The Strategist

High-tech becomes the most popular investment again

02/24/2021 - 02:43

High-tech stocks have become the most popular investment destination after a month's hiatus. In four weeks, international investors poured almost $20bn in funds focused on this segment of the stock market.

According to a report by Bank of America (incorporating data from Emerging Portfolio Fund Research), international investors invested $5.1 billion in funds related to high-tech stocks during the week ended Feb. 17. 

In four weeks, investments amounted to $19bn. The high-tech sector came with $7.2bn in January, second behind funds investing in oil and gas companies ($8.4bn).

The return of investor interest in the technology sector is largely due to the strong performance of companies late last year. According to FactSet, IT companies in the S&P 500 Index outperformed market expectations by 88% in revenue and 91% in earnings during the fourth quarter of 2020.

Managers warn, however, that sector funds, including high-tech companies, are high-risk investments. For example, last year this category of funds was a growth leader, providing holders with 50-90% returns. 

However, the year before it was among the outsiders, with only 5-8% growth. At the same time, oil and gas company funds were among the growth leaders in 2019 (25-30%) but showed a 15-20% decline in value in 2020.