RCM manager plays down tech IPO boom

Walter Price, manager of the RCM Technology Trust, says that the current IPO market in technology offers relatively few opportunities for investors to generate strong returns, but worries over a new technology bubble are overstated.

Fears of a new technology bubble have been mounting, as the Nasdaq hit highs not seen since the height of the last bubble in 2000 and a number of large, headline-grabbing initial public offerings (IPOs) have come to market.

Price says that the new IPOs have generally fallen into two camps: the first are companies such as Twitter and King, where the firm is in transition and needs to prove it can execute that transition effectively, or those that are strong, high-growth businesses that have come to market at extremely high multiples. He adds: "Neither is likely to generate strong returns for investors."

However, he does not believe that technology is displaying the same characteristics as it did during the boom years of 1999/2000. He says: "We have a couple of stocks in our portfolio that are on 100 times multiples, but they are growing at over 100% per year.

"There are also some companies that are losing money, but they are growing at 50-100% per year and are not bleeding cash in the same way as stocks did during the last technology bubble. There may be a risk of a company disappointing on growth, but it is not likely to go bust."

Price says that since March the market has rotated into some of the more defensive names in the technology sector, such as IBM, but he is retaining his weighting in higher-growth companies such as Facebook and some Chinese internet names. Facebook remains the largest holding in the trust at 5.9%, with Google and Salesforce.com also featuring in the top ten.

Over one year, the trust is up 40.1%, against an average return of 27.7% for the wider technology, media and telecoms sector. Over five years, the trust is up 174%.