It’s been smooth sailing this year for anyone in the stock market that bet on big tech companies.
That’s partly why stock pickers are having a strong year — they held a record overweight position in tech.
And so, for fund managers heavily weighted in the so-called growth sectors, 2017 has been a good year. They include Justin White, who manages the T.Rowe Price New America Growth Fund. It was up 25% as of Thursday, a stronger performance than the Lipper Multi-Cap Growth Funds average.
His biggest bet right now is on Amazon, even after he reduced the fund’s stake in tech stocks as the sector continued to leap higher this year.
“Their competitive position in both the core retail business and in their cloud business is just so unassailable,” he told Business Insider. “The market they’re targeting is so large that they’re just going to keep winning. They just keep gaining share at a healthy clip in this enormous market, and they will replicate the strategy in more markets across the world as they can.”
As for the biggest criticism leveled against Amazon’s strategy — that it prioritises growth over profits — White believes that Amazon would easily and quickly silence sceptics if it turned around to focus on net income.
“Jeff Bezos just sees so many things he wants to do, and his batting average on large investments is sufficiently high that it sure feels to me that the right decision is to keep investing capital,” he said.
The obvious casualty of Amazon’s reach is brick-and-mortar retail, where companies are losing their share of total sales to online shopping and being compelled to make big investments in ecommerce.
“There’s probably hundreds of publicly traded companies where the number one bear case on them is Amazon disrupting their business,” White said.
“I think that it has the deepest moat [or competitive advantage] of any business model out there, neck-and-neck with Google,” White said. Google-parent Alphabet, Apple, Facebook, and Intuit were among his fund’s largest holdings as of the end of the August.
White said there were “only a few battles” in established, physical retail that he’s chosen to fight. But otherwise, it feels like those companies are heading in the other direction over the long term.
“Brand equity is not what it used to be,” White said. “You can see that across the consumer-staples environment where the revenue growth from a lot of historically steady, slow-growing consumer-staple companies has deteriorated. I think a lot of that is the fact that consumers don’t really value brands as much.”
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