INVESTING IN TECHNOLOGY & INNOVATION

A Long-term View on Innovation

 

The outbreak of Covid-19 has forced a number of behavioural changes throughout societies across the globe, including how we work, shop and interact with others. These changes are accelerating existing dynamics at a faster pace, including the drive towards digitalisation of business and consumer behavior. At the same time, the world’s medical and scientific community, including health care, pharmaceutical and biotechnology companies are working more closely together than ever, in response to the COVID-19 virus.

Now, more than ever, we see innovation as the main driving force behind value creation in the global economy, as technology becomes more integrated into business processes and consumer behaviour. Growth-oriented investors need to start investing into innovation across industries to have the potential to outperform the market.

Matthew J. Moberg, Portfolio Manager of Franklin Equity Group who manages strategies focused on investing in innovation, believes that COVID-19 will be an accelerant of new innovations in many cases. He shares his outlook for the tech and biotech sectors in light of recent market uncertainty. Learn more in the video.

DRIVERS OF INNOVATION AND TECHNOLOGY GROWTH

 

Technology is fueling disruptive innovation, streamlining outdated processes, and creating new possibilities. We are in the middle of a period of unprecedented innovation where numerous technology-driven themes are starting to disrupt various industries.

While new technologies have already changed our world, the pace of innovation is continuing to accelerate. The coming decades will feature even more growth in digital technologies, tools, and services. Where are the potential investment opportunities?

Artificial Intelligence
Enables data analysis using automated computing processes at scale

Examples: Alibaba, Facebook, Google1

Cloud Computing
Supports companies in scaling their digital businesses globally at a low cost

Example: Amazon1

Financial Services (Fintech)
Key to new commerce growth, allowing for digital transactions

Examples: Tencent1

Internet-of-Things (IoT)
A rich source of consumer and business process data

Example: Qualcomm1

Software as a Service (SaaS)
Provides enterprises with a more efficient way to attract new customers while scaling operations

Examples: Salesforce1

E-commerce
Connects buyers and sellers no matter how far apart
Example: MasterCard, Alibaba1

Medical Technology
New pharmaceutical technologies offer new treatment options for patients and advancements in healthcare

Examples: Illumina Inc.1



As technology becomes more integrated into business processes and consumer behaviour, the pace of innovation will continue to accelerate.

Here are the key reasons why investors need to start investing in innovation.

KEY REASONS TO INVEST

 

  • Widespread Adoption of Technology

    From process automation to big data, digitalisation shapes our world today. More and more businesses are embarking on the digital journey and adopting digital tools to remain competitive.

  • Technology firms are increasingly central to the economy and businesses.

    The sector is dominating the equity markets and will continue to grow as a result of the digital transformation megatrend. Today, seven out of the ten most valuable companies are technology related.

    Top 10 Companies by Market Capitalisation (in USD billion)3
    As of 31 May 2020
  • The valuations of the technology sector (price-to-earnings ratio) remain reasonable and are nowhere near the dotcom era peak. The sector is also the third-most profitable sector in the S&P 500 Index by earnings before interest, tax, depreciation and amortisation margins.5
    S&P 500 Info Tech Index vs. S&P 500 Index
    Price-to-Earnings Ratio
    4
    1 July 1996 – 31 May 2020
  • Exciting future themes in Biotechnology

    We see exciting developments to come in gene therapy, immuno-oncology and platform companies, with new ways to deliver functional cures for genetic disorders, new therapies for cancer treatment and disease treatment.

     

  • Opportunities for the next decade and beyond in genomic advancements

    The cost of gene sequencing—the mapping of DNA for diagnostic and curative purposes—has fallen dramatically, creating rich set of opportunities for companies that benefit from this trend.

    Evolution of Genomic Sequencing6

    As the cost of sequencing a gene has declined, the investable universe has expanded from equipment and tools to contract resourcing, organisation, diagnostics, and therapeutics.

    The expansion of investment opportunities is only beginning.

    Evolution of Genomic Investment Universe7

CAPITALISE ON INNOVATION WITH OUR FUNDS

 

The diversity of technology sub-sectors and the prevalence of technology in daily life make a strong argument for treating technology as a core element of investor portfolios.

We see these themes evolving at different paces and becoming investable at different times. Thus, we offer a full range of equity funds that are actively managed to help guide investors into these themes. Check which one best suits your investment needs.

20

years

since launch

Franklin Technology Fund*

  • Identifies high-quality technology companies worldwide

  • Capitalizes on investment opportunities arising from digital transformation

  • Focuses on three leading growth themes cloud computing services, the internet of things and e-commerce

  • 20-year anniversary in April 2020

20

years

since launch

Franklin U.S. Opportunities Fund*

  • Invests in leading growth companies located in the US - the world‘s largest and most resilient equity market

  • A well-diversified, multi-cap, multi-industry portfolio

  • Leading growth fields in focus are technology, biotech and communications

  • Track record since 2000

  • A single-industry-focused fund that invests in biotechnology companies across all market capitalisations

  • Seeks potential growth from recent breakthrough developments

  • Focuses on biotechnology, emerging pharmaceutical, medical technology and life science tool companies

  • Long fund history since 2000

  • Identifies the growth potential of the most innovative companies worldwide
  • Focuses on global e-commerce, genetic breakthroughs, intelligent machines, new finance, and exponential data

  • A broadly diversified growth portfolio

  • Launched in 2019 – mirrors a similar fund sold in the US with a successful track record since 1968

*Sub-funds of Franklin Templeton Investment Funds, a Luxembourg-registered SICAV ("FTIF").

Our expertise in the technology sector

 

Franklin Templeton’s Strategic Location Technological and digital trends are changing our world at a faster pace than many investors expect. Franklin Templeton’s location in Silicon Valley and San Francisco Bay area gives our team unparalleled access to the world’s largest and well-established technology and biotechnology companies, research universities and venture capitalist firms. This access helps to see investment opportunities and technology-driven disruption before the broader markets.

Headquartered in the middle of the Silicon Valley, the team is located in the proximity of leading technology companies, research universities and Venture Capital firms. This access helps to see investment opportunities and technology-driven disruption before the broader markets.

30

Sector Experts8

Experienced sector experts conduct in-depth research and provide industry coverage across all market caps and styles.



 


NEXT STEPS

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