Apple stock drop fails to deter Magellan from ‘tech spree’

Bloomberg

The decline in Apple Inc.’s share price over the past year has failed to deter one of Australia’s top performing equities managers from boosting its exposure to the iPhone maker and other technology firms as they embark on an “arms race” that’s set to upend global business.
Magellan Financial Group Ltd.’s flagship fund is also betting on software maker Microsoft Corp. and Alphabet Inc., owner of the Google search engine and the Android mobile operating system.
While Apple, the Magellan Global Fund’s top holding, lost 16 percent in the 12 months through Friday and has been one of the biggest drags on its performance, the others have paid off more handsomely.
Alphabet gained about 20 percent over the same period, while Microsoft is up 22 percent.
Magellan wants to own businesses where artificial intelligence “will get monetized” and companies such as these provide avenues to do so, Magellan Chief Executive Officer Hamish Douglass said in an interview Monday. Artificial intelligence is approaching a “tipping point of exponential technological advancement,” he said in the company’s annual report to investors.
The A$7.9 billion ($6 billion) Magellan Global Fund has beaten all but 2 percent of its peers in the five years to July 27, delivering an average annual return of more than 20 percent, although its 0.9 percent loss over the past 12 months has been less stellar, according to data compiled by Bloomberg as of July 28. Douglass said the fund has more than doubled its exposure to technology stocks in the past two years as it bets innovations in artificial intelligence will reshape how companies conduct business.

MASSIVE ADVANCES
“I describe it as a nuclear arms race that’s occurring,” he said by phone. “Many of these big technology platform companies appear to be making massive advances in machine-learning, voice recognition.”
Other technology firms that feature in Douglass’s portfolio include Larry Ellison’s Oracle Corp., chipmaker Intel Corp. and online marketplace eBay Inc., according to the annual report.
He is also backing credit card company Visa Inc. and fast-food franchiser Yum! Brands Inc., while home improvement chain Lowe’s Cos. and CVS Health Corp. round out his 10 biggest investments.