors are over when it comes to these companies of the “old guard”.
Most notably Apple has no new blockbuster product in the pipeline. About two-thirds of its profit comes from one product, the latest iPhone, which generates super normal margins.
However, while it can still raise dividends and buy back, the big growth years could be finished.
As portfolio manager of Lombard Odier Technology Fund, Hohaus sold the last share in Apple in January 2013 at a price of $508. Back in the early 2000s he had bought shares at $13. He points out that Apple’s current share price is around $513.
Looking at opportunities ahead, Hohaus highlights a number of trends coming together at a time when companies now have to spend cash to maintain their competitiveness, after several years of holding back on tech expenditures.
Machine to machine data, digital advertising, demand for cloud computing services and advanced robots are tech trends that make it on his list of opportunities.
