The sparkle may have come off technology stocks recently, but there is still good value in the sector according to Henderson Investors Singapore managing director Alex Henderson.
The news in the tech sector hasn't been good since April when the Nasdaq crashed. More recently it has taken another hit as concerns are being raised about the growth capabilities of the companies which actually produce computers and chips.
Henderson says the real growth for the sector is in companies that produce the information technology infrastructure, and in the business-to-business, rather than business-to-consumer end of the Internet.
He says the huge growth in spending by corporates on information technology augurs well for the continued growth of the sector.
"We are excited about the commitment (by companies) to IT spending."
He says in the US more than 50% of corporate capital expenditure is on information technology.
"As the economy gets richer they spend a greater percentage of their expenditure on IT," he says.
The most promising parts of the industry are: companies which build and service websites, software manufacturers, transaction processing
"I'm a little bit cynical about B2C," he says. The real opportunities for the Internet are in supply chain management.
Henderson says the valuations on tech companies have become a lot more realistic since the Nasdaq correction in April.
Currently Henderson Investors is bullish on the US economy, as it believes growth is slowing and the Federal Reserve won't lift interest rates. The main risk in the economy is that earnings growth won't be sufficient to maintain high stock multiples.
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