Ian Cowie: the tonic to cure tech troubles

New technology, same old trouble about succession. Apple Inc (NASDAQ:AAPL), the digital giant that was the first business to achieve a $1 trillion (£740 billion) stock market value, saw its longstanding chief executive stand down on Tuesday.

That prompts worries about a core holding - sorry - in many investment portfolios, including my forever fund where it is the most valuable asset. Can Apple continue to shine? Or will investors get bruised?

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Other current tech troubles and sources of anxiety include the recent $18 billion settlement by Meta Platforms Inc Class A (NASDAQ:META), the Facebook owner, after claims it harmed children. Since it turned a feeling into a single-click button in 2009, Facebook has gained many “like’s” but remains unloved by regulators and others.

Both news events demonstrate the value of investors obtaining diversified exposure to technology. Similarly, professional stock selection can pay off in this sector, where many individual investors may struggle to keep up with fast-moving tech details.

Certainly, I am delighted to have been a shareholder in the investment trust Polar Capital Technology Ord (LSE:PCT) for more than 13 years, not least because it currently leads its Association of Investment Companies (AIC) sector (consisting of five trusts) over the last year and five-year periods. But PCT faces strong competition from Allianz Technology Trust Ord (LSE:ATT), which did even better over the last decade.

To be precise, PCT delivered eye-stretching total returns of 781%, 159% and 63% over the decade, five years and one-year periods. Over the same terms, ATT achieved 844%, 132% and 53% respectively. Neither pays any dividend income.

Better still, it is not too late to log in and buy a stake in the future. PCT shares continue to be priced 8.9% below their net asset value (NAV) and ATT is priced at a 7.3% discount to NAV.

Both their underlying portfolios include the aforementioned Apple and are led by the graphics processing unit (GPU)-maker NVIDIA Corp (NASDAQ:NVDA). Only the £7.8 billion total assets of PCT include META but both investment trusts’ top 10 assets include the software giant Microsoft Corp (NASDAQ:MSFT), the search engine Alphabet Inc Class A (NASDAQ:GOOGL) and the self-descriptive Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM).

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Interestingly, neither ATT nor PCT includes the online retailer Amazon.com Inc (NASDAQ:AMZN) in their top 10 holdings. It is also notable that the £2.5 billion assets of ATT include smaller tech names such as Micron Technology Inc (NASDAQ:MU) and Lam Research Corp (NASDAQ:LRCX). This has given ATT an advantage in the recent past when enthusiasm about all things tech was unbounded.

That trend probably peaked when the “Magnificent Seven” tech giants - namely Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and the electric car-maker Tesla Inc (NASDAQ:TSLA) - pledged to spend a total of $780 billion on AI this year.

Now that fashion is fading, PCT’s more mainstream approach is gaining ground. Doubts are rising about whether the mind-boggling sums being hosed into artificial intelligence (AI) capital expenditure will ever be seen again.

Similarly, the former chief executive of Apple, Tim Cook, was criticised - but now looks shrewd - for taking a cautious approach to AI CapEx and letting other companies win the hard yards. Whoever survives the AI software war will probably have to go through Apple hardware, anyway, to reach end users in the retail market.

Now tech watchers are waiting anxiously to see whether Cook’s successor, the new chief executive, John Ternus, will continue this cautious approach to AI. While Cook was criticised for lacking innovation relative to his predecessor, the quirky company co-founder Steve Jobs, investors loved the way Cook grew profit margins.

Apple’s stock market value soared from $350 billion in 2011, when Jobs died, to $4.7 trillion now. That’s equivalent to adding $32 million in value for every hour that Cook was in charge, according to calculations by Bank of America.

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Never mind the macroeconomics, here’s this small shareholder’s story. Despite many cynics criticising Cook, I paid the equivalent of $23.75 per Apple share in February, 2016, allowing for a subsequent four-for-one split.

Those shares traded at $325 this week and now comprise just over 8% of my life savings. No wonder Apple enthusiasts say: “Don’t mind the maggots”.

Having bought all my digital kit from Apple since 1990, when other ex-Fleet Street hacks were still bashing away at typewriters, I trust Ternus to continue Cook’s successful strategy of coming second but being best. It’s the early worm that gets eaten and innovators don’t always win.

But let’s hope that isn’t the verdict when Apple unveils its long-awaited folding iPhone, which might arrive as soon as next week. Pip, pip!

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL), Microsoft (MSFT) and Polar Capital Technology (PCT) as part of a globally diversified portfolio of investment trusts and other shares.