Is Big really "beautiful"?
At least the markets seem to fail to recognise that there is potential to be exploited even outside the tech giants of US origin. T-Mobile and Sprint are good examples of telecommunications companies in a market that has consolidated. This consolidation can also be expected in Europe. But here in Germany, market participants are not yet aware that the industry is in a phase of upheaval. The rollout of the 5 G networks is currently pending - a challenge that is not an easy one. Companies such as Vodafone, Orange and Deutsche Telekom should benefit from the consolidation. Ericsson, for its part, has a very strong position in the equipment market and is one of the major global players in terms of the quality of its equipment technology.
Far from Europe, Samsung is attractively valued, has a lot of cash and has a convincing market position in the fast-growing cloud sector. Good opportunities in the Far East are also offered by gaming companies such as the Japanese Nintendo and Square Enix, a producer of video games and mangas. Chinese shares should only play a role in the short term at best, given the continuing governance problems and the influence of the communist party on the companies.
Industry leaders without investment appeal
And the Big Five of the technology scene? Apple and Amazon do not impose themselves. Both showed a significant increase in valuation metrics without justifying this with new news or quarterly results. Microsoft has also performed exceptionally well in recent months. However, the share has now reached a valuation level that makes it unattractive compared to other shares in the sector. Alphabet, on the other hand, is very heavily exposed in the travel sector, which is suffering greatly from the Corona crisis. Only Facebook seems to have a promising future as a top dog, which is indispensable and has a positive future ahead of it.
Investors should also consider the regulatory paradigm shift, which can quickly become an economic factor. It is a thorn in the side of both Democrats and Republicans that the tech giants are so powerful. Equally dangerous is the tendency for internet platforms to be held responsible for what content is shown on them. However, investors should be realistic: Most services are free for users. But how to regulate something that is free and is paid for via the users' data. Against this background, it is likely to be very difficult to dismantle. After all, even if it should happen, upside potential can be expected.
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