Is the Divide Between New and Old Tech Widening?
Technology plays a part in virtually every company – even companies that consumers don’t associate with technology. But a divide between new tech and old tech persists. Watch Portfolio Manager Marc Pinto discuss the evolution of new tech, e-commerce and the retail sector on Bloomberg TV.
Romaine Bostick: I wanna go back to tech for a second because this has obviously been a big basket that we’ve sort of approached. And obviously a lot of investors are sort of splitting up into individual stocks, but is it time that we start to rethink what sort of what makes a technology company? Because it seems like there are more traditional names that have finally figured out this space that are probably better tech plays than the pure tech plays.
Marc Pinto: Yes. So I mean look, technology is in every company. A lot of companies are technology companies, but they’re benefiting from it whether it’s cloud adoption, engaging with their customers in the digital world. Home Depot, which reported today, is a great example of a company that has actually managed the e-commerce and the retail format concurrently and does a really good job in terms of engaging with their customer.
So I agree that the differentiation is getting smaller, but I do think there is still a divide between new tech and old tech. And I think, for the large part, old tech is sort of in the value category and really struggling to be relevant in this world as we see more migration to the cloud. So I think it’s pervasive, but I think there’s still going to be winners and losers.
Scarlet Fu: I’m glad you bring up Home Depot, because obviously the retailers will be reporting earnings this week, Walmart among them, and you get retail sales on Thursday. How’s the consumer doing in this environment as we look at the adjustment to lowered earning expectations?
Pinto: The consumer I think is still very strong. Obviously, we’re getting some wage increases, which is helping. Home prices not withstanding, the slowdown in new housing starts are still fairly stable. So I think the consumer’s still feeling pretty good. I think consumer balance sheets are in good shape. Companies that report consumer credit statistics report a pretty good environment.
The consumer I’ve heard is still 70% of the economy, so that still gives me some hope that the growth days are not over. And maybe consumers are shifting the way they spend money. They’re going more for experiences and travel than material goods, that’s what I’m told the younger generation does. So I still think the consumer’s strong and they’re still spending money, maybe in different ways.
Elena Popina: I’m interested by your perspective of growth versus value. For one last take, is Apple now value, or is it growth?
Pinto: That’s… depends on the day. So Apple is obviously a very large company, and by virtue of the law of large numbers, for it to grow is a real challenge. And we’ve heard a lot about how iPhone unit sales are a very scrutinized number. But a lot of people have phones, the penetration is very high, and they may wait a couple years to upgrade, and that’s what we’re seeing right now with the weakness in the supply chain. But from a valuation standpoint, I’d say it’s somewhere in between growth and value.
Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market as a whole.
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