Would You Invest in Technology and Social Media Stocks?

How many pieces of technology do you have on you right now and when was the last time you used social media? Tech is now ubiquitous - so why not profit from the habit?

Karen Kwok 29 January, 2016 | 7:45AM
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Technology not only makes consumers’ lives easier, but it increasingly provides opportunities for growth not only to businesses, but also to investors everywhere. As more people engage in technology, such as mobile phones and digital tablets, companies which manufacture them also gain profits.

Very strong results from large US technology companies recently helped Polar Capital Technology Trust to a 5% rise and the Allianz Technology Trust to a 1% gain over the past six months.

Facebook (FB), the social media giant, this week revealed it had hit a record for quarterly revenue with the aid of mobile growth. More than 1.6 billion users are now logging on Facebook every month, according to the company. Facebook’s fourth-quarter sales also rose up to 57% from a year earlier. Mobile advertising was 80% of total adverting revenue, up from 69% in 2014’s fourth quarter. Facebook’s shares surged 14% after the report, according to data in Morningstar Direct. Facebook’s impressive result cheered existing investors and poses the question; is it a good time to hold technology stocks in your portfolio?

Facebook was not the only major tech stock to report this week. Laith Khalaf, Senior Analyst, Hargreaves Lansdown said it had been another great quarter for Apple despite economic difficulties in some key markets, but the problem with being a constant over-achiever is that when your grades start to slip just a little, people start questioning your calibre.

Khalaf said the next quarter may therefore be uncomfortable for the tech giant, seeing as it predicts its first decline in sales since the iPhone was launched in 2007.

 “Apple is still very inexpensive, especially considering its almost $25 in net cash, and many investors are only waiting for these lower estimates to become consensus before buying the stock. So we think the stock may stabilize around these levels, despite these “disappointing” results,” said Walter Price, manager of Allianz Technology Trust.

Investors who are interested for the slice of the pie, should be aware that although the technology sector is thriving, it can be volatile and so portfolio diversity is the key.

Very bold investors might also look at new sectors within the technology industry like virtual reality and robots. Who knows when the next Facebook will emerge?

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Facebook Inc A301.02 USD2.17Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk