Tech Stock Rally Over? Fund Outperforming 86% Cuts Holdings

2024-05-27 157 Comments

For Findlay Park Partners LLP, which has outperformed 86% of its peers in fund performance this year, technology stocks that have driven the rise in U.S. stocks are no longer attractive. According to a client report, Findlay Park Partners LLP, which manages approximately $11.3 billion in assets, sold off its holdings in Nvidia (NVDA.US) in the third quarter. The report shows that Nvidia's stock once accounted for 5% of the fund's total holdings this year. In addition, the report also shows that as of the end of September, the fund's holdings in Microsoft (MSFT.US) decreased from 4.8% in August to 3%, while Microsoft has been the fund's top holding for most of the past decade.

Data shows that analysts currently expect the earnings growth of the "U.S. stock market's Magnificent Seven" to slow from 36% in the previous quarter to 18% during the third quarter. Simon Pryke, CEO of Findlay Park Partners LLP, said, "To some extent, the performance growth of the U.S. stock market's 'Magnificent Seven' has proven their excellent performance, but the current earnings growth expectations are quite moderate, while valuations still reflect a strong growth pattern that will continue. There must be a mistake in one of them."

Advertisement

It is reported that Findlay Park Partners LLP operates under the European UCITS framework, which aims to protect retail investors, mainly investing in the U.S. market. Data shows that the fund's return rate over the past year is about 29%, while the return rate of its peers is about 16%, and the fund has lower volatility; in 2023, the fund's performance exceeded 90% of its peers.

Findlay Park Partners LLP focuses on betting on stocks that have a significant relationship with the U.S. domestic market and supply chain. Simon Pryke said that this approach means it has never held shares in Tesla (TSLA.US) or Apple (AAPL.US). The fund stated in its report to clients that its holdings in the "U.S. stock market's Magnificent Seven" accounted for only 4.8%, while the benchmark weight exceeded 28%.

Rose Vangerven, the head of investments at Findlay Park Partners LLP, said that about 40% of the fund's portfolio consists of companies with a market value between $5 billion and $50 billion. Simon Pryke added that they prefer to invest in B2B companies rather than consumer-facing companies because "they are usually asset-light companies with high recurring revenue and high free cash regeneration capabilities."

So far this year, the U.S. stock market has repeatedly hit new highs. For most of the first half of the year, this rise was concentrated in a few stocks (mainly technology stocks). However, as investors' concerns about the threat of an economic recession faded, coupled with investors' doubts about the returns that huge spending on artificial intelligence can bring, the stock market gains expanded to small-cap stocks in the third quarter.

Nevertheless, the overall outlook for the technology industry remains optimistic. Analysts predict that the S&P 500 Information Technology Index, composed of companies such as Nvidia, Apple, and Microsoft, will reach about 4962 points in the next 12 months, which means there is still about a 14% increase.

Leave A Comment