Sectors: Technology

Data centre operator NXT is a quality stock that MM has liked for a while but its remained firm of late offering little in the way of risk/reward, we continue to believe it will eventually breakout above $14 but it does often correct ~10% hence we believe patience is the prudent course of action at this stage – NXT reports on the 29th.

TNE has been a solid performer in 2023 advancing +18.6% although this pales into insignificance compared to the likes of Wisetech (WTC) and NEXTDC (NXT) making it a potential candidate for some performance catch-up. Demand for their enterprise software solutions has remained very strong, and much like our thesis to own Microsoft, TWE is a major beneficiary of the growing digital transition as companies/Governments upgrade legacy IT footprints.

So far in 2023 XRO is up +71% while Altium (ALU) has only gained  +7% i.e. another potential candidate for some performance catch-up.  We can see XRO pulling back in line with US tech names but at this stage, we have tweaked how we intend to play this stock given the explosive re-rate it has had. For a time, XRO was one of our largest weightings in the Flagship Growth Portfolio, however, we did trim the position back in May at ~$109, affording us some further flexibility with the balance of our holding, ultimately can see the $130-$140 area on the upside hence we’re unlikely sellers.

Artificial Intelligence (AI) is the new runaway train, history tells us that hot sectors usually go further than most imagine before correcting deeper than expected as “Fear & Greed” punish many investors. Over the last few years, we have seen this unfold across the diverse Tech, Lithium and even Coal Sectors, hence at MM we often drip-sell positions we believe are stretched from a valuation perspective.

• We can see NVDA following our tech roadmap in the 2H i.e.3 steps forward and 2 steps back as the advance matures

Artificial Intelligence (AI) is a huge subject and there is little doubt, it will drive incredible change over the coming decades in how we all live and work. We believe it will be akin to the Industrial Revolution where the world moved from hand production to the use of machines in the late 1700’s, driving incredible productivity advantages as a result.

XRO is the best-performing major local tech stock having rallied over 50% in 2023 alone, it may not have scaled new highs like Apple but it has performed strongly from both a fundamental and share price perspectives.

REA has advanced +17% so far this year but it’s been struggling around $140 with interest rates weighing on both tech and real estate stocks, a double whammy for REA. As we look to reduce our overweight tech exposure even further REA is on the chopping block to afford us the flexibility to choose an alternative tech exposure into any decent pullbacks e.g. high fliers Technology One (TNE) or Wisetech Global (WTC).

We reduced our REA position from 5% to 3% above $140 and are now considering the balance as the stock underperforms.