Today GaveKal was out with a research note regarding the growth of consumption in Asia. We won’t regale readers with the entire note but one thing stood out:
Asian consumers generally have space issues and tend to be technology savvy. These conditions tend to stimulate purchases of technology gadgets as consumers get more disposable income. Â
Juxtaposed against the recent market sell-off in technology shares the argument is more compelling. The fact is that technology companies are generally in much better shape to weather the slow growth since many of them are so cash rich. (25% of assets in the S&P technology companies are in cash)
So technology stocks look like good medium term call options on global growth and are positioned very well longer term to benefit of increased consumption in Asia.Â
The above comments capture the gist of what was said in the note and we would add that a number of very strategic core names like Apple, Adobe, Google and Cisco should probably be bought here on a long term basis.
Overall economic fundamentals and a lack of certainty on future estimates will keep some pressure on these names but owning shares in these franchises when growth and visibility comes back will absolutely be the right thing to do.
Technology innovation and adoption is alive and well. We are in a short-term pause before what appears to be a major adoption cycle a year or two out.
[Research 2.0 owns shares in the names mentioned above.]
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