“A question from Sarah to kick things off: ‘Is it boom or bust for the tech companies this year?’” said Paul as the webinar got into full swing. “Rudi, what do you think?” Paul asked.
“Well, it’s all about the bond market, essentially,” Rudi replied. “I’m of the view that central bankers at some stage will move in and will calm, if not try to control and guide the bond markets, preventing them from becoming unruly and uncontrollable. And if that happens, we’ll see if the bond market disappears to the background a little bit. We see stocks like Charter Hall and Xero and Altium and others rallying quite strongly. I think that’s essentially the picture for 2021.
“Maybe at some stage they’ll do something like the RBA did and take out the sledgehammer. Then that sector will start reviving and trade more on fundamentals. Now it’s all fear and downtrend,” Rudi added.
“Having said that, I do think that sector has had it too easy for way too long. Even last year, as long as you were a technology company, your share price would go up. And it didn’t matter what your market cap was, etc., and what your performance was. Now the good guys are going to be separated from the not-so-good guys. And you saw that also earlier in the year from the moment that, for example, Appen had to start admitting that maybe the growth phase from the past few years was no longer in place. That share price halves and there were other similar examples,” he said.
Peter thinks tech stocks were over bought. “Now they’re being sold off pretty heavily,” he said.
“Tesla’s down 30%. I think Zoom is down 40%. They’ll start eventually making a bit of a comeback, but nothing like we saw. Once the value stocks have all been bought up and their share prices have been up, they’ll sell out of those and start nibbling at the good quality tech stocks, like the Xeros. And they will become value again,” Peter said.
Paul thinks the bond market story is overblown and way over-dramatised.
“I agree with both of you,” said Rudi. “But the problem is, how do you cope with that as an investor that, for example, has stocks like Xero and sees them falling? I think the last time I looked at them, they went from $150 to close to $110 now, which is a massive fall by anyone’s account. And it’s still a great company. But the paper losses are there,” he added.
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