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Top stocks from the manager of Canada’s top mutual fund

Star U.S. tech invstor Joshua Spencer.

Andrew Mangum

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Investing in technology stocks is not for the faint of heart, but it sure can make you a lot of money. Joshua Spencer oversees $3.5 billion (U.S.) for American mutual fund giant T. Rowe Price and manages the $466-million TD Science & Technology fund, which boasted average annual returns of 25.8% and 15.2% over the past five and 10 years.

Chalk up much of Spencer's success to his 20 years of experience. "When I started, technology was PCs and corporate data centres," he says. Now the opportunities are far greater, because almost every industry uses technology in some way.

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T. Rowe Price's heft also helps. Spencer can invest globally and across the entire market-cap spectrum. The firm's 20 tech analysts around the world help him keep up with trends. "We want the flexibility to participate in extreme positive outcomes and avoid extreme negative ones," he says.

When choosing individual stocks, Spencer looks for companies with large amounts of intellectual property that are also doing something unique. "If there are four companies that can do the exact same thing, then that's not good," he says. and Workday, two of his favourites, are the leaders in customer relationship management (CRM) and HR software, respectively. Spencer also wants to see earnings quickly. He aims to earn a return of at least 30% on his fair-value estimate of a company's stock price within two years.

Spencer is an active trader, too. His fund's annual turnover rate is more than 100%. He'll buy and sell giants like Alphabet and Amazon often. If a stock goes higher than his price target, he'll consider selling.  If it falls below, he'll consider buying. "We do the work and have the conviction to move when a company misses an estimate," he says.

Yet Spencer is also sure tech will continue to provide plenty of opportunities over the long term. "Technology is only gaining more share of GDP," he says. "Stuff is just starting to happen." Inc. (NYSE: CRM)
In 18 years, this software provider has grown from a basement operation into a giant with a market cap of $56 billion (U.S.). Salesforce is No. 1 in CRM software, and it has expanded into many other workplace-related cloud offerings. Spencer expects 20% annual earnings growth. International Ltd. (Nasdaq: CTRP)
The Shanghai-based online travel company is China's version of Expedia, but unlike its U.S. counterpart, it has nearly no competition. With China's GDP expanding by more than 6% a year and the middle class growing, travel is booming. Earnings should swell by around 40% a year, says Spencer.

Electronic Arts Inc. (Nasdaq: EA)
This video-game stalwart owns hot sports titles, like FIFA and Madden, and other massively popular action games. It generates revenue from the titles themselves and from in-game add-ons. With gaming being the main form of entertainment for younger people, Spencer says EA will keep growing.

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