03/2022
Global Tech has been the BEST performer in the past decade, yes, one of the rare sectors that even beat REITs. Whether it is over 3 years, 5 years or 10 years, the Tech sector has outperformed and posted the best returns of 42.63%, 30.82% and 23.07% respectively as detailed in Table 1. This has been the best performing sub-sector in the S&P 500!
Global Tech has been the BEST performer in the past decade, yes, one of the rare sectors that even beat REITs. Whether it is over 3 years, 5 years or 10 years, the Tech sector has outperformed and posted the best returns of 42.63%, 30.82% and 23.07% respectively as detailed in Table 1. This has been the best performing sub-sector in the S&P 500!
Take a step back and you will realize that a 30.82% annualized return over 3 years means that if you have been the perspicacious investor that we at GCP Global trains, you would have been able to double your wealth in just 3 years in Global Tech if the historical trend holds up.
Investing in the digital economy and next generation stocks went from being a “nice to have” strategy to a “need to have” for any businesses who wants to survive and prosper during the Covid-19 Pandemic in 2020. Satya Nadella, the CEO of Microsoft, MSFT said that the pandemic “saw two years` worth of digital transformation into two months, from remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security”.
MSFT did just that and grew its Revenue from $125.843 billion in 2019 to $168.088 billion in the 2 years during the pandemic. Operating Income exploded from $42.959 billion to $69.916 billion in 2021 (FYE Jun), a walloping 62.75% increase. Net Profit equally soared from $39.240 billion to $61.271 billion in 2021, a tremendous jump of 56.14%! As shrewd investors, we should recognize that we need to be exposed to the most promising and fastest-growing businesses to continue to triple our wealth in the current decade.
WHAT ABOUT INTEREST RATES INCREASES?
A lot of investors freak out about swelling inflation, which they fear will bedevil Tech stocks far into the future. The recent jump in Jan 2022 CPI to 7.5% annually which is the highest spike since Feb 1982, when America was reeling from an OPEC-driven surge in oil prices, has prompted a sharp change in the Federal Reserve guidance on the number and pace of interest rates increases for 2022, 2023 and 2024 on 11 Jan 2022. This has caused Tech stocks, Nasdaq, the DOW and the S&P 500 to suffer its first correction since the Covid-19 Pandemic sell-off or 19 Feb 2020 to 23 Mar 2020. The S&P 500 sold off from 4,796.56 on 3 Jan 2022 to reach 4,304.76 on 22 Feb 2022, a loss of 491.80 points or 10.25%.
At GCP Global, we have pre-empted and warned on such eventuality in our previous Tech classes as the market has gone up for 449 market days or almost 1 year 11 months without a 10% correction. This was the 2nd longest period without a 10% in the past decade. Now that it has happened, we are watching the bond market and volatility indexes closely to monitor how bad the sell off in Tech will be.
Bond yields are good indications on whether and when a lid on inflation will be put. Rather than panicking and bewildered by fickle media and analysts reporting, we train our investor students to watch the 5-year Breakeven Inflation Rate closely.
Table 3 above shows that the average annual inflation forecast over the next five years at 3.23%. The metric measures the difference between rates for five-year Treasury notes and 5-year Treasury Inflation-Protected Securities, TIPS. This number implies what market participants expect inflation to be in the next 5 years, on average. The treasury bond data used in calculating interest rates spreads is obtained directly from the US Treasury Department.
Whilst these levels are high as compared to levels seen in the past decade, these levels are just above the 3% level, about 50% below the shocking Jan 2022 CPI of 7.5%. Yes, the latest estimates are north of what Wall Street investors have gotten used to over the past few decades at around 2%. Still, they are nothing like the double-digit CPI increases that plagued the 1970s and early 1980s. At its peak, the CPI registered an annual increase of 13.5% in 1980, up from 5.7% in 1976.
Besides, Wall Street has proven that it can live with a sub 3.5% inflation level during the early 1990s when the CPI rose to around 3.5%. The S&P 500 did not have a 10% correction till 7 Oct 1997. And even then, it corrected from 983.12 to 876.99 or a magnitude of 10.8% when inflation first reared its ugly head.
Why the Need to Invest in Tech
Investing in Global Tech and e-commerce goes beyond offering a thematic portfolio. An idea only has value when combined with proper implementation. My goal has been and will continue to be – an all-in-one service that combines all key aspects of a successful investment strategy from identifying and understanding clearly the underlying technology and the stocks that will benefit from the rapid evolution of the technology.
Global Tech has an internal rate of return of more than 30% annually since I invested heavily from 2014. Many of the Tech stocks that I presented at public investment seminars in Asia have tripled in the last 3 - 5 years. This has beaten the S&P 500, the FTSE REIT Index and FTSE STI Index hands down over the same period.
Most importantly, there are real returns, not a back-tested strategy, where we have reaped the bountiful rewards. I expect this superb outperformance to continue in the current decade. As many of my REIT students have come to understand, REITs offer investors steady dividends every quarterly or half-yearly which offers the steady cashflow for investors to invest in high alpha returns stocks like Global Tech. This has been sacrosanct in our teachings, and we continue to carve it in our tombstone of Multiplying Wealth for our student investors which total more than 8,000 currently across many Asian countries.
In Tech, unlike REITs, it can oftentimes be very daunting to navigate and understand high growth companies like Nvidia, NVDA or Advanced Micro Devices, AMD. For sure, the chip stocks like NVDA and AMD will be volatile as their business profile are almost totally different from other businesses that are traded on SGX like Banks, Property and Manufacturing. But it is crucial as this are the kind of companies that can create transformational wealth for the sharp and smart investor.
So, hurry and grab our Early-Bird Special for our next twice-a-year Tech class on 19 Mar 2022 where we seek to address a few misconceptions on Tech like “Tech Stocks are Expensive” or “Tech stocks are Difficult to Value”. But it is precisely overcoming such misconceptions can one consistently multiply one’s wealth in Tech over 1, 2 and 3 decades, inflation or not. Do join us at Investing Profitably In The FAAMG & Doubling Your Money In Tech Stocks | gcpglobal (gcpglobalsg.wixsite.com)
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