- Covid-19 was a shock to the economy. Businesses had to adapt quickly to new circumstances.
- The most important ways in which businesses achieved this were by increasing their use of IT solutions such as video conferencing and shifting to digital business models.
- Many sectors are likely to receive a further boost in coming years from a shift to full networking across industries.
Covid-19 has triggered a growth spurt in technology-heavy business models.
Can we take any positives from the Coronavirus pandemic? Well, one thing is for sure: enforced social distancing has triggered a digitalisation push - not just among consumers but also in the wider economy. From an investment point of view, that could be particularly beneficial for growth stocks.
In a survey conducted by the digital association Bitkom[1], more than 80 percent of companies stated that digitalisation had become more important to their own business processes and to the economy as a whole. As a result, we now need new software solutions and powerful digital infrastructure to enable a multitude of videoconferences, increased home working and online employee training both during and certainly after the pandemic.
The fourth industrial revolution has opened up growth prospects
"Overall, digitisation is speeding up with Coronavirus," says Marcus Poppe, who manages the DWS Smart Industrial Technologies fund. In his opinion, this trend is also giving further impetus to industrial automation. "Industries are becoming increasingly smart,” he explains. “Their goal is to network people, machines and industrial processes as tightly as possible via the internet in order to make production more flexible and to be able to react more quickly to customer demands or changing framework conditions."
This is where the DWS Smart Industrial Technologies fund comes in. It invests in the shares of international companies that generate a large part of their sales in growth areas. These include medical technology, energy efficiency and factory automation, as well as the infrastructure and e-commerce segments.
Avoid a narrow sector focus
"We concentrate on companies that particularly benefit from the technological breakthroughs currently taking place, without focusing on a specific industry," says Poppe. "For example, we map the digitalisation and data security segment with chip and software companies that have mainly tailored their products to industrial applications."
High-growth technology stocks were for months among the big winners from the Covid 19 pandemic, and adding them to the portfolio last year paid off. However, given its otherwise broad sector weighting, Poppe characterises the fund as a cyclical investment overall that tends to move in line with economic trends. He also does not completely exclude technology companies that may be described as classic growth stocks:
"Of course, the big tech players operate in classic growth fields, but one should not simply extrapolate the growth rates of the past into the future," he says. Their growth is also likely to slow down one day, leading to a rather cyclical share price development.
Technology stocks outperformed all other equities last year.
Companies that offer digitalisation solutions to industry currently look promising.
Covid-19 caused distortions in more defensive stocks
In any case, when you look at share price development in certain sectors, it is clear that 2020 was an unusual year.
"Medical technology is actually considered a defensive and less cyclical sector given the ageing population in the developed world,” says Poppe. Last year, however, hospitals were mainly preoccupied with coping with Covid-19, and so purchases of large new items of equipment such as CT scanners were postponed."
The situation is similar in the infrastructure and building technology and energy efficiency sectors, which historically have not been strongly affected by the economy’s ups and downs. However, Covid-19 sometimes triggered violent price fluctuations in these sectors too.
After its strong run last year, stock-market valuations for the classic technology sector are now quite high, and so Poppe now sees good opportunities in future technologies in the more classic industrial sector.
"Valuations there are not cheap in absolute terms either, but relative to the overall market the stocks have catch-up potential," he says.
That will be especially true if the economic engine revs up again this year and next. The chances of that happening are good because central banks around the world are keeping interest rates low, and billion-dollar economic aid packages are being made available in the USA and Europe.
Fund facts of the DWS Smart Industrial Technologies LD
|
Management Company |
DWS Investment GmbH |
|
Currency |
EUR |
|
Launch date |
24.04.2006 |
|
Fund assets |
EUR 1,079.59 million |
|
Fund assets (unit class) |
EUR 844.63 million |
|
Appropriation of earnings |
Distribution |
|
Issue surcharge |
5.00% |
|
Flat-rate fee |
1.450% |
|
plus performance-related remuneration |
No |
|
Current costs |
1.450% |
|
plus performance-related Remuneration |
N/A |
|
plus remuneration from securities lending |
0.002% |
Risks of the DWS Smart Industrial Technologies LD
-
The fund invests in equities. Shares are subject to price fluctuations and thus also to the risk of price declines.
-
Due to its composition/the techniques used by the fund management, the investment fund has a significantly increased volatility, i.e. the unit prices may be subject to considerable downward or upward fluctuations even within short periods of time. The unit value may at any time fall below the purchase price at which the client acquired the unit.
Performance in the past 12-month periods of the DWS Smart Industrial Technologies LD
|
Period |
Net |
Gross |
|
03.02.2020 - 03.02.2021 |
17.58% |
17.58% |
|
03.02.2019 - 03.02.2020 |
21.15% |
21.15% |
|
03.02.2018 - 03.02.2019 |
-5.74% |
-5.74% |
|
03.02.2017 - 03.02.2018 |
10.8% |
10.8% |
|
03.02.2016 - 03.02.2017 |
27.97% |
34.37% |
