On the US market overall, Stanes suggests we are still likely to see a third consecutive quarter of negative earnings growth, the first time since 2009, which would technically count as an earnings recession.
But what about outside the S&P 500? Research published on Venturebeat.com counted some 229 so-called ‘unicorn’ startups globally – private companies valued at more than $1bn – representing some $175bn in funding. Almost half of these are based in California.
Ninety eight of the unicorns are in the consumer space, including familiar names such as Uber, Etsy and Airbnb, and who knows where the next Apple or Alphabet could grow from.
“When people say corporate earnings are falling in the US, they are only looking at the listed stock market,” says Richard Philbin, chief investment officer at Harwood Multi-Manager.
“There are so many of these businesses now that are very powerful in the economy but not contributing to corporate earnings because they are not listed. Unicorns are definitely having a bigger impact.”
Paraphrasing Bill Gates’ famous speech about people overestimating the power of technology in the short term, and underestimating it in in the long term, Philbin believes the promises of ‘network’ technologies which emerged in the 1990s – some of which helped caused the TMT boom and bust – have now come to fruition.
For Nick Evans and Ben Rogoff, managers of Polar Capital Global Technology Fund, with so many macro distractions at play, it is easy to overlook the fact that many newer technologies are now reaching inflection points and becoming substitutes rather than complements to legacy technologies.
They say: “What makes us feel constructive despite current market turbulence is we see lots of interesting growth opportunities among our core themes, most of which have little to do with traditional legacy enterprise computing or smart phones and are far from the epicentre of the current market turmoil with limited direct China exposure and no requirement to access credit markets given exceptionally strong balance sheets.”
The managers’ preferred areas include: online advertising, e-commerce, cloud infrastructure, software as a service, games software, mobile payments, online travel, streaming video, big data/analytics, cyber security, factory automation, additive manufacturing and the ‘internet of things’.
