UK investors wishing to access technology stocks may think they have to look to the US and Asia but Fidelity’s Leigh Himsworth believes if investors are willing to move away from the big tech names, there are plenty of opportunities.
Citywire A-rated Himsworth, manager of the Fidelity UK Opportunities fund, argued that while technology stocks made up only a small portion of the domestic market, some small-cap names offered ‘enormous potential’.
Himsworth searches out smaller companies that have ‘leading positions in new but potentially large markets’ that trade at valuations that do not reflect ‘the size of the opportunity’. The companies do not have an ‘obvious large US competitor’.
The fund is 8.3% invested in the technology sector, and among Himsworth’s (pictured) holdings is robotic automation company and small-cap darling Blue Prism (PRSM), which makes up 2.2% of the portfolio.
Himsworth said Blue Prism’s robots were ‘tomorrow’s outsourcing, insourced’.
‘Any US or Asian start-up would kill for their pace of expansion, with revenue growth in the first half to 30 April 2018 of 145%,’ he said.
Himsworth recently took profits on ID verification software provider GB Group (GBG) but is keen to top up on any dips.
‘They appear to have struck a rich vein of demand with their fraud protection software now being used in five of the top 10 banks in China, three of the top 10 in Hong Kong, and three of the top 10 in Mexico,’ he said.
Himsworth is also keen on companies leveraging technology in the healthcare and consumer sectors, with a further 8% of his portfolio devoted to this theme. Himsworth pointed to Oxford Biomedica (OXB), the fourth largest position in the fund, making up 3.3% of the portfolio.
It has a ‘unique’ LentiVector delivery platform that allows gene therapies to be delivered to patients, ‘a system that may revolutionise some areas of cancer treatments and degenerative disease’, said Himsworth.
‘Pharmaceutical research has always been an area of expertise in the UK, and occasionally I come across a company which offers the twin benefits of improving healthcare provision as well as giving shareholders a healthy glow,’ he said.
The fund has returned 58.6% over the past five years, versus 41.2% for the Investment Association UK All Companies sector.