FinancialGauge
Independent Strategic Thinking
February 2012
Natural Re-alignment
Is information technology becoming a new staple?
Over the last half-year we have increasingly favored US equities over other assets but have long viewed high tech stocks as attractive from a secular perspective. (See our previous features – Shifting Tectonic Plates, Gauging Earnings Yields, Divergent Universes and Secular/Cyclical Forces). Additionally, however, the ongoing steady growth of information technology is transforming segments of high tech into a sector similar to Consumer Staples (e.g., Proctor & Gamble, Coca Cola and Colgate Palmolive) – i.e., less vulnerable to cyclical downturns. (See our previous features – Beyond US Obligations and Steady Growers). This helps explain the decline in volatility of the information-technology-laden Nasdaq 100 (e.g., Apple, Google and Intel) relative to other traditional cyclicals like Industrials (e.g., GE, Caterpillar and 3M).
Strategic Implications:
The indispensable and growing role of information technology globally implies greater earnings stability and growth for this sector – favoring it over other cyclicals.
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This article is distributed for informational purposes only. All information contained herein should not be considered as investment advice or a recommendation of any particular strategy, security, investment product or financial instrument. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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