A Year of Challenges and Resilience – Review of 2023 and outlook for 2024

Technology: Conviction pays off

This time last year, we remained resolute in our conviction in the investment cases for the technology companies we have invested in.  We highlighted that many of these companies have exceptional core businesses and strong growth prospects but had to adjust to the changing macro environment and implement cost-cutting measures after excessive hiring during the pandemic. We said that the battered share prices of companies in semiconductors, software and digital advertising offered an opportunity to own great companies at great prices, and that we were taking advantage of it by increasing our position in Nvidia.

Reviewing the performance of the year, these companies have been the success stories in 2023.  Salesforce (+90%) and Meta (+176%) performed strongly as their core businesses remained stable, they cut costs and they delivered on operating margin expansion. Alphabet (+53%) Amazon (+75%) and Adobe (+80%) did well as their businesses remained resilient after the sell-off. We continue to own these companies in the portfolio and their long-term outlook remains unchanged.

Artificial intelligence is the new metaverse and our strongest performer was Nvidia (+225%). What it is really about is the increase in computing capacity that is enabling new technologies, software and applications that will change and disrupt how we do business and how we live our lives.  Despite Nvidia’s share price performance we believed that the fundamentals of Nvidia remained very strong and its valuation more than justified its share price. Quarter after quarter Nvidia regularly increased its guidance well ahead of Wall Street expectations and comfortably exceeded it when it came to report the actual results three months later.  Nvidia delivered higher sequential growth through the year as its experienced management team proved that they were able to secure enough capacity to accommodate this demand.

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