Outlook: Technology Stocks Will Outperform the Overall Market in the Long Term

Interest in online shopping and new technological gadgets has continued to decline significantly in the wake of the removal of travel restrictions, alcohol bans and virtual meetings. This is currently a short-term headwind for technology, media and telecommunications stocks, but this should stabilize once the stock market turbulence subsides. At the same time, interest rates continue to rise and investors are currently focusing on profitable growth rather than just revenue growth. Much of the decline in the tech indexes is being driven by the companies that are not making money today. More than 40 percent of the companies in the tech-heavy Nasdaq index are down more than 50 percent from their peak in the last 12 months.

We currently see unique investment opportunities in video game companies. This sector has very attractive demographics, as the average age of the gamer is still very young at 33, compared to an average age of just under 50 for consumers of traditional media such as television. The sector should therefore be in for a long period of growth. Nevertheless, the industry has been hit hard and, in our view, companies are valued as if growth is a thing of the past. This currently creates good investment opportunities. While video games make up 1.5 percent of the fund's benchmark index, we now have over 10 percent of the fund invested in the largest companies in North America, Japan and Europe. We are interested in American Take Two Interactive, among others, and have invested in shares here this year. Take Two Interactive owns successful titles such as Grand Theft Auto, NBA2K and Red Dead Redemption. The company is led by perhaps the best CEO in the industry and has a large pipeline of AAA games, meaning high-profile games with big budgets. And with the recent acquisition of Zynga, the company is moving full steam ahead into the mobile games segment. Despite a very attractive setup going into 2023, the stock is trading 20% below its historical average.

Another area with potential, which we consider to be stable and where demand remains strong, is business software. The pandemic has reinforced the great need for digitization in companies, resulting in solid growth for players such as Microsoft, SAP and Salesforce.