Stock Stories bring you closer to the heart of our investment strategy. In these short videos, lead portfolio manager Mike Seidenberg discusses a selection of Allianz Technology Trust’s portfolio holdings and how they contribute to our overall strategic objective of achieving long-term capital growth by investing principally in technology companies globally that use technology in an innovative way to gain a competitive advantage.
In this short episode of ‘Stock Stories’, Mike discusses an investment decision that was made and is illustrative of the Trust’s strategy: Monolithic Power Systems
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I'm Mike Seidenberg, Lead Portfolio Manager of the Allianz Technology Trust. It's important to remember that all investments come with risk. The technology sector is well known for both growth and volatility. We aim to chart a smoother course in technology investing by focusing on sustainable secular themes.
Take Monolithic Power Systems. It is capitalising on the electrification of the economy, which is being driven by several powerful trends: industrial automation, the transition to hybrid plus electric vehicles and the boom in artificial intelligence, which is driving the demand for data centres. Monolithic Power plays an important role in all of these areas.
The company's focus is power management. As semiconductors proliferate, power management becomes increasingly important. Think about a car or piece of industrial equipment. The more semiconductor content you add, the greater the need for effective and efficient power management. The ultimate example of the importance of this is an electric vehicle where multiple electronic components ensure controlled, safe and efficient driving.
Monolithic power creates a range of compact modules, sensors, circuits, drivers and other power management solutions, helping to make electronic devices more effective, reliable and capable. As investors, one aspect to the business model we like is the company not only designs these solutions, but also manages their fabrication versus outsourcing it. This facilitates one of its key objectives: to reduce manufacturing costs and improve product performance through continued developments in its process technology.
Stocks do not travel in a straight line. Monolithic is no different. We can't predict the future and we're not making any investment recommendations here. Our job at the Alliance Technology Trust is to find great businesses. Companies like founder-led monolithic, which is quite literally powering the future.
Disclaimers: Past performance does not predict future returns. Securities mentioned in this document are for illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any particular security. These securities will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.
Monolithic Power Systems Stock Story: Inside the ATT Portfolio
Allianz Technology Trust strives for superior long-term returns by looking to identify major trends ahead of the crowd and stocks that we believe have the potential to become tomorrow’s tech titans.
The Trust aims to hold companies that the managers expect to benefit from continued growth in particular subsectors of technology – especially businesses that provide money-saving solutions or enable companies to improve their relationships with customers and deliver revenue growth.
Investing in Monolithic Power Systems: an Allianz Technology Trust Investment Case Study
It is important to remember that all investments come with risk, and that the technology sector is well known for both growth and volatility. The Trust aims to chart a smoother course in technology investing by focusing on sustainable, secular themes that are not dependent on the economic cycle.
Riding the electrification wave
Monolithic Power Systems (MPS) is capitalising on one of those themes, namely the electrification of the economy. This is being driven by several powerful trends: industrial automation; the transition to electric and hybrid vehicles; and the boom in artificial intelligence, which is driving demand for data centres. MPS plays an important role in all of these areas.
The company focuses on power management, a crucial part of the technological revolution that is currently underway in so many areas. As semiconductors have become increasingly powerful, their role in our everyday life has also expanded.
The growing need for effective power management
Cars now contain up to 3000 semiconductors,1 and these computer chips are also widely used in industrial manufacturing and many other areas. The more semiconductors that are added to a process, the more pressing the need for effective power management. The Monolithic Power Systems’ portfolio of products includes a range of compact modules, sensors, circuits, drivers and other power-management solutions that help to make electronic devices more effective, reliable and capable. A key attraction of investing in MPS is that the business not only designs power-management solutions but also manages their production, rather than outsourcing it. This facilitates one of the company’s key objectives: to reduce manufacturing costs and improve performance through continued developments in its process technology.
The benefits of diversification
Investors should note that this is simply an example of the type of business that Allianz Technology Trust looks for; it is not a stock recommendation. There are many risks associated with investing in an individual stock, ranging from a deterioration in the quality of management to technological advances that disrupt a company’s business model or a general stock-market sell-off that affects the MPS share price. Nobody can predict the future, or how the MPS stock price or any other share price will perform over time, so it is arguably less risky to invest in a portfolio of technology stocks.
1 https://www.icdrex.com/how-many-semiconductor-chips-in-a-modern-car/
Article disclaimers
Securities mentioned in this document are for illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any particular security. These securities will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.
The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. We assume no obligation to update any forward-looking statement.