Boris Johnson has reportedly joined “a final push” to persuade Cambridge-based chip designer Arm to go public in London. The seller, SoftBank, has a strong preference for New York, the default destination for big tech listings. But nowadays nowhere is safe, Laurence Fletcher said on the FT. High-growth tech stocks have officially “entered a bear market” — defined as a decline of 20% or more from a recent high — ending “one of the most lucrative trades in recent years.” The MSCI World Growth Index is down 22% from its November high and “April was particularly brutal”. Among the big casualties is Cathie Wood’s Ark Innovation Fund, a former “flagship” in tech investment, which is down 48% this year. The UK’s most committed investor, Scottish Mortgage Trust, is down 34%.
Dot Bust Redux?
“Now it’s dawning on people that there’s more to investing than handing out capital like lollipops at a school festival to anyone with an idea for flying taxis or carbon-free hot dogs,” said Argonaut Capital’s Barry Norris. In fact, it feels like we’ve been here before, said David Brenchley in The Times. The dot-com bubble that began to burst in 2000 took two years to fully deflate. Are we already in the middle of a similar crash? Some of the biggest losers — like tech-related lockdown winners like Zoom, Peloton, and Moderna — have lost 65-85% of their value since their recent highs. Even the NYSE Fang+ Index, which tracks the largest tech stocks, is down 27% this year after recent sharp falls at Netflix and Amazon.
act of realignment
Of course, as Richard Hunter of Interactive Investor points out, investors ignore established tech giants at their peril. Many have “dominant and in some cases unassailable positions in their market … They are prime examples of what Warren Buffett would describe as a ‘moat’ around the business,” he told the Times. In fact, Rathbone’s David Coombs suggests this could be the chance to build the technology portfolio “you’ve always wanted.” More cautious voices call for a “rebalancing”. If you decide to stick with tech, AJ Bell’s Laith Khalaf said, give yourself “a buffer against a recession” with some “old-economy stocks” that also pay robust dividends.
https://www.theweek.co.uk/business/markets/956652/the-tech-stock-rout-what-the-experts-think The Tech Stock Rout: What the Experts Think