Our exchange-traded fund (ETF) seeks to capture the leading 120 technology companies globally. We equally weight eight key subthemes: social media; cloud computing; AI & robotics; cybersecurity; digital entertainment; blockchain; genomics and future cars. It is difficult to time the cycles of various areas of the tech sector, and every year there are different winners. By equally weighting the top-15 global leaders in each subtheme, we aim to avoid over-concentration in the US and the “Magnificent Seven”. This makes the ETF a truly global play and helps to reduce volatility and risk. Below we analyse three stocks in the ETF that have caught our attention.
Netflix: a streaming company set for success
When it comes to digital entertainment, Netflix (Nasdaq: NFLX) continues to draw interest. The stock has gained 35% this year as the group has grown its global footprint and subscriber base aggressively.
Netflix has also intensified efforts to combat password sharing, an issue estimated to have cost the company billions in lost revenue over the years. By implementing stricter account-sharing policies and offering new pricing tiers for additional users, Netflix is unlocking a new revenue stream without significantly increasing the cost of its content.
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Netflix is also venturing further into the online gaming sector. If successful, this diversification could deepen users’ engagement, further strengthening the recurring revenue model.
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Cybersecurity is another area of interest, given how the proliferation of cloud computing and AI tools has greatly expanded the scope for threats. To combat remote hacking, the US government is outsourcing more to cybersecurity players, and Congress is likely to pass legislation in this area.
Zscaler (Nasdaq: ZS), a leading name in cloud-based cybersecurity, has seen its stock rise 53% this year thanks to this heightened demand for digital protection. Zscaler offers real-time, zero-trust security that has proved effective in safeguarding remote work environments and complex digital networks.
The company reported a 23% year-on-year increase in its latest quarterly earnings, demonstrating strong operational execution and demand for its services. With high customer-retention rates and a robust innovation pipeline, Zscaler is becoming a core holding for investors seeking exposure to digital infrastructure.
The growth of electric vehicles (EVs) has made BYD (Hong Kong: 1211), the world’s largest EV maker and backed by Warren Buffett over a decade ago, a focal point for us. In the fourth quarter of 2023, BYD dethroned Tesla as the world’s top EV maker, selling more battery-powered vehicles than its US rival. BYD’s vehicles are generally more affordable than Tesla’s, making them attractive to middle-income consumers in emerging markets.
BYD’s success is rooted in its vertically integrated business model, which spans battery production, semiconductor supply, and vehicle assembly.
Meanwhile, BYD’s battery technology is proving useful beyond consumers’ cars. In the UK, its advanced lithium-iron phosphate (LFP) batteries are powering London’s next-generation electric double-decker bus, the BD11.
These buses feature hub motors that allow a remarkably tight eight-metre turning radius, ideal for navigating the city’s narrow streets. With international expansion, government partnerships, and increasing worldwide adoption of EVs, BYD remains a key player to watch.
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