Is the tide turning?20 Jun 2022 08:38
From IC 16 June 22.
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The tech stocks I'm buying amid the downturn
Polar Capital's Ben Rogoff tells Mary McDougall why he's dipping back into rapid growth companies despite recession risk
Mary McDougall
Polar Capital Technology Trust has reduced exposure to ecommerce and consumer businesses
It has added to software companies
The trust has been underperforming its benchmark because it has a lower relative rating to large US tech stocks
Tech investors' luck had to run out at some point. After sensational gains in 2020 and throughout most of 2021, the first half of this year is proving a very different story. Few people have been monitoring the sell-off as closely as Ben Rogoff, manager of Polar Capital Technology Trust (PCT), which has suffered a share price fall of a third since the start of the year, albeit it still had assets of £2.9bn as of 13 June.
Rogoff, who has been investing in technology for 26 years, has seen his share of bear markets, from the bursting of the dotcom bubble at the turn of the century to the financial crisis in 2008. “When the tech sector drops it can be quite painful,” says Rogoff, adding that each one he has endured has been very different. “This one is really about inflation and the loss of the 'Fed put'”. He describes Federal Reserve policy as such because it has, in effect, behaved like a put option contract by supporting markets with interest rate cuts and quantitative easing in recent decades.
The key question on investors minds is how much further the tech sell-off has to go. Rogoff recently noted to Investors' Chronicle that over half of companies' in the Nasdaq index have fallen by 50 per cent from their peaks, and said valuations of many companies are now materially much more attractive than they were last November.
“Calling bottoms and trying to work out if this is the time to buy is really just part of that conversation about risk and reward,” he says. “Last year we were worried about certain facets of the market – things like special purpose acquisition companies, ultra long duration investing and the fashion towards concentration in portfolios”.
Since then, there has been a sizeable derating of some of these assets and Rogoff says that he is just starting to dip his toes back into the water.
On a scale of one to 10, where one is the most bearish he could imagine being and 10 the most bullish, he says that he’s now at “around seven or eight”. And companies are a sort of “coincident indicator” because when things turn down in the economy companies don’t see it in advance but rather as it happens. He adds that the overwhelming sense from his colleagues attending company conferences is that “things are still OK”.
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