Putnam’s Global Technology Fund has outperformed nearly all of its peers over the last five years.
Di Yao, the fund’s co-manager, said he and his partner have focused on companies that the market either doesn’t understand or with which it’s not familiar.
They’ve found some of their best bets overseas and among smaller companies in the US; but they’ve also placed some winning bets on some of the tech giants.
Yao told Business Insider about 3 stocks he particularly likes in his portfolio — Microsoft, Sea Limited, and Applied Materials.
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Di Yao isn’t afraid to make big bets on well-known stocks or to invest in companies that few people in the US know about.
As the co-manager of Putnam’s Global Technology Fund, he’s done both. And the strategy has paid off in a big way. Of all the tech-focused mutual and exchange-traded funds, Yao’s ranks fourth in performance over the last five years, topping not only most other actively managed funds, but all the passive ones also, according to Morningstar Direct.
Yao and co-manager Neil Desai are big believers that the tech industry provides big opportunities for growth because of all the innovation and disruption that happens.
But they also believe that the market is inefficient, and there’s money to be made when investors as a whole fundamentally don’t understand a company or its potential, whether it’s one of the tech giants or a relatively unknown firm overseas, Yao told Business Insider in an interview last week. Instead of spreading their bets on all the usual suspects in technology, Yao and Desai focus on those underestimated companies, sometimes in a big way.
“We want our bets to be meaningfully generating performance,” Yao said.
Yao and his team have found many of their favorite bets overseas and among smaller tech companies in the US. Part of the reason for that is that many of those companies, particularly the ones that are located outside the US, tend to fly under investors’ radar screens. Generally, there are few financial analysts who study and write reports about those companies, few institutional investors that own their stocks, and little written about them in the press.
Yao and his team look at second- and third-order effects
What makes such companies particularly attractive is when they stand to benefit from long-term but not well-appreciated trends that are in their favor, Yao said. He and his team like to look at both big trends in tech and major news events to figure out what their longer-term second- and third-order effects might be and which companies are likely to see a boost from them.
For example, when Apple announced earlier this month that it would replace Intel’s chips with its own processors in its Mac laptops, Yao and his colleagues didn’t spend too much time thinking about what that move might mean for Apple or Intel’s stocks. Instead, they started thinking about how the move might shake up the PC chip industry and even the entire supply chain for notebook computers, he said.
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Source:: Business Insider