Selloff Is a Rotation From New to Old Tech: Hawtin

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April 16 (Bloomberg) -- Mark Hawtin, investment director at Gam, discusses what he sees as the reasons for the selloff in tech stocks, what we will learn from this earnings season and what will be the next thing to watch in the industry on Bloomberg Television’s “The Pulse.”

About the trends.

If you look at the correction we have seen over the last two weeks, has it been justified or is it market movement?

I do not think it has been justified by fundamentals.

We have seen no change in earnings expectations, and a downward revision in technology.

We have seen a rotation from risk on to risk all.

Some of these leading-edge names in the cloud and social networking mobility have risen extremely fast over the last six months.

We have seen a reverse of that.

Is that going to have more to go?

Or do you think we are starting to get to levels where you would be biased?

It is tricky to predict.

There have been three occasions in the last 10 years where what we might call leading-edge has underperformed the broadening sector by 12% to 15%. one was in 2008, one was in 2011 . the third is the last six weeks.

If we look back at history, this would represent a maximum pain point.

Therefore i think we are closer to the bottom of that rotation and may have a little bit more to go.

We are looking for opportunities to buy.

What are you looking for?

Social media, technology, wearable technology?

Anything you are pinpointing that might look expensive that will be the next big thing?

X co in general, we look for ways to gain exposure to social networking, internet of things, the automation of knowledge work.

If we can do this through traditional names, we do, because we get better valuation.

Hard disk drive companies like western digital.

Some of the leading-edge names are really interesting and have really big setbacks.

We like fireeye.

Are you comfortable with the multiples being paid when it comes to technology m&a right now?

A difficult question because we are being asked to make an assessment, this might be worth many years in the future.

The cycle is so compressed now compared to what a used to be historically.

A company like facebook, and 10 years, has driven a quite big revenue stream and a big evaluation.

Whatsapp in four years attract a valuation of $19 billion.

It is hard to be certain.

We do have to accept that companies can create enormous value very quickly in this iteration of the technology cycle.

We are very excited because we are about to start some virtual reality testing.

We will be trying on oculus.

As virtual reality going to be the next big thing customer it is used in gaming.

How can you translate that into retail?

It will be the goal to see that move anytime soon.

I know you talked earlier about the tesco test case of being able to put on a virtual reality set of glasses and see the aisles.

You still cannot touch them and do a great deal more than you can do by doing online shopping at the moment.

I think it is going to take a long time before it gains any form of mass acceptance and the price point will have to be dramatically lower.

I think we are many years away from that.

Those of us who are a little older lived through the 2000 dot com bubble crash disaster for the tech sector.

Which some would say created so much more value because it forced companies to be more pragmatic.

In terms of where we are right now in silicon valley and in the tech centers around europe, do you get a sense that momentum is building?

We have come a long way but there is still more to come.

Do you get a sense that some of the technology we have been talking about, oculus, we are getting ahead of ourselves in what it can deliver?

When you step back and look at the landscape, what are you seeing?

The key is you need to be selective.

When you get any type of hype or major price appreciation, it draws up the good and the bad initially.

That is what we have seen in the last six months.

We got to a point over the last four months where pretty much any ipo that had the word cloud computing or social networking went to 50% or 100% rhenium on day one.

It is about being selective.

That is the key.

Look at each technology at each company and its own merits.

Do the intrinsic valuation work.

It is really hard in a business where the life cycle, the half-life of one technology to the next one is going shorter and shorter.

When you run your normal valuation metrics over these businesses, is it getting harder and harder to get the model to spit out or easily understand an answer?

The answer at the beginning of this year is that we were finding it tougher.

The setbacks have allowed us to see some of our companies at 50% to 100% up time -- upside.

We do not look at p valuations, traditional violations do not work well.

When you look at weibo or the chinese tech giants, they seem to be more reasonable, should that be the benchmark?

We have increased our chinese exposure for exactly that reason.

Chinese has -- china has the fastest-growing smartphone growth, 25% a year.

The western world is relatively stagnant.

More interestingly, we are seeing an opportunity to miss out on traditional ways of dealing with the market.

In china we might move straight to online retail and miss out on bricks and mortar.

The chinese market is very exciting.

Mark hawtin, investment

This text has been automatically generated. It may not be 100% accurate.


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