The Future of Technology
As we kick off 2021, there are six emerging technology trends that are set to define the next decade.
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Cloud Computing Renting out IT capacity in the cloud rather than building it yourself – is arguably the biggest tech trend of this decade. |
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Software as a Service This service continues to grow and be a bigger piece of the pie as companies move to the cloud model and a subscription model of accessing the latest and greatest and secure software at all times. |
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5G 5G and the companies that enable 5G technology, the semiconductors and required equipment are also favorable trends in technology. |
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The Internet of Things The internet of things is something we continue to hear more about – making devices smarter, with more sensors, more processors, and greater connectivity. |
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Big Data Big data is an ongoing trend – capturing and analyzing data and storing it efficiently. |
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Cybersecurity Cybersecurity continues to be a focus, accelerated by the global move to remote working and the need to access networks and software from different devices and in different ways. |
ETFS Morningstar Global Technology ETF (ASX Code: TECH) provides exposure to quality global tech companies and captures the growing trends across the tech sector. TECH, therefore, enables investors to access individual themes, such as cloud computing, through a broader sector ETF with companies vetted for quality and value through Morningstar’s moat methodology.
Trend in Focus: Cloud Computing
Drilling down into Cloud Computing, 20 companies in TECH’s portfolio with a combined weight of 56.5% have exposure to this theme (as of 12 April 2021). These are companies that create and develop cloud solutions, software as a service companies that use cloud infrastructure, cybersecurity companies and other firms that are involved in the building, managing or selling of equipment or chips into cloud vendors. Alongside Microsoft, Salesforce and Workday, lesser-known companies with exposure to Cloud Computing in TECH include:
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Artisan Networks Inc. |
Artisan Networks Inc. is an industry leader in cognitive cloud networking for mission-critical data center and campus environments. |
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Citrix Systems Inc. |
Citrix Systems Inc. is in the process of transforming to a cloud-based model with its focus on moving from software licenses to software as a service, driving growth in its Citrix Cloud product and via its recent US$2.5bn acquisition of Wrike – a provider of leading cloud-native, collaborative work management platforms. |
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F5 Networks Inc. |
F5 Networks Inc. provides multi-cloud application services for the security, performance, and availability of network applications, servers, and storage systems. The company’s multi-cloud application services enable its customers to develop, deploy, operate, secure, and govern applications in any architecture, from on-premises to the public cloud. |
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Oracle Corp. |
Oracle Corp., via its Oracle Cloud Infrastructure (OCI) product, provides all three layers of the cloud – connected in unprecedented ways. |
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Service Now Inc. |
Service Now Inc. is one of the fastest‑growing $1‑billion cloud enterprise software companies in the world, focused on digitizing workflows. |
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Workday Inc. |
Workday Inc. is an American on‑demand (cloud-based) financial management and human capital management software vendor. |
TECH’s exposure to these long-term themes, along with its quality and valuation screens, have led to significant outperformance against the Nasdaq 100 Index over the last 12 months.
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Period Total Return (p.a.) |
1M |
3M |
6M |
1Y |
3Y |
From 7-April-17 |
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ETFS Morningstar Global Technology ETF |
1.6% |
4.3% |
20.1% |
51.1% |
26.4% |
27.4% |
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Nasdaq 100 Index |
3.1% |
3.0% |
8.0% |
34.9% |
26.5% |
24.8% |
Source: Bloomberg as of 31 March 2021. TECH returns are fund returns and are net of fees. The Nasdaq returns are index returns. Past performance is not an indication of future performance.
ETFS Morningstar Global Technology ETF
MER: 0.45% p.a.
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TECH is a developed markets, technology sector pure play.
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TECH uses Morningstar’s Moat methodology to invest in quality companies with a wide or narrow economic moat, providing them a sustainable competitive advantage.
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Morningstar also applies a valuation screen, only investing in those companies trading below or closest to fair value.
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TECH is equally weighted to instil a dynamic of selling high and buying low, as well as allowing representation of all holdings and limiting single stock risk.
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Research rating: Lonsec Recommended – research report available on request.
Concerned About Valuations?
For investors concerned about the valuations of technology stocks, check out one of our recent Partner Series episodes with Brian Colello, Director of Technology Equity Research for Morningstar, on the outlook for technology and how Morningstar identifies value in technology companies.
