Allianz Technology Trust (LSE:ATT)
The Trust’s objective is to achieve long-term capital growth by investing principally in the equity securities of quoted technology companies on a worldwide basis.
The award-winning Allianz Technology Trust PLC offers investors access to the fast moving world of technology with the reassurance that investment decisions are made by Walter Price who has 40 years of experience of investing in technology. He is Co-Head of the AllianzGI Global Technology Team which currently manages $4bn in assets under management.
Disclaimer: A ranking, a rating or an award provides no indicator of future performance and is not constant over time.
Fund Manager's Review
The Allianz Technology Trust’s NAV returned -0.9% in December, underperforming the Dow Jones World Technology Index return of 2.6%. During the month, both stock selection and industry allocation detracted from relative performance.
Our position in electric vehicle maker, Tesla, was the top relative contributor. Shares gained amid reports that the company’s Chinese plant would soon start making vehicle deliveries. This was ultimately confirmed at the end of the month with the first Model 3 sedans going to company employees. Along with the first deliveries, it was reported that Tesla could reduce price on the Chinese produced models by 20% or more next year as production scales and supply chains mature, which could spur further demand. We acknowledge the high variability of cash flows given the capital intensity of the company’s strategy. This variability of cash flows makes the shares more sensitive to changes in business trajectory and the perception of capital conditions. We are mindful of this sensitivity and manage the position size in the portfolio to reflect these issues.
Our position in semiconductor manufacturer Advanced Micro Devices was also a top relative contributor during the period. Shares gained along with other semiconductor stocks after the US and China reached a phase one trade agreement. AMD has executed solidly and delivered new products (PC Client CPUs, Gaming GPUs, and Server CPUs) enabling unit share gains. The Compute/Graphics business segment (71% of revenues) grew 36% year over year in the third quarter driven by increased shipment of PC client CPUs for desktop and notebook applications.
Other top active contributors included an overweight position in Taiwan Semiconductor, an underweight position in Alphabet (Google’s parent) and not owning Oracle.
Our position in cloud security company Zscaler was a top relative detractor during the period. The company reported strong quarterly results driven by 48% revenue growth, ahead of forecasts of 42%, and 37% orders growth, ahead of forecasts of 25%. Despite the very good results, shares were down in December as most analysts continue to have a hold on the stock and found reasons not to compliment the company. Customers are increasingly adopting Zscaler’s products, which provide a single platform to enforce business and security policy for their users to access multiple applications and services. Our conviction in Zscaler remains high as the company has a significant growth opportunity and compelling competitive advantages with its unique capabilities in cloud security. Additionally, customers are seeing a quick return on their investment, which is a very strong selling point for Zscaler relative to competitors. The company is the leader in cloud security, the fastest growing sector in the security universe.
Our position in Okta was also a top relative detractor despite reporting strong quarterly results with revenue growth of 45% year over year. Management articulated a confident and strong environment for their offering and excitement around some of their new offerings (Access Gateway in particular). The valuation is expensive, which is the biggest investor concern about a company that appears to be in position to becoming a de-facto standard in identity security as companies move to the cloud. The world’s largest organisations are increasingly realising that identity security is essential to their cloud, digital transformation, and security initiatives. Okta has a compelling opportunity to disrupt the large market for identity and access management. A growing market opportunity, strong execution, and new product launches should further advance Okta’s leadership in identity security.
Other top active detractors included an underweight position in Apple and overweight positions in Paycom and Roku
16 January 2020
Walter Price, CFA
Allianz Technology Trust PLC is managed by Walter Price who is a Managing Director and Co-Head of the AllianzGI Technology Team in San Francisco, having joined in 1974. Walter is a current Director and past president of the M.I.T. Club of Northern California. He also heads the Educational Council for M.I.T. in the Bay Area and is a past Chairman of the AIMR Committee on Corporate Reporting for the computer and electronics industries.
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been or will be made or concluded shall prevail.
All data source Allianz Global Investors as at 30.11.19 unless otherwise stated.
This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42‑44, D‑60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.