Get your teeth into the FAANG stocks of the future with these three budding tech titans
Professional investor Josh Sambrook-Smith of the Digital Opportunities Fund at Sarasin & Partners picks three stocks that he thinks could grow to be the tech titans of tomorrow.
Digitalisation is a multi-decade investment theme – a megatrend ushering in the unparalleled adoption of digital products and services. The theme encompasses everything from social media and cloud-computing to machine learning and digital commerce. The coronavirus crisis, which is bringing firms’ digital capabilities to the fore, will accelerate these developments.
The cost of bandwidth, computing and storage has been falling for decades. As a result, the barriers to digital innovation have collapsed. With an array of digital tools and services at their disposal, entrepreneurs are embarking on a frenzy of creative destruction, challenging the old industrial economic order.
Technology investing is commonly perceived to be a one-horse race, with the FAANGs expected to dominate the world, but this could not be further from reality. The acronym stands for tech giants Facebook, Amazon, Apple, Netflix and Alphabet (formerly Google). Tech is an immensely varied and creative sector, with pockets of specialisation so extreme even the FAANGs struggle to compete. The current wave of historically unparalleled innovation is creating a broad range of investment opportunities.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Seeking the sweet spot
Instead of investing in the FAANGs of today, we are trying to find the FAANGs of tomorrow. While you could make a decent return investing in Google today, you are unlikely to enjoy the same growth as in the time before Google became a household name. Focusing on the winners of the past can also mean missing out on the winners of the future. We seek to capitalise on digitalisation by investing in smaller and medium-sized companies with compelling long-term growth prospects. Between high-risk stocks and the maturing FAANGs is a sweet spot where we can find established firms with great potential.
Tomorrow’s tech titans
The digitalisation theme comprises more than 300 potential investment opportunities. They can be found in several areas – not only in foundational sectors such as semiconductors, towers, data centres and computing hardware, but also in IT, operations, HR, data analytics, sales, supply-chain management and communications, as enterprise reinvents the way it does business. Lastly, there are companies using technology to completely redefine industries.
One company at the forefront of the digitalisation trend is cloud-computing group ServiceNow (NYSE: NOW), which provides work-flow automation services. ServiceNow’s offering enables massive cost savings for companies, in some cases allowing them to halve their workforce.
Another company likely to become a major tech player over the long term is Splunk (Nasdaq: SPLK), a data-analytics group producing software for extracting and analysing big data. Its products can be especially useful in the face of hacking threats, allowing companies instantly to detect warning signs across global networks of servers.
Zendesk (NYSE: ZEN) is another company that’s rapidly becoming ubiquitous. The customer software-service business creates chatbots for e-commerce websites. These are being widely adopted as consumers retreating from traditional in-store shopping increasingly seek a personalised experience.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Josh Sambrook-Smith is manager of the Digital Opportunities Fund at Sarasin & Partners
-
Is a mortgage in retirement always a bad idea?
A mystery shopper exercise shows high street lenders are “shunning” retirees looking to take out a mortgage. Are they right to do so?
-
Three funds to consider as UK small caps trade at 30% discount
UK small caps have been unloved for some time, but a shifting economic environment could give them a boost
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
Trainline: a cheap cash machine for investors
Opinion Trainline’s shares have slumped owing to concerns about growth, but the sell-off seems overdone
-
Look to British stocks to lead the charge as the Magnificent Seven falter
Opinion Gervais Williams, fund manager, The Diverse Income Trust, picks three British stocks where he'd put his money
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.