Technology stocks have given investors a total return of 33.9% for the year to date‚ compared with 5% for the FTSE-JSE all-share index‚ says Andrew Newell‚ head of business development at Cannon Asset Managers.
The asset management company has‚ however‚ warned that not all information technology (IT) companies within the JSE were good investments‚ as some traded on more demanding multiples than others.
“The FTSE-JSE technology index has returned almost 54% per annum on average over the past three years‚ against the FTSE-JSE all-share index (ALSI) return of 21% per annum‚ over the same time period‚” Newell said.
Looking ahead‚ he said‚ despite the sector’s strong performance it remained attractively priced.
“However‚ investors ought to exercise caution‚ as there are a number of companies within the IT sector which appear to be fully priced. Naspers is a case in point‚” he said.
“Despite being commonly recognised as a broadcasting or media stock‚ the majority of the company’s market capitalisation is explained by Chinese-based TenCent‚ an internet and gaming firm that is being priced euphorically.”
Elements of the IT sector would continue to deliver results over the medium and long term‚ Cannon Asset Managers forecast‚ amid an environment of growth being increasingly driven by a greater use of information technology and systems.