A high-tech view of active management

Active fund managers base much of their sales pitch around meeting companies. It is one of the key factors behind a decision-making process on whether they will buy, sell or hold a position and yet is one we journalists rarely get to see in action.

Last week I was lucky enough to trail two of Neptune’s American fund managers – Felix Wintle (US Opportunities and US Max Alpha) and Rebecca Young (US Income) – on a trip to San Francisco to meet a host of American technology companies. Names we saw included Autodesk, Salesforce.com and a couple of (off the record) company meetings in Silicon Valley.

Sadly, Silicon Valley as a place to see was a tad disappointing, more resembling Milton Keynes than living up to the futuristic vision I had in my head. But as home to the world’s largest tech companies, its significance is vast.

To be clear, this was not just an exercise of seeing the managers’ holdings in action. For example Salesforce.com, the social enterprise software company, was once a holding in Wintle’s portfolio but was sold out last August, while the visit to Autodesk, which makes 3D design software, was a fact-finding mission for the pair as it is a stock they have never owned. (Comment continues below)

On first glance, both of these companies were impressive. Salesforce.com gave an extremely slick pitch, extolling the virtues of cloud computing and how it is going to change the way corporations do business, while at Autodesk it was a breathtaking walkthrough of what 3D printing can do first hand. I thought 3D printing was just giving items a 3D look on paper, but instead the printers print in three dimensions, using heated plastic and metals to produce physical goods.

For instance, did you know that soon a 3D printer will be able to print another 3D printer? It might seem an odd point but this means you could soon ’print off’ plastic spare parts for anything broken in the household.

”You could soon ’print off’ plastic spare parts for anything broken in the household”

It was hard not to get excited by such a pitch, but for managers it simply comes down to numbers and turning innovation into profits. Autodesk has been going 30 years, but a recent bout of initial public offerings and proposed flotations, such as Facebook, suggests the tech sector seems to have divided into two camps.

On the one hand you have the existing companies, many of which are cash generative, profitable and trading on sensible multiples. Then there are more sexy, hyped-up names, where it seems share prices will initially be driven more by hope than real numbers. But this was the case 10 years ago with 3G, and we know what happened then.

Adam Lewis was a guest on Neptune Investment Management’s trip to San Francisco.