Some of the best technology investments right now are businesses which most consumers have not heard of, according to Jim Strang, chairman of the HG Capital investment trust.
That trust claims to invest in “boring technology” companies, which Strang said means business-to-business, rather than direct-to-consumer businesses, and in areas such as software for accountancy, and other back office functions.
He said these companies have helped small businesses innovate away from pen and paper, and now they are innovating further by using cloud technology.
Strang said: “The appeal of those type of companies as investments is that no small business really wants to change its accounting software, as that is a lot of hassle. And as a result, the providers of these things can put their prices up a little each year, and customers will still pay.”
Another of the areas they see value in “boring tech” is educational software where, again, they say many people who work in education would not have heard of the companies involved, even if they use the actual product every day.
Another investor keen on the concept of investing in less glamorous or obvious areas of technology is Nick Train, who runs a range of mandates at Lindsell Train.
Among the funds run by Train are some UK equity funds and in a recent update to investors he said that while the FTSE contained few obviously high-profile technology companies, he regarded his Finsbury Growth and Income trust as having a 40 per cent exposure to technology.
He wrote: “We have been able to allocate circa 40 per cent of your portfolio to the shares of UK-quoted data, analytics, software and platform service companies, all of which have been highly successful businesses over time – certainly in terms of delivering growth and exceptional profitability.
"There are five of them in the portfolio - Experian, Hargreaves Lansdown, London Stock Exchange Group, Relx and Sage.
"And, by the way, all these can credibly claim to be beneficiaries of artificial intelligence, at least in terms of being able to harness AI’s power to enhance their own products and services.”
david.thorpe@ft.com
