The growth of mobile Internet usage via smart phones and tablet computers is poised to drive the next major technology cycle, according to Keith Goddard, president and chief investment officer of Capital Advisors Inc.
Mr. Goddard, who manages $787 million — mostly in separate accounts in a large-cap growth strategy — plans to tap into all aspects of the burgeoning wireless Internet space as a powerful driver of performance over the next five to seven years.
“I'm not implying another technology bubble, but as a growth investor, we want to figure out the leading market positions in all aspects of the mobile Internet space,” he said.
The road map for the global expansion of wireless Internet technology can already be seen in Japan, where smart phones have a 50% penetration rate among cell phone users, he said.
That compares with a 25% smart phone penetration rate in the United States, and 10% or less penetration for the rest of the world.
Mr. Goddard expects the cycle's evolution and ultimate impact to resemble previous technology cycles that led to 10-fold increases in unit volume.
Beginning with the development of mainframe computers in the 1960s, technology cycles have followed about once every decade.
In the 1970s, the cycle involved “mini-computers” that brought more manageable versions of mainframes businesses.
The 1980s cycle involved the sweeping popularity of personal computers, and the 1990s cycle was driven by widespread use of the Internet.
Mr. Goddard plans to tap into the wireless Internet cycle by building exposure to a broad selection of likely beneficiaries.
Some of those companies include Apple Inc. Ticker:(AAPL), Broadcom Corp. Ticker:(BRCM), Sybase Inc. Ticker:(SY), AT&T Inc. Ticker:(T), and Vodafone Group Plc Ticker:(VOD).
But the growth component of Mr. Goddard's strategy is also anchored in the more immediate reality of what makes sense today.
“We're finding that, far and away, the best value in the market right now is big global large-cap companies that pay dividends,” he said. “We've reached the point where a lot of these companies are very cheap, both in relative and absolute terms.”
For the anchoring portion of the 34-stock portfolio, Mr. Goddard turns to AT&T, which has an 11.7 trailing price-to-earnings ratio and is paying a 6.7%
dividend.
Another example is Total SA Ticker:(TOT), which has a P/E of 11.1 and a 5.7%
dividend yield.
While the bulk of the firm's assets are managed in separate accounts, Mr. Goddard also manages a small mutual fund, Capital Advisors Growth Ticker:(CIAOX), using the same strategy.
Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives .
