Show Transcript
The pandemic has brought a surge in certain technology trends. With vaccines now in sight, which pandemic-driven tech trends may have staying power? And how can investors continue to ride the wave? Kim Parlee speaks with Vitali Mossounov, Global Technology Analyst at TD Asset Management.
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The pandemic has brought in a surge of technology stocks and, of course, when the vaccine came in, we saw rotation out of that into some value stocks. So does that mean with vaccines coming in, perhaps life getting a little closer back to normal, that the technology boom could be over? Or are there long-lasting trends embedded in the market? Vitali Mossounov is a Global Technology Analyst at TD Asset Management. He joins me now to help us with that question. Vitali, thanks for joining us. What does the vaccine mean for technology and work from home and the live-at-home trends that we saw?
Straight to the million-dollar question, Kim. It means a lot, but I think to answer competently, we probably need to take a step back and take a bird's eye view about how this looks for both the markets and the fundamentals. I think on the market side, it's important to remember tech has had a good year, 18% outperformance over the rest of the market. However, interestingly, in 2019, tech also posted 18% better performance than the rest of the market. And I think that goes really to the essence of this question that you and everyone else now is asking, it’s: how much of this outperformance this year was really about COVID tailwinds in tech and how much was related to the structural factors, right? The innovation, the better inventiveness of tech companies. And at the end of the day, I think that the bigger factor in this outperformance are those structural factors, that better growth at the end of the day that these companies give. Look, there's no question, there’s some pockets of outperformance that are due to these work-from-home and other COVID tailwinds, but that's not the big part of it.
Let's run through some of those trends,Vitali, we’ve got a couple of minutes here. Remote work. So, the Zooms and the Docusigns. What do you see there happening?
Well, nothing short of a work revolution, I guess we've all experienced it, this meeting proving it out. But it's been a bit crazy for all of us, and these companies have benefited by providing these videoconferencing tools, by giving us collaboration like Slack, digital signatures. Everything we need, it seems available to us, and we can do our jobs from home. So, look, has demand been pulled in to some extent? Yes. But, ultimately, are these trends going away? No. And I think that companies have looked and said, you know what, it's very expensive for me to keep all of my employees in the building like I used to, and so I'm going to have a little bit of a mix of that, because that $10 Zoom subscription per month looks a lot better than the thousand dollars I may have been spending on real estate. And so these trends had a banner year, but they're not going away, I don't think.
But I'm sure they'll evolve. But that’s just it, we'll have to wait and see. Let me ask you about payment. I mean, we've had digital, and contactless payment’s been a big one.
Yeah, and that's been an evolutionary theme, to use that word. It's been something that's been happening for many years, over a decade. But again, a real acceleration this year. First and foremost, because you can't feed cash into your phone, so whenever you use e-commerce, which has had obviously a standout year, you use digital payments. But even in-store, we're seeing people, whether it's because they're cautious about handling cash, for obvious reasons this year, or just the better technology, the contactless payments, the tap technology, we're seeing growth of that and sort of abandoning cash, even in-store. And again, whatever happens going forward, the mix of how much we go out versus we spend in the house, I think digital payments, these wallets and other forms, they're here to stay.
What about cybersecurity?
Yeah, it's... We've all, I think, learned how important it is this year. I get many warnings from TD now about "don't click on this", "don't do that", and I think just about everyone does and we're all super cautious. But it's been a big shift for companies, because they used to have all of their employees really within a well-defined IT security perimeter. And now we're all miles, if not thousands of miles apart, and using devices that may or may not be authorized on networks that may or may not have malicious elements to them. So, cybersecurity attacks are off the charts. You're hearing a lot about ransomware. One company, we heard, had all their data locked up and had to pay millions to get it back. And again, that is something where trends will evolve. But as we think about the next decade, cybersecurity and these threats, as we all work and live remotely, especially in a world of 5G, that's going to be top of mind and that's a trend that stays with us.
I've only got about 30 seconds here, but what about online shopping?
I mean, the Canadian market darling Shopify has certainly shot up and has people looking at valuation questions around that one.
Yeah, Shopify looks scary at initial glance on valuation, but I think investors need to realize that, coming out of the pandemic, Shopify is the default infrastructure, I’d say, for really a lot of e-commerce out there. And so whereas a few years ago, you might have had a choice and were thinking as a potential merchant of where to go, who to use, right now Shopify is increasingly that only choice. And so that company has kind of defeated its competitors and has a long runway for growth. It's an innovative company.
Vitali, I truly do have 30 seconds right now, but if there is one thing you want people to keep in mind in terms of thinking about the space and just maybe opportunities in terms to play the space, what should they keep in mind?
I think they should keep in mind that on a tactical perspective, I'm talking three, four months, predictability right now is very low. And so I caution people to be cautious about trying to say, these tech trends or these non-tech trends, these vaccine themes, these are going to be the winners. That's very tough and that's not investing. But at any reasonable time horizon, we're talking one, two years plus, these technology themes, when you're investing in technology, what you're really investing in is innovation, human ingenuity and inventiveness. And that, I think, is really going to power the 2020s. And so your allocation to technology over that next decade needs to be a key consideration in portfolio construction.
The pandemic has brought in a surge of technology stocks and, of course, when the vaccine came in, we saw rotation out of that into some value stocks. So does that mean with vaccines coming in, perhaps life getting a little closer back to normal, that the technology boom could be over? Or are there long-lasting trends embedded in the market? Vitali Mossounov is a Global Technology Analyst at TD Asset Management. He joins me now to help us with that question. Vitali, thanks for joining us. What does the vaccine mean for technology and work from home and the live-at-home trends that we saw?
Straight to the million-dollar question, Kim. It means a lot, but I think to answer competently, we probably need to take a step back and take a bird's eye view about how this looks for both the markets and the fundamentals. I think on the market side, it's important to remember tech has had a good year, 18% outperformance over the rest of the market. However, interestingly, in 2019, tech also posted 18% better performance than the rest of the market. And I think that goes really to the essence of this question that you and everyone else now is asking, it’s: how much of this outperformance this year was really about COVID tailwinds in tech and how much was related to the structural factors, right? The innovation, the better inventiveness of tech companies. And at the end of the day, I think that the bigger factor in this outperformance are those structural factors, that better growth at the end of the day that these companies give. Look, there's no question, there’s some pockets of outperformance that are due to these work-from-home and other COVID tailwinds, but that's not the big part of it.
Let's run through some of those trends,Vitali, we’ve got a couple of minutes here. Remote work. So, the Zooms and the Docusigns. What do you see there happening?
Well, nothing short of a work revolution, I guess we've all experienced it, this meeting proving it out. But it's been a bit crazy for all of us, and these companies have benefited by providing these videoconferencing tools, by giving us collaboration like Slack, digital signatures. Everything we need, it seems available to us, and we can do our jobs from home. So, look, has demand been pulled in to some extent? Yes. But, ultimately, are these trends going away? No. And I think that companies have looked and said, you know what, it's very expensive for me to keep all of my employees in the building like I used to, and so I'm going to have a little bit of a mix of that, because that $10 Zoom subscription per month looks a lot better than the thousand dollars I may have been spending on real estate. And so these trends had a banner year, but they're not going away, I don't think.
But I'm sure they'll evolve. But that’s just it, we'll have to wait and see. Let me ask you about payment. I mean, we've had digital, and contactless payment’s been a big one.
Yeah, and that's been an evolutionary theme, to use that word. It's been something that's been happening for many years, over a decade. But again, a real acceleration this year. First and foremost, because you can't feed cash into your phone, so whenever you use e-commerce, which has had obviously a standout year, you use digital payments. But even in-store, we're seeing people, whether it's because they're cautious about handling cash, for obvious reasons this year, or just the better technology, the contactless payments, the tap technology, we're seeing growth of that and sort of abandoning cash, even in-store. And again, whatever happens going forward, the mix of how much we go out versus we spend in the house, I think digital payments, these wallets and other forms, they're here to stay.
What about cybersecurity?
Yeah, it's... We've all, I think, learned how important it is this year. I get many warnings from TD now about "don't click on this", "don't do that", and I think just about everyone does and we're all super cautious. But it's been a big shift for companies, because they used to have all of their employees really within a well-defined IT security perimeter. And now we're all miles, if not thousands of miles apart, and using devices that may or may not be authorized on networks that may or may not have malicious elements to them. So, cybersecurity attacks are off the charts. You're hearing a lot about ransomware. One company, we heard, had all their data locked up and had to pay millions to get it back. And again, that is something where trends will evolve. But as we think about the next decade, cybersecurity and these threats, as we all work and live remotely, especially in a world of 5G, that's going to be top of mind and that's a trend that stays with us.
I've only got about 30 seconds here, but what about online shopping?
I mean, the Canadian market darling Shopify has certainly shot up and has people looking at valuation questions around that one.
Yeah, Shopify looks scary at initial glance on valuation, but I think investors need to realize that, coming out of the pandemic, Shopify is the default infrastructure, I’d say, for really a lot of e-commerce out there. And so whereas a few years ago, you might have had a choice and were thinking as a potential merchant of where to go, who to use, right now Shopify is increasingly that only choice. And so that company has kind of defeated its competitors and has a long runway for growth. It's an innovative company.
Vitali, I truly do have 30 seconds right now, but if there is one thing you want people to keep in mind in terms of thinking about the space and just maybe opportunities in terms to play the space, what should they keep in mind?
I think they should keep in mind that on a tactical perspective, I'm talking three, four months, predictability right now is very low. And so I caution people to be cautious about trying to say, these tech trends or these non-tech trends, these vaccine themes, these are going to be the winners. That's very tough and that's not investing. But at any reasonable time horizon, we're talking one, two years plus, these technology themes, when you're investing in technology, what you're really investing in is innovation, human ingenuity and inventiveness. And that, I think, is really going to power the 2020s. And so your allocation to technology over that next decade needs to be a key consideration in portfolio construction.
