Investing in technology – should investors look beyond the US?
Where there’s innovation, there’s investment opportunity. From pioneering vaccines to takeaway-delivering robots, creativity and ingenuity is all around us. So how can investors make the most of these opportunities?
When investing on behalf of our clients, we’re always on the lookout for interesting opportunities for capital growth and/or income. We’d all love to be invested in the ‘next big thing’, but all too often they can be fraught with danger and the investment risk/reward doesn’t stack up. Which is why our chief investment office and investment experts do a great deal of research, analysis and face-to-face meetings with investee companies and funds, to make sure their management is trustworthy and the company’s finances are sound.
And well-established businesses with a future-orientation are definitely worth consideration when it comes to investing in tech innovation. Their focus on research and development means some of these companies are adding real value to their business model, ensuring their future sustainability.
Where should investors look for tech innovation opportunities?
Think technological innovation, and you need to start in the US whose largest stocks - the so-called FAANGMs (Facebook, Amazon, Apple, Netflix, Google (Alphabet) and Microsoft) – are all technology-related. At the time of writing, the market capitalisation of just two of these US companies, Apple and Microsoft, is now greater than the entire UK stock market combined. The US is undoubtedly the global leader.
This accolade is in sharp contrast to the UK market, where the top 20 are mostly:
- Integrated oil companies (Royal Dutch Shell, BP)
- Miners (BHP, Rio Tinto, Anglo American)
- Banks (HSBC)
- Consumer staples (Unilever, Reckitt Benckiser)
- Pharmaceuticals (AstraZeneca, GlaxoSmithKline)
- Tobacco (BAT)
- Beverages (Diageo).
The largest listed ‘technology’ company in the UK, ranking a lowly 34th place, is Ocado (maker of the world’s leading grocery fulfilment systems).
Is the UK void of technology innovation?
However, to conclude that UK PLC or in fact, Europe is devoid of innovation would be a mistake. The acquisitions of UK technology companies in recent years are good examples of the UK’s ability to punch above its weight in developing niche technologies. And because they tend to be smaller, they can offer greater growth potential and come at a discount to perhaps more highly valued US tech stocks.
In fact, the UK and Europe have a huge array of great innovative companies for us to invest in for our clients, including:
- Fintech – to support financial services
- Edtech – to support learning institutions
- Healthcare – through diagnostics or other medical technology
- Engineering – in the UK, for Formula 1 or defence
- Innovative companies – delivering green infrastructure and technologies to meet the challenges of de-carbonising society in the face of the climate emergency.
Recent history of tech innovation suggests it’s unlikely that the next Facebook or Google will spring out of the UK – or perhaps even Europe. However, in our view, tech innovation in the UK and Europe looks well placed to continue making a significant contribution to global technology advancements for several years to come.
Speak to a wealth adviser
If you’d like to discuss ways to invest in tech innovation, please get in touch on +44 20 7523 4500 or email email@example.com.
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Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.
Investment involves risk and is not suitable for everyone.