InvestmentEurope has canvassed views of French investors on FAANGs and their Chinese counterparts.
Bernard Aybran, deputy chief executive officer and chief investment officer multimanagement at Invesco
“US big tech names and their Chinese equivalents are must-haves in equity portfolios. On average, We cannot term FAANGs’ valuations as extravagant even though these of Netflix and Tesla are harder to explain. There are important components of many active fund managers which are overweight tech. As per European tech names, the issue lingers in the poor offering. Managers get two or three same names like Gemalto and Wirecard.”
“We position ourselves on both US and Chinese tech stocks. We are invested in an active Asian manager which holds Tencent, Alibaba and co. That said, we see more potential on the US tech giants. Look at Amazon. On the commercial side, its market share remains for now only a little fraction of Walmart’s activity if we compare both stocks.”
“The rebalancing of indices will propel interesting moves within nomenclatures. Telecoms are due to become communications services. In the US, this sector’s weight in the S&P 500 will pass from 3 to 10%. Alphabet is due to be removed from the discretionary sector to be transferred in the new communications services bucket. Some other IT and discretionary names will follow. That will have an impact on MSCI indexes’ composition that we will have to monitor.”
“Within the four megatrends that compose the Dauphine Megatrends fund of funds, the exposure (as of end June 2018) to tech disruption was preponderant, forming 38% of the fund’s net assets. FAANGs represented 3% of the fund of funds. FAANGs’ volatility will likely stretch in a significant manner and we want to be positioned on other players enjoying a very strong growth.”
“Alibaba, Tencent and Baïdu trade at lower valuations than FAANGs. Though, only half of the Chinese population has access to Internet. The market that can be addressed in China is colossal. Moreover, Facebook and Google cannot enter this market, which is not reciprocal like we have seen with Alibaba that can impose its payment methodology Alipay in the United States…”
“FAANGs are a performance drive no investor would like to be cut of. The market offers a premium to quality management skills of visionary CEOs who manage to reposition their companies by adapting them to a larger addressable audience and capacities to monetise their products.”
“Markets love to burn its icons. FAANGs will be shorted sooner or later… but after markets will have brought them to higher valuations.”
“If companies were books, most would be Ulysses stories today. At the beginning, Amazon was doing e-commerce, Google was a search engine and Facebook a social network. But It doesn’t stop there. They are in TV, sport broadcasting, finance, research like Google with transhumanism. It is very complicated to analyse what they are and have become.”
“Understanding newcomers has become difficult since they raise funds for products whose use is impossible to understand
without the help of a specialist or an engineer and which do not even exist yet.”
“I favour Tencent and Alibaba over Facebook and Amazon. Alibaba is a builder of a new world in China with its shopping malls. Before Alibaba, the shopping experience
in China was pretty sad. Also, the cost of delivery is cheaper because of the way cities are built in China. It is easier to deliver 20 to 30 parcels in a same building than in 20 or 30 different houses. Life is built around new technologies in China.”
All comments appeared in the Summer 2018 edition of InvestmentEurope which also included the view of Athymis’ CEO Stéphane Toullieux.