Chart of the Month – Jump on the bandwagon of digitalisation

by Marie-Caroline Fonta

Jump on the bandwagon of digitalisation

Source: Bloomberg, Notz Stucki

The health crisis has led to the acceleration of an already fast-growing trend: digitalisation. It is already demonstrating its ability to transform the global economy and is now a promising investment.

But what does “digitalisation” mean? In its most basic form, it is probably the elimination of spacial and temporal barriers, there is a performance goal and it is ultimately a logical consequence of technological evolution. More and more objects and processes are improved and transformed to become more efficient through digital technologies. More and more actions can be carried out online. Digitalisation covers a fairly wide range of companies in the market that pertain to information technology, Internet, new media, e-commerce, Internet of Things (IoT), semiconductors, 5G, cloud, among others. And it directly confronts the recent issues of semiconductor shortage, data protection…

The first quarter of 2021 is behind us, the big tech companies have reported extremely good numbers. But how to find your way in this world? Investors are seduced by the new « darling » companies that attract attention. But these are volatile and when it comes to their valuation, it’s enough to make one’s head spin. If you decide to invest in them, you have to be on your toes.

Investment in digitalisation is gaining traction and in April we decided to launch an actively managed certificate on this theme. Our approach is “the stock selection is key” and “don’t give in to temptation “, if you want to invest for medium to long term. Technology-related companies can have very high valuations, and this year it was better to avoid the new « darlings », which were ultimately very volatile, have very high valuations and are negative from the beginning of the year to the end of April.

In our digitalisation strategy, we have no constraints in terms of regions, we cannot do without some of the famous FANG, and we decided to take into account some mid-sized companies with not-so-high valuations, low PEG, revenue growth, interesting ROE level, comfortable cash generation or even growth in the earnings per share. The strategy brings less volatility than a “hot” topic in cloud, e-commerce and new media, with a better performance at the end.

Digitalisation, and especially digital technologies, can accelerate and support development and help every human being. New opportunities will emerge. The digital sector is probably today a major argument and actor in the global reduction of carbon emissions.






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