The Two Johns

John, this is the subject of your weekly column in the Investors Chronicle and on the website.

But yeah, I guess the interesting point is technology, which has been a growth sector for a while, which has been the investment case that we have long been interested in, has kind of swiveled to a value case.

Talk us through the thinking behind that.

yeah john i mean very briefly um as you well know where the portfolios in general are underweight equities and within that underweighting we're underweight the us and i have been underweight the larger technology companies uh as a result and we're overweight value basically um believing that value stocks tend to perform well in times of stagflation and there's no reason to believe that it's going to be different this time having said all that We've seen quite a sell-off in technology for a variety of reasons.

I think there's concern about valuations.

There's perhaps the end of the so-called US exceptionalism.

There's concerns about geopolitical policy and so forth.

And to the point where the technology sector has come back to a valuation range which we think looks attractive.

And although we intend remaining overweight value, and value is outperforming, we do have one eye on portfolio balance.

and ensuring that there's an element of that, despite our favoured sectors and themes, of value.

And we think technology does represent an attractive entry point for those that wish to top up, as we have done.

What sort of de-rating have we seen? Obviously, this was an extremely expensive sector, and particularly some of the larger companies within it.

They got the kind of rating, PE ratings, barely ever seen in history, if ever, what have they sort of fallen from and back to?

Well, I produced a chart in my monthly Investors Chronicle column and reproduced on the website, basically looking back over roughly the last year and making the point that if you look at the S&P 500 and then the S&P 500 technology sector, the technology sector was on a rating 31, 32 times expected earnings.

And it fell back to in April around 22, 23 times.

So still reasonably punchy when you look at other markets overseas, but certainly much better value than it was over the summer of last year.

And I suppose...

That gives you a flavor.

Meanwhile, the S&P itself bonded between 20 and 22.

So the technology sector rushed up.

Then it came back in April.

It's bounced a little bit now.

But we just thought in April it was a good opportunity and added to portfolios accordingly via an investment trust we particularly like.

We'll come on to what that trust is in a minute.

Let's just sort of stick with the big picture for now.