A new debate seems to be percolating throughout financial news headlines: Within the tech sector, is old tech or new tech the way to invest? In March, I was on CNBC to discuss the topic and drill down into the current market environment and the outlook of the entire sector. This is an important theme for readers to consider, and we’re here to explain why we think this debate shouldn’t be broken down into an “either or” investing mentality.
Human beings will always be interested in “new,” because by definition, new is usually “better.” Existing companies usually get tarred with “Oh, that is old technology,” but that’s not necessarily true. As a professional investor, I try to look past this old/new mentality, and instead look at cash flows, how likely a company is to grow, and how risky that path to growth might be for them.
As discussed on CNBC, we are not thematic investors – we want to understand what drives a company. We have a bottom-up approach, looking at the metrics of individual companies and seeing what is undervalued based on how it may have traded in the past.
What’s key for investors is to not drill down into whether they want to invest in new tech or old tech, but rather look at the foundational structure of a business. Companies have to demonstrate that they will do what they say, and say what they do – as this is usually a good indicator for their future growth path. Don’t get caught up in headline hype, and instead look at management’s track record to see if they have the ability to move a company in a positive direction.
Sure, it’s easy to gravitate toward shiny, new things, but don’t let this mentality lead you down a shaky investment path. No matter the sector, market environment or financial news of the day, investors should have a true understanding of the companies in their portfolio, not act based on emotions or hot trends, and seek to find undervalued companies that are poised for growth.