Going in search of the UK's top technology stocks

Wednesday, Mar 13 2019 by
38
Going in search of the UKs top technology stocks

-- I should say up front that I got started on this article partly because of Carey’s great post about his tech-inspired fantasy fund - it’s an inspiring read! --

One of the biggest stories to come out of the US stock market over the past decade has been the spectacular rise of technology stocks. The relentless run in the S&P 500 has gone hand-in-hand with the growth of so many leviathan-like companies.  

Some of the best known names have been Facebook, Amazon, Apple, Netflix and Alphabet’s Google (the so-called FAANGs). Then there’s Microsoft, which is currently the biggest of the lot. Beyond them are dozens and dozens more multi-billion dollar tech groups. And while prices fell sharply across the sector last autumn, many have rebounded very quickly.

By contrast, UK quoted tech stocks have had nowhere near as much influence on the market here. To be fair, there have been some big wins. But successful tech has not been ubiquitous like it has in the States. So are UK investors missing out - or is the tech sector simply a different beast in the UK that still holds speculative upside for those who know where to look?

Inspiration from Silicon Valley

Right now, there are 88 stocks in the US technology sector that are valued at more than GBP £10 billion each. Twenty-four of them are valued at more than £50 billion and 11 at more than £100 billion. Microsoft, the most valuable of all, is valued at £665 billion (or around US $822 billion). That’s around $10 billion more than Apple - which is pretty much a rounding error when you get to this sort of size.

But while the big fish in US tech are genuinely huge, the pool of tech companies in the States is deep and wide. There are more than 830 companies classified in the sector, and while many are huge by most standards, hundreds more of them are small- and micro-cap plays. So the choice for investors is vast.

Alongside predominantly American companies are a few foreign names that have chosen the US as a destination to get quoted. You can count among them the likes of Alibaba, Baidu and Weibo from China. Then there’s Spotify from Sweden/Luxembourg,

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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10 Comments on this Article show/hide all

jules2k6 14th Mar 1 of 10
1

It's interesting that WANdisco (LON:WAND) was not mentioned as a tech stock here

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matylda 15th Mar 2 of 10

Nice one Ben - Thanks for that.

Blog: Briefed Up
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Gert1e2sh0es 15th Mar 3 of 10

GAME?

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melody9999 15th Mar 4 of 10
2

Been watching D4T4 for some time and this article has just prompted me to take an initial position

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dodge1664 15th Mar 5 of 10
2

not much of a selection is it? Just Eat? Seriously? Enough to make me worry about the future of the UK...

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Gromley 15th Mar 6 of 10
2

In reply to post #458068

It's interesting that WANdisco (LON:WAND) was not mentioned as a tech stock here

It is not really surprising that it doesn't get a mention in the article.

  • MCap of c. £340m leaves it way off being one of the biggest.
  • StockRank of 14 (cough) leaves it way off being one of the most highly rated by Stocko.
  • The lack of earnings (even forecast out 2 forward years) disqualifies it from the Naked Trader(eque) screen - possibly along with other things.

Which of course doesn't necessarily mean it will be a bad investment; but as far as the factors are concerned, it's just another story stock (narrowly misses out on being a 'sucker stock' due to the fact that the share price performance has been not too bad).

Personally I have no idea whether the 'story' in this case is one worth backing or not. I do though know that I personally have no skills in picking the winners from early stage pre-profit story stocks, but I do know that most of them disappoint.

If you really can pick the winners from the losers amongst story stocks, you stand to do very well indeed, but I'll stick to easier pastimes.




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drvodkaquickstep 15th Mar 7 of 10
2

£D4T4 are my largest holding where I have been adding since last 2011. Quality business with excellent management, cash, freehold property and operating in a hot sector with IP protected technology.

Once they get to £100m mcap I can see the valuation moving further ahead as further institutions start to take interest.

Worth looking at the typical M&A multiples in this sector - staggering.

Year end is March so trading update expected in April.

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mmarkkj777 16th Mar 8 of 10

Hi Ben,

A really good post. Thanks.

Tech Stocks are of real interest to me. I have a couple that you mentioned Spirent and D4T4 (and have held a few more, including Blue Prism for most of 17 and part of 18), but I now mainly go hunting in the Nasdaq for tech investment candidates (but still very interestind in UK).

A couple of lesser known US Tech stocks that I own are Smartsheet and Five9 (smatsheets update is on the 19, so I'm waiting on the results). But one really interesting company that I have recently taken a postion in is CRSP.

Its a, Nasdaq listed, Swiss gene editing company with its own method and process.

Thanks again and I would be interested to see a follow up to this article in the coming weeks.

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RichardEllis Mon 12:56pm 9 of 10
2

The UK tech stock scene is a national disaster. We have recently lost ARM (to Softbank) & who remembers Cambridge Silicon Radio, or how about Autonomy? Anyone old enough to remember Imos? If you want to invest in tech stocks, then - unfortunately for the UK economy- the US is the #1 place to look. Furthermore, US stocks are reported quarterly & tend to be well researched.

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millen Mon 1:50pm 10 of 10

In reply to post #459063

+1 for this. The UK just doesn't do big tech, as we were discussing on another forum a month ago. To quote from https://ftalphaville.ft.com/2018/11/15/1542266674000/The-future-of-the-FTSE-100/ "This would be fine if the FTSE 100 offered exposure to the high-growth technology companies benefiting from this disruption, such as the S&P 500's FAANG (Facebook, Apple, Amazon, Netflix and Google). However, technology businesses like Sage and Microfocus make up just 0.9 per cent of the index. Including tech-enabled businesses like online retailer Ocado and food delivery company Just Eat brings this figure to 1.3 per cent. A mile off the 20 per cent of the S&P 500 that tech stocks command, and a key reason for the FTSE 100's under-performance versus its peers."

Some would argue that Tech is an unhelpful classification now. Almost every successful business uses tech to a significant extent. Perhaps a better concept is between those that use tech (created by others) and those that genuinely create new tech? Article here on the classification issue https://ftalphaville.ft.com/2019/01/08/1546923600000/The-tech-sector-is-over-/

I also wonder if tech investors are deep down seeking genuine 'disruptors' (in any sector) which obviously are far and few between. And for every successful disruptor there are many that fall by the wayside. And don't forget the depressing fact that an awful lot of promising tech businesses are bought up by the big players with the express intention of closing down potential competition.

Personally I feel that if you're seeking neaningful exposure to tech you need to look outside the UK and outside the public markets. There are plenty of ITs, ETFs, VCTs etc that can help. Bear in mind also that a professional manager will have access to sector expertise to appraise businesses that the average amateur won't (unless they studied in that field and have kept current). And again, several of the US blockbusters I understand didn't IPO until they were very well established and no longer seeking fresh capital (eg Uber is only now getting close to IPOing).

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