Asia Will Drive Growth for Core Tech Companies

Today GaveKal was out with a research note regarding the growth of consumption in Asia. We won’t regale readers with the entire note but one thing stood out:

Asian consumers generally have space issues and tend to be technology savvy. These conditions tend to stimulate purchases of technology gadgets as consumers get more disposable income.

Juxtaposed against the recent market sell-off in technology shares the argument is more compelling. The fact is that technology companies are generally in much better shape to weather the slow growth since many of them are so cash rich. (25% of assets in the S&P technology companies are in cash)

So technology stocks look like good medium term call options on global growth and are positioned very well longer term to benefit from increased consumption in Asia.

The above comments capture the gist of what was said in the note and we would add that a number of very strategic core names like Apple (AAPL), Adobe (ADBE), Google (GOOG) and Cisco (CSCO) should probably be bought here on a long term basis.

Overall economic fundamentals and a lack of certainty on future estimates will keep some pressure on these names but owning shares in these franchises when growth and visibility comes back will absolutely be the right thing to do.

Technology innovation and adoption is alive and well. We are in a short-term pause before what appears to be a major adoption cycle a year or two out.

Disclosure: Research 2.0 owns shares in the companies mentioned above.

Comments

[expat in China:]

Well gagets change in a heart beat and the cost and lead times to market are bruising to a tech company.

I have been in China for 5 years and I could buy a very good clone of any tech gaget for pennies. Yes patend and copyrights will some day be undercontrol but the reality is to make money you need to fast to market and fight the 10 year infringement suits.

What is the dividend yield of most tech companies? sure they make money but in the habit of sharing it?

So the risks are great and the rewards are fleeting.

Feb 25 03:10 AM

[Zoltan L. K...:]

Apple is just at the beginning of penetrating Asian Markets, (opening retail strores and selling products), especially in the largest ones. So there is plenty of room to grow for them in these growing economies.

Feb 25 03:56 AM

[ArtfulDodger:]

These are great companies; this article shows there's more potential in them than most think.

Feb 25 05:14 PM