Why Is Julian Robertson Betting on Technology Stocks?
Various sectors of the S&P 500 Index
The S&P 500 Index (SPY) has seen a strong rally so far this year. On a year-to-date basis, the index returned nearly 10.8% as of September 21, 2017. Various sectors of the S&P 500 Index (IVV) have also provided strong returns during this time period.
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The technology sector remained one of the top performers. The Technology Select Sector SPDR ETF (XLK), which tracks the performance of the technology sector, returned nearly 20.5% on a year-to-date basis. Similarly, the healthcare sector also provided strong returns so far this year. The Health Care Select Sector SPDR ETF (XLV), which tracks the performance of the healthcare sector, rose nearly 16.8% on a year-to-date basis.
Julian Robertson on the technology sector
Although the legendary investor Julian Robertson worried about the higher valuation of the market, still he is optimistic about the technology sector and favors some particular technology stocks. He said at the conference, “right now, the Apples, the Facebooks, the Googles, those great growth companies are priced cheaper than they would have ever been in the ’60s, ’70s and ’80s. I don’t think a lot of people realize that.”
Facebook (FB), Google (GOOGL), and Apple (AAPL) returned nearly 46.4%, 17.2%, and 32%, respectively, on a year-to-date basis, as of September 21, 2017. These stocks are trading at trailing price-to-earnings multiples of 35.2x, 30.4x, and 17.7x, respectively. The technology sector is trading at a trailing price-to-earnings multiple of 28.5x.
Robertson is optimistic on these large-cap technology stocks, as he is confident about their business models and he thinks that these stocks’ valuations are cheaper compared to their historical valuations.
In the next part of this series, we’ll analyze Julian Robertson’s view on Netflix.