Each week, a professional investor tells us where he'd put his money. This week: Anthony Ginsberg of the HAN-GINS Cloud Technology UCITS ETF picks three favourites.
We believe that there is a major opportunity in "cloud" technology. Today, this market accounts for almost 60% of total US technology spending; investment in this field is set to rise by 18% this year alone, reaching $214bn, according to Gartner, a research group. Cloud computing describes the trend whereby companies are increasingly paying subscriptions for software and renting computer power online rather than buying applications that run on their own servers. They are also storing and managing more and more data online as the cloud becomes more reliable and secure.
Businesses increasingly consider the cloud cost-effective and safe. For example, AT&T just agreed to shift most internal business applications to Azure. Without cloud-based technology to support them, Uber, Netflix and Airbnb would not exist.
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The top cloud-computing companies
Amid a volatile period for the so-called FAANG tech superstars, it is the giants of cloud technology that are holding up the best. Amazon and Microsoft, and to a lesser extent Alphabet (Google), have all been increasing spending on cloud technology in recent years, and there is unlikely to be any let up this year. A significant portion of Amazon's profits now come from its Amazon Web Services (AWS) division, which leads the growing cloud computing market. Its earnings now account for more than 50% of Amazon's total. Microsoft has almost doubled its revenues in this sector since 2015.
For now, we believe companies such as IBM which recently acquired software firm Red Hat will be big winners as multinationals seek their help transferring and sharing their IT data across multiple clouds. Whichever platform shows signs of becoming dominant in this area will probably become a winner next year. Here are three to watch.
Turning data into strategy
Splunk (Nasdaq: SPLK) produces software that makes machine data accessible across an organisation by identifying data patterns, diagnosing problems and providing intelligence for business operations. Making sense of the growing amount of data the digital world is generating is a top priority for many enterprises. Splunk has forecast that the amount of data production each year will be 44 times greater in 2020 than a decade ago. Double-digit growth at Splunk in 2018 was driven by companies' continued interest in trying to interpret the unusable and unwieldy data they generate.
Providing cloud hardware
Seagate Technology (Nasdaq: STX) is a US data storage company and currently the world's second-largest maker of hard-disk drives and related storage products. Clients include all the largest cloud infrastructure providers, notably Amazon, Google, Apple and Facebook. The growing demand for the hardware used for cloud computing will help drive revenues.
Finally, NetApp Inc. (Nasdaq: NTAP) is a US hybrid cloud and data management Fortune 500 company that helps customers build and run applications on Google Cloud quickly and at scale with the right data strategy. Over 30 leading enterprises in numerous fields, including oil and gas, media and entertainment, and life sciences, are already using NetApp's service.
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