SICKLY TECH Eoin Murray Head of Investment
Hermes Investment Office July 2018
For professional investors only
HERMES INVESTMENT OFFICE
Now don’t misunderstand, for technology is undoubtedly the future and has improved our lives in so many ways, but there’s something not quite right about Big Tech at the moment, despite phenomenal long-term share price performance. In fact, the original ‘Four Horsemen’ were setting the pace back in 2007:
Big tech in 2007 160
Amazon +135% Apple +134% BlackBerry +127%
140 120 100 80 60
S&P 500: +4% Dec 07
0 Jan 07
G. Soros – Chairman of Soros Fund Management and of the Open Society Foundations
Big Tech is having a rough time of it at the moment, besieged from all sides – governments and regulators have to show an interest, while investors have questions about economic harm and consumers question their social licence to operate.
It is only a matter of time before the global dominance of the US internet companies is broken. Regulation and taxation, spearheaded by Vestager, will be their undoing1.
Source: Bloomberg as at December 2007.
And with the exception of Blackberry, whose fortunes may represent a salient note for our comments, they have continued to deliver strong returns:
Big tech to date 1300
S&P 500: +4%
Source: Bloomberg as at December 2017.
1 Soros, G. (2018). Only the EU can break Facebook and Google’s dominance | George Soros. [online] the Guardian. Available at: https://www.theguardian.com/business/2018/feb/15/ eu-facebook-google-dominance-george-soros
SICKLY TECH JULY 2018
Their growth has allowed these companies to become some of the largest in the world:
Source: Visual Capitalist, How Much. http://www.visualcapitalist.com/most-valuable-companies-100-years/
HERMES INVESTMENT OFFICE
In recent times, Netflix has been the star of the show:
Netflix relative to NYSE FANG+ index 140
We saw continued dramatic outperformance by tech in general and by the FANGs (Facebook, Amazon, Apple, Netflix and Google) in particular
Even the market ruckus in February earlier this year mysteriously failed to correct the leaders of the market – instead we saw continued dramatic outperformance by tech in general and by the FANGs (Facebook, Amazon, Apple, Netflix and Google) in particular, which benefit from the ongoing growth in internet commerce:
Amazon’s 2017 growth is almost four times the combined total value of 10 retailers that traditionally dominate US malls 200
Abercrombie and Fitch American Eagle Urban Outfitters
Amazon’s year-to-date market cap increase
Gap Foot Locker Kohl’s Nordstrom Dillard’s JCPenney
50 Total market caps of mall staples 0