If you had bought the tech-heavy Nasdaq Composite index a year ago, you would be sitting on a return of about 35 per cent now. That compares with a gain of about 15 per cent on the broader Dow Jones Industrial Average .
What are the trends and opportunities that you should be looking at now? You asked Cameron Scrivens, a senior portfolio manager at RBC Asset Management your tech sector questions.
Mr. Scrivens manages the RBC Global Health Sciences Fund, the RBC Global Technology Fund and the RBC Life Science & Technology Fund. He is also co-manager of the RBC US EquityFund C$ and the RBC US Equity Currency Neutral Fund.
Please note that he cannot comment on all tech stocks, only those that his funds may hold.
Mr. Scrivens began working in the investment industry in 1993 for Carson Group in New York, where he advised issuers on capital structure, macro-economic trends and the outlook for capital markets. In 1997, he joined AGF Management in Toronto where he eventually became VP and Portfolio Manager responsible for a range of U.S. mandates.
He then worked for Blair Franklin Capital Partners managing global equities and Scotia Capital managing a proprietary trading book, and joined RBC Asset Management in 2007. He holds a BA from the University of Western Ontario and an MBA from the University of Toronto.
Sonali Verma, Globe Investor: Thanks very much for joining us, everyone. Looks like we're having some problems with Cover It Live. The discussion will appear here instead -- just keep refreshing your screen every so often to see new questions and answers. You can send in questions by clicking here.
We have many questions on Research in Motion , so let's start with those:
Nick Waddell asks: Do you think that RIM entering the consumer market and competing directly against Apple means that the wide moat they have enjoyed in the enterprise market has peaked?
Cameron Scrivens: Thank you to all the participants on this discussion. Looking forward to the interaction. Just a note that I'll refer to companies using their ticker symbols.
RIMM has done an outstanding job penetrating the enterprise space with their device and software. We think that RIMM has an uphill battle to gain traction in the crowded consumer space. With outstanding products from the likes of AAPL and new devices from PALM, NOK and MOT it will be challenging for RIMM to gain share in this market place. One of the competitive disadvantages for RIMM devices is the modest number of apps.
Bob and Marg ask: What is your outlook on RIM?
Terry Frost asks: What are your thoughts/expectations regarding Research in Motion stock?
Darry Stevens asks: Where do you see RIM going with its price in the next 30-60 days?
Cameron Scrivens: We think that RIMM will be in a trading range over the short term, as we believe investors' confirmation that RIMM's consumer strategy is working.
RIMM will be launching the Storm2 device in the near term and we will be watching it closely as the first iteration of the Storm did not meet expectations.
Read more : Jim Balsillie discusses the Storm2:
Margaret writes: My question is: Is this for long range investment? There are many kinds of tech stocks -- which do you recommend?
Cameron Scrivens: At RBC our general approach to investing in technology stocks is to take a top down approach and then use a proprietory 3D stack-screening system which encompasses technical, quantitative and fundamental factors to help us select stocks for our portfolios.
Using this approach, we are positive on technology stocks over the longer term. Within the technology universe, many companies have been holding back on their technology spending for the past couple of years, which will benefit the likes of MSFT, INTC, CSCO, etc. as these companies upgrade their systems, hardware and software.
Another reader identified as cGuest asks: In your opinion will MSFT keep climbing or will it dip back down after last week's rally?
Cameron Scrivens: MSFT had a blow-out quarter, and we believe that the company is facing a multi-pronged product cycle with the roll-out of Windows 7, Office 10 and WinServer 2008 R2. As Vista was a disappointing software upgrade, many consumers and businesses have been waiting for Windows 7. In addition, MSFT has cut operating expenses materially, so we should continue to get earnings upside and revenue beats. MSFT is still trading at a relatively low valuation and we believe they have good things ahead.
Csmyth asks: What is your outlook for Technology companies whose customers are almost all com[...]ercial, such as IBM, given the recent optimism.
Cameron Scrivens: Thanks, Csmyth. IBM is, in fact, quite a diversified technology company, with hardware, software and services in their business mix. We like the company and, given our previous comment regarding the enterprise upgrade cycle, IBM can be expected to benefit as companies reinvest in technology.
Michael O'Connor writes from Fredericton, NB: Hi Cameron, so to get right to the headline question, what are the trends and opportunities that we should be looking at now?
Cameron Scrivens: Thanks, Mike. We think that technology companies today are better positioned than they were after the 2000 "tech wreck".
The balance sheets and income statements of these companies have told us that, over the last 10 years, technology companies have kept their inventories lean and have not spent like they did in the late 1990s. Coming out of the March 2009 downturn, technology companies have proven able to expand their margins and grow the top line (revenues). Semiconductor companies tend to lead out of a downturn and this has been the case over the last 6 months. We like software companies and we believe that there is a great opportunity for hardware companies also.
cBill asks: Has Apple gone too high and has RIM gone too low? What is your pick between these two tech favourites? Thank you.
Cameron Scrivens: We prefer APPL over RIMM. APPL has a solid platform which, we believe, continues to take consumer and enterprise "mindshare". The iPhone device sales were outstanding last quarter, which demonstrates APPL's lead in the consumer smart phone space. Notebooks and iMacs were also excellent in terms of sales. As we expected, iPod sales have been declining, given that many consumers are upgrading to the iPhone as both their mobile communications and entertainment device.
Going forward, we continue to expect great traction from the iPhone, and APPL will continue to increase its presence in the notebook and desktop computer space.
Tony Ritzi asks: I wanted to know if you were following Terago networks, and if you had any input on where you thought they were headed in the next few years?
Pierre Quenneville writes: I recently purchased shares in DWI (DragonWave International) and was surprised to see the share value plummet when more shares were listed on Nasdaq. Cannacord Adams and RBC both stated share value to be north of $14. It's now around $9.49 as of this morning before trading. Do you think the $14 valuation included the recent 7 million+ share issue on Nasdaq? Any comment would be appreciated.
Kyle Storey asks: Can you ask Mr. Scrivens his opinion of TSO3 Inc., (TOS-T), I've held it for a couple of years. Should I continue to hold.
Cameron Scrivens: We've had a couple of questions about small Canadian wireless hardware, software and services companies. While we aren't holders of these companies specifically and don't follow them actively, we think that there will be a telecommunications upgrade cycle as consumers and businesses continue to demand higher speeds and volumes for data and voice communication. This trend will benefit these sectors in general.
Sonali Verma, Globe Investor: Cameron, sincere thanks for sharing your expertise with us and for giving us so much of your time. And thanks to everyone who joined us. Before we wrap it up, Cameron, any concluding remarks? Do you think we're headed for a correction, or this is the time to buy?
Cameron Scrivens: In general, we think that the markets overall will be positively biased over the longer term. We have seen a tremendous run since the March 2009 lows and we may be due for a pause, but given the low interest rate, low inflation environment, we believe that companies will continue to post strong earnings and revenue growth.
Looking more specifically at technology, this sector has been one of the leaders in 2009. Given that we still believe there are tailwinds (enterprise upgrade cycle, lean inventories, recovering consumer, etc.) behind many companies, we expect many technology stocks to continue to do well in 2010, although going forward it is likely to be more stock-specific.
Thanks, everyone, for the opportunity to be here.
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