One of the more interesting sectors to watch has always been the technology sector. There are constantly new ideas being developed and innovative products being brought to market. While this is all “cool”, there can be a higher degree of risk, making it an ideal candidate for a mutual fund or ETF.
One of my favourite funds in the sector has been this T. Rowe Price managed offering. It invests in companies from around the world that are involved in the development, advancement and use of technology. At the end of December, it held over half the fund in U.S. funds, about 20% in Europe, and nearly 18% in China.
It holds just under 50 stocks, with the top ten making up nearly 60% of the portfolio. The top ten is littered with names like Alphabet (formerly Google), Priceline, and Amazon.
Performance has been very strong, gaining an annualized 26% for the five years ending December 31, compared with the S&P 500’s gain of 20.4%. A good chunk of that was currency, with the U.S. dollar version gaining just under 18% annualized, compared with 12.6% for the broader market.
Given the nature of the sector, volatility has been higher, with a level of volatility that is significantly higher than the broader market. In 2008, it lost nearly 31% in Canadian dollar terms, while the S&P 500 was down 21%. However, it tends to bounce higher when markets rally. For example, in 2009, it bounced by an impressive 51%, while the S&P 500 rose by 7.4%.
The manager uses a very active process and has a level of portfolio turnover that has averaged well over 100% for the past five years. Further, the managers tend to use periods of volatility to step in and pick up quality names at attractive prices.
Despite carrying an MER of 2.82%, this is one of my picks in the category. That said, I would generally be reluctant to add additional technology exposure to a portfolio for anyone except the most aggressive investors.