Hexavest is standing by its decision of being underweight US technology stocks, in the belief the companies are failing to live up to expectations.
The firm, a subsidiary of asset manager Eaton Vance, said prices for tech stocks were at the similar level to during the technology boom at the turn of the millennium. However, they were not reporting the similar booms in growth that they did at the time.
Hexavest chief economist, Jean-Pierre Couture, said: “We are underweight US technology stocks due to the valuation sentiment. The stocks are as expensive now as they were in the dotcom bubble but they are not growing that much faster than other sectors and are not outgrowing the wider index either.
“These companies such as Facebook are structural growth but remain cyclical, they rely on advertising and if the economy is slowing then discretionary spending such as advertising is going to slow down too and we think this will happen.”
The S&P 500 returned 17 per cent over the past year to 20 May, according to FE Analytics, and the tech-heavy Nasdaq returned 20 per cent, but individual stocks such as Facebook and Apple returned less than one per cent over the same period.
Couture said the trade was difficult for the firm but it remained convinced of having the trade in the its portfolios.
“Being underweight US technology has been a difficult trade but our level of confidence is actually getting stronger as we see weaker economic growth coming through from the US,” Couture commented.
Although the team were underweight US tech, they did not dislike the whole sector and were overweight companies in Asia such as Tencent and Alibaba.
