Pressed by the interest rate hike promoted by the Federal Reserve (Fed, central bank of the United States) to bring US inflation down, the stock index of large global technology companies Nasdaq sank about 30% (29.51%) in the first half of 2022.
It was the worst half-year performance recorded by the index in 14 years, since the second half of 2008, when the fall was 31.22%, in the wake of the housing crisis in the United States, according to a survey prepared by the TC/Economatica platform.
According to the analysis, the worst semi-annual drop in the American technology index was in the second half of 2000, by 37.71%, when the episode that became known as the bursting of the internet bubble took place.
“The fall on the American Stock Exchange in the first half was approximately US$ 11.5 trillion, equivalent to about 14.5 times the market value of all companies listed on the B3, of US$ 745 billion”, points out Einar Rivero , relationship manager at TC/Economatica.
Despite the already quite expressive losses in the year, for the second half of the year, the outlook is not very encouraging, with the North American monetary authority continuing to tighten financial conditions in the world’s largest economy, and with the ECB ( European Central Bank) likely also kicking off the drain on abundant liquidity in the region’s markets, with increasing discussions of a possible global recession ahead.
While the short-term picture doesn’t look very favorable for equity investors, fund managers dedicated to exploring the best opportunities in the global technology sector and with a long-term view have taken advantage of the indiscriminate price correction to go shopping.
These professionals focus mainly on technology businesses with high growth potential over the next few years, but which today already have strong cash generation, with a low level of debt on the balance sheet, and which do not depend on the expected profit to be be achieved in the still relatively distant future.
Periods of widespread declines are generally not good times to sell anything, says analyst at Nextep Investimentos
Senior analyst and partner of the manager focused on global stocks Nextep Investimentos, Maria Antonia Viuge says that during the last months of Nasdaq correction, she reinforced the positions in Google and Microsoft stocks, which she already carried for a long time in the funds’ portfolios.
“Periods of generalized declines are generally not good times to sell anything. And when the investor is convinced that the fundamentals of the business remain solid, the declines usually provide more opportunities than challenges”, says the expert.
The Nextep partner also says that, while well-established digital businesses, which already have strong cash generation and low leverage, are able to more resiliently face an environment of high interest rates, those that still demand high levels of investment. to seek profitability further down the road tend to suffer more. “The challenges apply differently to nascent techs and those that already have established positions.”
She adds that, in situations of strong volatility and falls in share prices, investors need to try to separate what is an overreaction of the market, vis-à-vis the expectations that they themselves had for the shares and for the growth perspective. businesses in their respective niches.
Strong bearish cycles are usually followed by price recovery, points out Arbor Capital manager
A partner at the manager with a focus on global stocks Arbor Capital, Leonardo Otero also says he took advantage of the drop in the last six months to reinforce the weight of Google, Microsoft and Amazon shares in the funds’ portfolio.
“It’s not the first time we’ve seen a strong correction in stock prices on the stock exchange, and the last few times we’ve seen movements like this happen, the following periods were very good. There’s no reason to be different this time,” says Otero. “Very bad periods are usually followed by good periods, it’s almost a mathematical consequence.”
He adds, however, that big techs have important differences according to the business model of each one, and that, while some tend to show a more resilient performance, others may still suffer much more than the industry average.
As an example, the manager of Arbor says that he recently removed from the funds the shares he had been carrying for some time from Meta (ex-Facebook). According to him, the strong increase in competition suffered by the social network in recent times, with the meteoric rise of rivals such as the video platform TikTok, tends to keep the shares of the social network founded by Mark Zuckerberg under intense pressure. “Meta proved to be a business with fewer entry barriers than we imagined there were”, says the Arbor manager.
Successful series underpin Geo Capital’s investment in Netflix
In the manager focused on shares abroad Geo Capital, partner and investment analyst André Kim says he keeps Meta shares in the funds’ portfolio.
While acknowledging the fierce increase in competition, Kim points out that regulatory bodies in the United States have signaled that they intend to increase restrictions imposed on technology companies controlled by Chinese conglomerates, in the case of TikTok, which, in the expert’s opinion, may bring relief to companies. target operations.
In addition, the reach and monetization via Instagram, WhatsApp and Facebook, and the avenue of growth to be explored with the metaverse, should guarantee Meta robust results for a long time to come, says the partner at Geo Capital.
Kim adds that the manager took advantage of the sharp drop in Netflix shares, after the release of first-quarter results considered disappointing by most of the market, to start a gradual allocation in the shares of the streaming platform.
Responsible for successful series such as “Stranger Things” and “House of Cards”, Netflix has been successful in creating original content with stellar casts that are recognized in awards around the world, says the partner at Geo Capital. “We think that Netflix is a tried and true model that is being tweaked, whether it’s introducing advertising with subscriptions or inhibiting the sharing of passwords between multiple users.”
He adds that the manager also took advantage of the indiscriminate sale of technology shares in the first half to increase its position in Google. “In moments of market irrationality, it is necessary to separate the wheat from the chaff.”
Despite his proactive stance in the market, Kim points out that he currently estimates the possibility of a global recession in the next year at around 50% to 60%, but that he works with a horizon of three to five years for portfolio investments, a time he understands. which should be enough for companies to suffer even more from market volatility, but recover in a longer term.
Growing demand for digital security drives bets on Catarina Capital
CEO of investment manager specializing in technology Catarina Capital, Thiago Lobão says that he has been paying special attention at this time to the digital security sector.
The global military and geopolitical context, most recently evidenced by the war in Ukraine, and the constant and growing hacker attacks against large companies, should make the topic of technological security gain more and more space within the market in general over the next few years. , predicts the expert.
“Until recently, the topic of cybersecurity was restricted only to large corporations. However, the new solutions that have been launched are beginning to be accessible also to small and medium-sized companies”, says Lobão, who cites Fortinet, CrowdStrike and Palo Alto Networks among the positions it added to the fund’s portfolio in recent months.
The theme of sustainable energy, in a scenario of replacing fossil fuels with renewable sources, is also mentioned among the bets that have been gaining ground, through names such as Enphase Energy.
The CEO of Catarina Capital believes that the bottom line for global technology stocks is already close to being reached, and that, for the investor interested in the topic, this may be a good time to start an allocation in the sector, but it should be done gradually and with a view to the medium and long term.
“It’s very difficult to get the exact moment when stocks will start to recover more consistently, but if the investor stays out of the market to try to enter when that happens, he runs a great risk of missing a good part of the movement” , says Lobao.
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