The tech sector has several bright spots of secular growth in 2014 despite remaining vulnerable to ‘dysfunctional’ fiscal policy in the US, according to Franklin Templeton’s JP Scandalios.
The tech veteran, who runs the $870 million Franklin Technology fund, outlined several themes to follow in the coming year which can help override markets uncertainty.
In his latest investor note, Scandalios highlighted six themes which he expects to form a cornerstone of his fund.
‘We believe the main market risks in early 2014 are linked primarily to the US government’s fiscal decisions and its dysfunctional behaviour, which could thwart the gradual economic recovery that’s taking place both in the US and internationally.’
‘One of the major secular trends is the adoption of SAS, or software-as-a-service, within the software industry. Another is the continued proliferation of e-commerce, which is in the midst of transitioning to a more mobile, local and personal functionality.’
Scandalios pointed to cloud computing, both in the private and public sectors, as the third theme he will be focusing on in 2014.
‘Now that we have a greater number of mobile workers using connected mobile devices or the cloud, there has also been a growing number of cyber-attacks, causing a dramatic increase in demand for network security.’
Along a similar line, Scandalios said the speed of connectivity will prevent investment opportunities, as wireless carriers start to deploy LTE and 4G functionality.
Data storage is another theme, he said, with the NAND flash solid state drives taking meaningful share on both the client side and enterprise side from hard disk drives.
Looking beyond what Scandalios called ‘traditional areas’, he said there are a host of opportunities emerging in previously undeveloped or newly-formed industries.
‘In the less traditional, emerging technology sectors, we are seeing some interesting trends, including gene sequencing and constant glucose monitors in the medical technology field, as well as areas such as 3-D printing and LED light bulbs.’
Finally, Scandalios said the ‘Internet of Things’ will present a new stage of interaction between machines, which refers to uniquely identifiable objects and their virtual representations in an internet-like structure.
‘Simply, this means data can be automatically transferred over a network without human-to-human interaction. Already, doctors are using pill-shaped micro-cameras swallowed by patients to take thousands of images from inside the human digestive tract to search for possible sources of illness.’
The Franklin Technology fund has returned 149.3% over the five years to the end of November. This compares to a rise of 149.79% by its Citywire benchmark, the FTSE World/Technology TR, over the same period.
Six to watch: Scandalios’ tech themes for 2014
- Software-as-service (SAS)
- Ecommerce and increased mobile use
- Cloud computing
- High-speed data (LTE/4G)
- NAND flash solid state drives
- Emerging technologies (3D printing, Internet of Things, gene sequencing)