Norway’s top performing tech fund has gotten a taste for Apple Inc. again.
DNB Nordic Technology, which has beaten its peers seven of the ten past years, according to data compiled by Bloomberg, bought a “little bit” in Apple Tuesday after exiting the stock in the spring of last year.
“It’s too early to take a big position in Apple,” Anders Tandberg-Johansen, portfolio manager at DNB ASA, said in an interview Wednesday. “But the stock is obviously very cheap right now.”
Apple has fallen 27 per cent from a high in February. Investors are pricing in a potentially weak first quarter driven by slowing sales of Iphone 6s.
Tandberg-Johansen sees estimates for earnings per share for 2016 coming down to $8 as the replacement rate for Iphones will be “stretched.”
“Then the stock is still cheap,” he said at DNB’s office in Oslo. “We don’t think Apple will lose market share. But they replaced a lot of their users last year and will have a tougher year this year.”
Alphabet Positioned
One of the 5.7 billion kroner ($645 million) fund’s biggest holdings is Alphabet Inc., the holding company that owns Google. It’s one of the companies that is “best positioned within many of the important trends,” said Sverre Bergland, another portfolio manager.
“It’s hard to see how they could be derailed within the important areas where they have position,” he said. “The biggest risk is the regulatory. EU has put a question mark to some of their business because they are so powerful.”
Still, the fund trimmed its stake in Alphabet in 2015 as the stock surged from July.
“It was very cheap,” Bergland said. “Now it’s not that cheap but valuation is still pretty okay compared to many of the other players in the Internet sector.”
Bergland prefers Alphabet to Facebook Inc., which the fund has never held. The barriers are higher for Google with their search business than for example for Facebook, he said.
“We’re a bit afraid of the engagement within the real Facebook app,” he said. “They have 1.4 billion users. It’s not unthinkable that there can come something that derails that. If you look at younger people it’s a lot of Snapchat. New competitors are coming.”
No ‘FANG’
The managers see the so-called “FANG” stocks - Facebook, Amazon.com Inc., Netflix Inc. and Google’s parent Alphabet - getting more expensive. Instead the fund is investing in companies that are “less popular” such as Oracle Corp., SAP SE and Marvell Technology Group Ltd, which is the fund’s biggest holding.
“SAP looks very good for 2016,” Bergland said. “Priced in line with market and it will have a rather high earnings growth. And the business model is very stable and sticky so we think it can be repriced from this level.”
Although tech stocks have outperformed since the financial crisis, Tandberg-Johansen sees no bubble in the tech sector.
“Due to low rates there’s still a very good risk premium in tech stocks,” he said. “But with seven years of rise it’s smaller than it was. If the rate is where it is now and we think estimates look rather fair we believe it can be an okay year. We expect a normal year in tech, about eight to ten per cent in the market.”
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