Virtual winnings

Virtual winnings

02 December 2019 from Mikael Syding

Virtual winnings

Just because some consider WeWork and Tesla to be houses of cards, not all technology
companies are. On the contrary. The combination of sensors everywhere (IoT), self-improving
algorithms (AI), augmented and virtual reality (AR / VR) and autonomous transport (drones,
FSD) are already about to fundamentally change everyday life. Lee Sedol knows this, the world champion in the Go game, who the other day announced that he quit playing professionally because he can never beat the computers. Soon, the Swedes will also find out about the new IT wonder, when Amazon establishes physical presence and can deliver goods to the home almost as quickly and cheaply as downloading digital products.

It was mainly US business software that led the rise this fall, with names like Splunk, Autodesk,
ServiceNow and Adobe at the forefront, and of course the giants Apple, Microsoft, Alphabet and
Facebook. The losers in the tech sector have been major Chinese telecom companies and
network hardware, such as China Telecom, China Unicom, China Mobile, Nokia and Cisco. In
Europe we find software companies such as SAP and Dassault among the winners.

The winners are scalable companies that ride on the scale to seamlessly integrate the virtual
and real worlds. Apple has gone from manufacturing computers to delivering pocket-sized
education and entertainment to becoming a more general portal into cyberspace with the latest
3D initiatives. Next year, Apple's standalone 3D headset will be released and a few years later
it's time for lightweight glasses with the same functionality. Apple is no longer its gadget, it is a
user interface that should not be noticed at all. The only other listed billion dollar company,
Microsoft, has also recently taken a patent on a 3D mat to complement the 3D system Kinect.
The trend towards virtual worlds among the winners is clear.

Challengers Alphabet and Amazon have their own variants of being human-machine interface.
Together with Facebook, these companies share the future needs of information, entertainment,
relationships and gadgets between themselves and the rest of the world may become more or
less important niche players. But surely, we should not forget those who make the networks
themselves, the semiconductor circuits, build houses and roads or stand for energy, food and
transport, ie all physical infrastructure. They will always be needed. It's just that they are old
news, while growth, profitability, power and glory are quickly concentrated on the natural virtual
monopoly.

Historically, the financial sector has seized on a growing portion of the economy regardless of
where growth has come from, but now the fintech sector is threatening the banks' payment
hegemony. Admittedly, in the US, the large bank stocks and card companies are still racing
against new all-time highs, not least VISA, MasterCard and JP Morgan. In Europe, on the other
hand, the banking sector signals that a recession and associated credit losses and reduced
lending are waiting around the corner. It is the negative interest rates and the inverted interest
rate curve that make it difficult to cover up for all old sins. Deutsche Bank may be the prime
example of that, but the Nordic money launderers don't seem to feel so well either. The question
is how long the artificial incentives will last to get the US banks to hold back. When the banks
pull the economy down in a downturn, while money pressure rises, the natural losers become
tired of old physical infrastructure companies while the winners become the same virtual
virtuosos as before.

In Sweden, however, it is still the opposite. Industrial companies such as Atlas Copco, Skanska,
SCA, Assa, SCA, Sandvik, SKF and Epiroc top this year's list of winners (and the few losers are
the big banks).

Unfortunately Sweden has few serious technology companies to expect nowadays, although
micro-companies such as MIPS, Vitec and Fingerprint have gone strong. Otherwise, most
gaming companies such as Evolution gaming, Stillfront and Embracer have delivered price-wise
this year and are expected to continue to attract investors' interest even if the economy slows
down. The FortNox business system, IT security company Sectra and the hydrogen fuel cell
company Powercell can also be mentioned in this context.

It is not easy to navigate a world on the way into cyberspace and digital payments, when central
banks try to cure debt mountains with even greater debt. In the US, investors are investing in
finance and software, while Europeans believe in the industrial sector all the way into the
recession, which the clearing bank shares clearly warn of. The Americans are probably getting it
right as usual, ie it is scalable software with low unit costs that will be the winner, while the
financial sector continues to make money off credit card debt. Do you have enough Virtual 3D in
your portfolio, or are you stuck in the woods and mines?

Legal notice

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

08/12/2019 23:16:04

 

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