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 7.7% in November, outperforming the Dow Jones World Technology Index return of 5.1%. During the month, stock selection contributed and industry allocation detracted from relative performance.
Paycom Software was the top contributor to relative performance after reporting strong quarterly results driven by revenue growth of 31% year over year. Paycom provides cloud-based payroll and human capital management software in a software-as-a-service (SaaS) format to small and medium businesses in the US. The company’s software provides unique value to customers because it typically replaces multiple systems and helps manage complex compliance requirements. The single database, ease of implementation, and high customer satisfaction should help Paycom continue to take market share in this market. We see the company as a unique cloud asset modernising the payroll market.
Our position in Okta was also a top relative contributor as investors reacted positively to analysts’ upgrades during the period. Okta is a data security provider offering services such as automated user management, integration, mobile identification, multifactor authentication, and reporting software. Okta has a compelling opportunity to disrupt the large market for identity and access management. With a large number of applications and over 5,000 customers, Okta is beginning to see a network effect developing. The company also benefits from the shift to the cloud as customers looking for an identity management solution for cloud applications are attracted to the wide range of applications. Management has noted that subscription revenue is being driven by the company’s acceleration with enterprise customers. The world’s largest organisations are increasingly realising that identity security is essential to their cloud, digital transformation, and security initiatives.
Other top active contributors included overweight positions relative to the benchmark index in Fortinet, Bloom Energy, and Advanced Micro Devices.
Our underweight position in Apple, one of the largest holdings in the benchmark, was the top detractor from relative performance. The company reported strong quarterly financial results with both revenue and earnings exceeding expectations. Although iPhone sales were down 9% year over year, outperformance was driven by growth in the services and accessories segments. While the iPhone product cycle remains uncertain, the consistent growth in the services segment is helping the company re-accelerate revenue growth. We have recently added to our position due to our expectation that services growth will remain strong. However, the portfolio’s weighting in Apple continues to be significantly underweight relative to the benchmark’s 12% position.
Our position in Arista Networks was also a top relative detractor during the period. The company posted solid results for the third quarter, but shares fell sharply after management provided disappointing guidance for the fourth quarter and the full year of 2020. The weaker guidance is primarily due to softer spending from the large cloud providers (Cloud Titans segment) as well as the smaller cloud providers and service providers segments. Strength in the enterprise and financials segments were not enough to offset the lighter cloud spending. The weak guidance and negative sentiment will likely be a significant headwind for the stock over the next few months. Their management believes growth in cloud spending will eventually accelerate, but this will likely not occur until 2021 at the earliest. Their management sees this downturn as a temporary setback, and they believe other segments such as enterprise and financials can become significant growth drivers to overall revenues over the next few years. We reduced our position size earlier this year in anticipation of uneven spending from cloud players, and Arista remains a relatively small position in the portfolio.
Other top active detractors included overweight positions in Pure Storage and Cree and an underweight position in Alibaba.
12 December 2019
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.