Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — Shareholder Meeting (September 2014)
59 slides from Polar Capital Technology Trust's shareholder meeting presentation, Sep 4, 2014
Slide 1: AGM Presentation
AGM Presentation 4th September 2014 This presentation is for one-on-one use with non-US professional investors only www.polarcapital.co.uk
Slide 2: Results As At 30 April 2014
Results As At 30 April 2014 Year ended Year ended Change 30/04/13 30/04/14 (y/y) Net Assets £528,845,000 £606,633,000 +14.7% NAV per ordinary share 412.41p 458.40p +11.2% Price per ordinary share 398.50p 442.00p +10.9% Price per subscription share 7.88p - - Benchmark Change +13.1% Ordinary shares in
Slide 3: PCT As At 31 July 2014
PCT As At 31 July 2014 Year ended Year ended Change As at Change 30/04/13 30/04/14 (y/y) 31/07/14 (y/y) Net Assets £528,845,000 £606,633,000 +14.7% £654,002,000 +13.5% NAV per ordinary share 412.41p 458.40p +11.2% 494.20p +10.0% Price per ordinary share 398.50p 442.00p +10.9% 474.00p +8.3% Price per
Slide 4: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since Apr 2013 • Global equities (FTSE World + 6.8%) added to their post 2008 gains as PE expansion outweighed negative revisions to global growth • Pronounced sterling strength (+8.5% / 13.8% vs. USD / JPY) significantly stymied returns Source:
Slide 5: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since Apr 2013 • Technology stocks outperformed sharply (DJ World Tech + 13.1% in sterling terms) due to passive (limited emerging market exposure) and active (PE expansion, capital return, next- generation fundamentals) factors Source: Bloomber
Slide 6: Full Year Review
Full Year Review US technology small caps vs. large caps since Apr 2013 • Small-cap / growth technology stocks outperformed during the first half but a pronounced market rotation during March and April saw them trail large- caps by 2.5% over the full year • NAV performance (+11.2%) trailed the bench
Slide 7: Full Year Review (continued)
Full Year Review US technology small caps vs. large caps since Apr 2013 • Post March sell-off in high PE / high growth stocks divorced from (continued) strong fundamentals • New technology cycle appears to have entered a more pernicious phase, obscured by (temporary) PC market improvement and PE exp
Slide 8: Small-Cap Underperformance Akin To 2011/12
Small-Cap Underperformance Akin To 2011/12 US technology small caps vs. large caps: 2009 - Present Small-caps outperforming Small-caps underperforming Source: Bloomberg, 28 August 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 8
Slide 9: Small-Cap Underperformance Akin To 2011/12
Small-Cap Underperformance Akin To 2011/12 US technology small caps vs. large caps: 2009 - Present Cloud Tech M&A Tech M&A Twitter WhatsApp Small-caps outperforming Eurozone ‘crisis’ Small-caps Facebook IPO underperforming Draghi speech Source: Bloomberg, 28 August 2014. It should not be assumed tha
Slide 10: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis Forward absolute PE: 1992 – present Source: Ned Davis, 15 August 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 10
Slide 11: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis Forward relative PE: 1992 – present Source: Ned Davis, 15 August 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 11
Slide 12: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis 2010 2011 2012 2013 Delivering IT Public clouds Smartphones ‘Big data’ as a service mass production mass adoption new (cheap) tools Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 12
Slide 13: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 13
Slide 14: Deflation: Cost Of Computing
Deflation: Cost Of Computing The cost of 1m transistors Source: KPCB, Deloitte May 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 14
Slide 15: Deflation: Cost Of Storage
Deflation: Cost Of Storage The cost of storing one gigabyte of data Source: KPCB, Deloitte May 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 15
Slide 16: Deflation: Cost Of Bandwidth
Deflation: Cost Of Bandwidth The cost of 1,000Mbps of bandwidth Source: KPCB, Deloitte May 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 16
Slide 17: Deflation: Bad For Incumbent Technologies / Vendors
Deflation: Bad For Incumbent Technologies / Vendors IT budget growth (1990 – 2014E) Source: Goldman Sachs, May 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 17
Slide 18: Deflation: Bad For Incumbent Technologies / Vendors
Deflation: Bad For Incumbent Technologies / Vendors Information Processing Equipment as a % of GDP (1945 – Present) Source: Ned Davis Research, Q2 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 18
Slide 19: Deflation: Bad For Incumbent Technologies / Vendors
Deflation: Bad For Incumbent Technologies / Vendors modest IT spending1 + budget reallocation2 = Limited top-line growth3 1. Source: Gartner, 28 August 2014. 2. Source: Gartner. 3. Source: Bloomberg, 28 August 2014. *Unadjusted for the acquisition of Nokia. It should not be assumed that recommendati
Slide 20: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Source: Bloomberg Source: Bloomberg Source: Bloomberg Source: Bloomberg. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made withi
Slide 21: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency “The Innovator’s Dilemma” How low-end disruption occurs over time “This…is about the failure of companies to stay atop their industries when they confront certain types of market and technological change. It's not about the Performance failure of simply a
Slide 22: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Global Technology M&A avg. premiums: 1995 – 20131 Select M&A activity2 Date Target Acquirer Premium Value $m 60% Feb-12 Taleo Oracle 25% 1,838 May-12 Ariba SAP 19% 4,324 50% Aug-12 Kenexa IBM 42% 1,260 Oct -12 Cymer ASML 64% 2,346 40% Oct -12 OPNET Riverb
Slide 23: Tech Deflation = Enabling Reinvention
Tech Deflation = Enabling Reinvention Digitisation of knowledge Vast digital repositories being established eg. Wikipedia Smartphones + algorithms = real-time information retrieval We are asking more questions than ever before! 3.5bn daily searches1 170m reviews2 1. Source: Internetlivestats.c
Slide 24: Tech Deflation = Enabling Reinvention
Tech Deflation = Enabling Reinvention Digitisation of knowledge Vast digital repositories being established e.g. Wikipedia Smartphones + algorithms = real-time information retrieval We are asking more questions than ever before! 3.5bn daily searches 170m reviews Unprecedented scale of networks
Slide 25: Tech Deflation = New Buyers Reinventing Other Industries
Tech Deflation = New Buyers Reinventing Other Industries Digitisation of knowledge Vast digital repositories being established eg. Wikipedia Smartphones + algorithms = real-time information retrieval We are asking more questions than ever before! 3.5bn daily searches 170m reviews Unprecedented
Slide 26: Advertising
Tech Deflation = New Buyers Reinventing Other Industries Advertising Internet advertising worth $121bn this year1 45% of media consumption / 26% of ad. dollars2 1. Source: TechCrunch, April 2014. 2. Source: KPCB, May 2014. It should not be assumed that recommendations made in future will be profitab
Slide 27: Commerce
Tech Deflation = Reimagining Other Industries Commerce eCommerce worth $260bn in the US last year Penetration just 8% / 10% in US / W. Europe Source: Citigroup, February 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities
Slide 28: Communications
Tech Deflation = Reimagining Other Industries Communications c.5.2bn global mobile handset subscribers1 145bn emails sent / pictures shared every day2 1. Source: KPCB, May 2014. 2. Source: Economist, April 2014. It should not be assumed that recommendations made in future will be profitable or will
Slide 29: Software (as a service)
Tech Deflation = Reimagining Other Industries Software (as a service) Rental software model enabled by Cloud Expanding TAM, penetration only c. 16% today Source: Morgan Stanley, February 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance o
Slide 30: Gaming
Tech Deflation = Reimagining Other Industries Gaming $24bn online market c. 3x > movie box office1 Mobile gaming growing c.30% per annum2 1. Source: bigfishgames.com, August 2014. 2. Source: Mobile Gaming, August 2014. It should not be assumed that recommendations made in future will be profitable o
Slide 31: Payments
Tech Deflation = Reimagining Other Industries Payments $617bn mobile payments market by 20161 Growth driven by m-commerce / money transfer 1. Source: Gartner, August 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in t
Slide 32: Travel
Tech Deflation = Reimagining Other Industries Travel Online travel industry worth $155bn by 2017 Rapid growth in ‘sharing economy’ segment Source: Marketwired.com, August 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities
Slide 33: Entertainment
Tech Deflation = Reimagining Other Industries Entertainment Ubiquitous broadband making OTT possible Netflix = 34% of peak US bandwidth usage1 1. Source: ABC News, May 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in
Slide 34: Romance
Tech Deflation = Reimagining Other Industries Romance Online dating $1.25bn industry in 2014 Accounted for c. 17% of marriages last year1 1. Source: Statistics Brain, August 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securit
Slide 35: Tech Deflation = Reimagining Other Industries
Tech Deflation = Reimagining Other Industries Source: Polar Capital, August 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12 month
Slide 36: Technology: Diverging Fortunes
Technology: Diverging Fortunes Technology: long-term growth expectations and valuation for top vs. bottom quintile of growth expectations 40% 4 LT Growth Expectations 30% 3 Valuation Premium 20% 2 10% 1 0% 0 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Slide 37: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency US Technology sector (un-weighted) 1969 - present Source: Piper Jaffray, September 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 37
Slide 38: Apple: Defying The S-Curve
Apple: Defying The S-Curve • Our largest position at c.8.6% of NAV, but our largest underweight position versus the benchmark1 • Positives: strong product pipeline, attractive customer base, ecosystem, balance sheet, capital return • Negatives: smartphone penetration > 55%, growth challenged ($185bn
Slide 39: PCT Positioning As At 31 July 2014
PCT Positioning As At 31 July 2014 Sector and geographic exposure (%) Market cap exposure (%) Internet Software & Services 23.3% Semiconductors & Semiconductor Equipment 20.3% Software 17.2% Large (greater than US$10bn) 71.7% Tech. Hardware, Storage & Peripherals 12.7% Communications Equipment 8.1%
Slide 40: PCT Positioning As At 31 July 2014
PCT Positioning As At 31 July 2014 Largest overweights Largest underweights Market cap exposure versus benchmark1 Allot Analog Devices Amazon Apple Athenahealth Avago Large-cap -12.21% Baidu Broadcom Cognex Canon Cornerstone OnDemand Cisco Systems F5 Networks EMC Facebook Fujitsu Mid-cap 7.47% Hiros
Slide 41: PCT Performance
PCT Performance 10 year PCT performance: April 2004 – April 2014 350.00 300.00 250.00 200.00 150.00 100.00 50.00 Source: Bloomberg, as at 2/8/11 May-04 Feb-05 Oct-05 Jul-06 Mar-07 Dec-07 Aug-08 May-09 Jan-10 Sep-10 Jun-11 Feb-12 Nov-12 Jul-13 Apr-14 Dow Jones World Technology Index PCTT Ordinary Sha
Slide 42: Outlook
Outlook • We remain constructive on markets, although anticipate greater volatility given geopolitical risk – aligned interests / valuations in line with long-term averages / paucity of alternatives • Our conviction in a new technology cycle continues to increase – pace of innovation (and disruption
Slide 43: Appendix
Appendix For non-US investor use only. Please refer to the Important Information at the end of this presentation. 43
Slide 44: Team Biographies
Team Biographies Ben Rogoff, Director – Technology Experience: 18 years Ben joined Polar Capital in May 2003. He is lead manager of Polar Capital Technology Trust plc and is also joint manager of Polar Capital Global Technology Fund. He has been a technology specialist for 18 years. Prior to joining
Slide 45: Team Biographies cont.
Team Biographies cont. Fatima Iu Experience: 9 years Fatima joined Polar Capital in April 2006 after working as an analyst with Citigroup Asset Management for 18 months. She focuses on European technology stocks and has responsibility for coverage of the global alternative energy and medical technol
Slide 46: S-Curve: Identifying Themes & Product Cycles
S – Curve: Identifying Themes & Product Cycles R&D High growth Low growth No growth negative OM% expanding OM% stable OM% uncertain / declining OM% Enterprise software / offshore Dev mkt smartphones (inc. iPhone) LCD TV / HDTV Wireless Networking (802.11n / ac) Notebooks Server & Storage Virtualisat
Slide 47: Emerging Themes
Emerging Themes Source: Gartner, July 2013. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 47
Slide 48: The Internet of Things (IoT)
The Internet of Things (IoT) • The Internet of Things1 is a network of physical objects that communicate, sense and interact with their internal states or the external environment. At its best, it envisions a world where computing is so ubiquitous that it becomes invisible. • By 2020, each person wi
Slide 49: The Internet of Things (IoT)
The Internet of Things (IoT) Wearables Industrial Internet Augmentation Autonomous Vehicles Today Future Home Automation Connected Car Smart Cities For non-US investor use only. Please refer to the Important Information at the end of this presentation. 49
Slide 50: Big Data: What Is It And Why Now?
Big Data: What Is It And Why Now? 2012: mass consumption of IT 5.1bn 2.4bn Number of daily searches Global Internet users 1.5bn 6bn Hours of video / month 1.1bn 90% of the world’s data created in the last two Smartphone subscribers Monthly active users years alone 500m 30bn Number of RFID tags Numbe
Slide 51: Big Data: New Tools Required To Extract Value
Big Data: New Tools Required To Extract Value • Today companies only retain the data they perceive to be valuable – c. 5% of the total – discarding the rest • The prospect of extracting value from untapped sources has led data to be described as ‘the next natural resource’ • Existing IT solutions (h
Slide 52: Big Data: The Automation Of Knowledge Work
Big Data: The Automation Of Knowledge Work • As the mining experience demonstrates, massive datasets challenge our basic assumptions about the value of data • When ‘n’ is exceptionally large, enormous value can be extracted from data where individual bytes appear worthless • The ability to process v
Slide 53: A Second Technology Bubble? We Think Not
A Second Technology Bubble? We Think Not “We are witnessing our second tech bubble in 15 years” - David Einhorn 4th April 2014 “Are we staring at a tech stock bubble?” - BBC News, 26/4/14 Searches for “tech bubble” on Google are at a seven year high Source: Greenlight Capital, BBC News, Google Trend
Slide 54: Valuations: Then And Now
Valuations: Then And Now Technology Company Market Value as % of S&P500: 1999 - Present Source: KPCB Internet Trends, April 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 54
Slide 55: Valuations: Then and Now
Valuations: Then and Now Select valuations at highs: then and now. Select valuations today Source: KPCB Internet Trends, April 2014 For non-US investor use only. Please refer to the Important Information at the end of this presentation. 55
Slide 56: A Second Technology Bubble? We Think Not
A Second Technology Bubble? We Think Not Investment into VC backed companies: 1995 – present1 Number of technology IPOs by year2 1. Source: Ned Davis, as at 14 February 2014, MoneyTree Report. 2. Source: Jay Ritter, University of Florida, April 2014. For non-US investor use only. Please refer to the
Slide 57: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Inflation adjusted UK holiday expenditure: 1951-1996 overseas domestic 1. Source: www.seasidehistory.co.uk. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 57
Slide 58: Important Information
Important Information Polar Capital 4 Matthew Parker Street London SW1H 9NP Important Information This document is provided for the sole use of the intended recipient and it shall not and does not constitute an offer or solicitation of an offer to make an investment into any fund managed by Polar Ca
Slide 59: Important Information Cont.
Important Information Cont. Polar Capital 4 Matthew Parker Street London SW1H 9NP Regulatory Status Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK Financial Conduct Authority (“FCA”) and is registered as an investment adviser with the U
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