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Follow the leaders – 10 stocks at the heart of the technology revolution

June 17, 2021

The stocks I am planning to write about below make up around 46pc of the Nasdaq 100 index, which means their performance is a major reason why the index has been rising so strongly since the last major bear market low in 2009. They are all technology shares. It would be an exaggeration to say they are the technology revolution but they are certainly playing an important role. Given my belief that this revolution is going to run and run that bodes well for the performance of these shares. Who can say but I would not be surprised if a decade from now they are all members of the trillion dollar club with a number of them on multi-trillion dollar valuations. This makes them suitable as core holdings in any growth-focused equity portfolio. They have all been recommended multiple times in Quentinvest and many of them have been favoured selections back to 2009 if not earlier.

Adobe ADBE. Buy @ $548. MV: $263bn. Next figures: 17 June. Times recommended: 17. First recommended: $175.64. Last recommended: $449. Highest recommended: $460

It always seems a bold move to recommend a share just ahead of its quarterly report but I think the importance of these quarterly reports is overstated. Is Adobe going to stop being a great business between one quarter and the next? Obviously not so who cares. The shares may jump around but that is usually more to do with the dynamics of short term market positions which will unwind and lose their influence over time.

My guess is that the 17 June quarterly report for the second quarter of the 2021 fiscal year (Q2 ends 31 May with a 30 November year end) will read much like the Q1 report full of exciting news on trading, prospects and the constant stream of innovation being delivered by the business.

Historically Adobe’s software has been used by students and media creatives but it is widening its reach into the business market such that increasingly everybody comes across Adobe products. It has also successfully made the transition from selling packaged software and upgrades to software as a service, selling software by subscription, which is always the latest version. This is an easier sell and a more appealing product.

The performance in the new millennium has been astounding. In January 2000 the shares were around $16 but you can go back even further to 1986 when the shares were 20 cents. Part of what makes these successful technology companies such great investments is their ability to keep reinventing themselves. Ten years from now the business will no doubt look very different again.

The company spent around 17pc of revenue on r&d in the last quarter and has also been making acquisitions to position itself for new trends like artificial intelligence, augmented and virtual reality. A recent analysis of the areas addressed by the group’s products calculated a total addressable market of around $130bn, which compares with group sales expected to reach around $15.5bn this financial year. As befits a market leader the company is highly profitable and very cash generative.

Alphabet. GOOGL. Buy @ $2,440. MV: $1.65 trillion. Next figures: 25 July Times recommended: 18. First recommended: $985.19. Last recommended: $2,237

Alphabet is becoming a collection of amazing businesses. There is Google Search, You Tube, Google Cloud Services, a whole bunch of slightly miscellaneous thinks like Android, which give the group an even bigger footprint in the digital world and the famous Other Bets like Waymo autonomous driving. All these businesses put together are so extensive in scale that as the global economy grows, not just the digital part but all of it, that generates more revenue for Alphabet and more free cash flow.

Free cash flow for calendar 2021 is forecast to be around $59bn. This is being used in the most direct way to look after shareholders. “The board has authorised the repurchase of up to an additional $50bn of our Class C stock”. These purchases have a double whammy benefit to shareholders. First of all, by reducing the number of shares in issue they raise earnings per share driving a higher valuation for the remaining shares. Secondly, on the performance to date, Alphabet shares have been an amazing investment because the price now is so much higher than when the company started its share buyback programme. Buybacks began at serious scale in 2011 when the price was around $300.

Not least of the amazing things about Alphabet is that big as they are they can still say – “In terms of investment levels within Google Services (the bulk of the business), we still intend to invest aggressively to support the extraordinary opportunities we see.”

As with Adobe it seems almost ridiculous to look for a specific ‘something new’ at Alphabet when across the board they are innovating at scale. Ten years from now the mind boggles at what may be happening.

Amazon. AMZN. Buy @ $3,450. MV: $1.7 trillion. Next figures: 16 June Times recommended: 28. First recommended: $984. Last recommended: $3,279. Highest recommended: $3,285

Jeff Bezos is no longer the CEO of the company he founded which is an important something new but with unknown effects at this early stage. He has not left. He is the executive chairman so likely to play a more strategic role. New CEO, 52 year old Andy Jassy, went straight from Harvard Business School to working for Amazon in May 1997, when it was an online bookseller with big ambitions. Jassy founded Amazon Web Services, which is the most profitable part of the group and owns almost half the world’s public cloud infrastructure. (The three leading players in cloud infrastructure are AWS, Microsoft Azure and Google Cloud Platform).

Jassy is known for understanding technical details, and has bestowed a rock-star aura to keynotes at AWS’s annual Las Vegas conference, which makes him an exciting choice as CEO. Alphabet and Microsoft have both done extremely well since making a non-founder the CEO. The newish CEO at Microsoft, Satya Nadella, who has presided over a sterling share price performance, also came from running the cloud services business, which may be a pointer to how these tech giants see the future.

Amazon has three core businesses- Amazon Marketplace, where the group operates like an online retailer but also increasingly as a market place for other vendors to sell their wares and use services such as fulfilment by Amazon; Amazon Prime, which is a subscription service that offers both faster delivery on items bought on Amazon and Amazon Prime Video. The latter offers a large library of free content including increasingly high profile content being developed in house but if Amazon doesn’t have it you can buy or rent content from a seemingly limitless library. (I had been looking to buy or rent The World of Suzy Wong starring William Holden and Nancy Kwan for years but could only find it for a ridiculous cost in Germany. Then, as a subscriber to Amazon Prime, I looked there and found it offered for rent for £2.49).

The third and most profitable business, as referenced above, is Amazon Web Services, AWS, which has become the jewel in the crown. Across all its businesses Amazon is obsessed with customer service. I have a vague recollection that Marks & Spencer pioneered the expression -‘The customer is always right’, which helped them in their great period of growth though others ascribe it to a hotelier called Cesar Ritz. Amazon is the modern incarnation of this attitude and it permeates everything they do. They are continually raising the bar on services in MarketPlace and Prime in ways that cannot possibly be profitable when they introduce them. Similarly AWS is continually introducing technology improvements while lowering prices so the competition is always chasing a moving target.

Reading Amazon quarterly reports can be boring because they are mostly an endless list of new innovations they have introduced for customers. Amazon is a business which has brought the process of innovation at scale to the heart of what it does. The company has around 1.3m employees and and is fast climbing the list of the world’s biggest employers. There is a spear head of strategic thinkers and boffins working on r&d, who are a bit like the officers and then a growing army of rank and file who run the warehouses, work in the shops and do the less skilled things.

There is no sign that progress is slowing in any of the businesses though there may have been some supercharging of progress because of lockdowns. The company enjoys a virtuous circle because of its intense customer focus. More customers brings more sellers into marketplace attracting yet more customers, more choice brings more customers into Prime and better technology and lower prices means more customers using AWS, which funds further improvements in the offer ad infinitum.

There is a fourth emerging business at Amazon, which is advertising, where they are estimated to have around 10pc of a market dominated by Alphabet and Facebook. Advertising in the digital age is data based and Amazon has an unrivalled store of data making it a powerful contender enabling its customers to reach their customers. This division is thought to have grown by 50pc in the latest year.

Like the other giants there is aways the possibility that huge and often secretive r&d spending initiatives will lead to new business divisions emerging in the future. Regulators may want to break Amazon and the other giants into their component pieces. This famously happened with Rockefeller’s Standard Oil in the 20th century creating a group of companies which went on to become larger than the parent.

Apple AAPL Buy @ $131.50. MV: $21.16 trillion Next figures: 3 August. Times recommended: 23. First recommended: $39.46. Last recommended: $134. Highest recommended: $143

Apple is still the biggest company by market value and is another example of a giant business that has flourished under a non-founder CEO. Tim Cook became CEO in August 2011. Since then the share price has risen over 10-fold from around $12 to over $130. Prior to becoming CEO he was the operations director, brought into Apple in 1998 with a reputation as a man who could get things done. At 60 he should be full of energy for the tasks ahead.

Apple is a wonderful business, which has grown to become one of the largest investments at Berkshire Hathaway, the vehicle for Warren Buffett and Charlie Munger. Like the other giants it is becoming more of a conglomerate as it grows though with great interdependency between the various divisions. The big businesses are phones and computers, which are refreshed on an annual basis giving Apple some of the characteristics of a luxury fashion group, providing products which enable its customers to signal their wealth and success to the world.

Another exciting business is wearables like Apple Watches and AirPods. Wearables revenue grew by 25pc in the last reported year. Also growing fast is the Services division which grew sales by 27pc in the latest year. These are by no means inconsequential divisions. In the breakdown of sales for the year to end-September 2020 iPhones were $137.8bn, Macs were $28.6bn, iPads were $23.7bn, wearables were $30.6bn and services were $53.8bn.

Part of the reason why 2021 is proving such a strong year for the group is that while the smaller divisions continue to grow iPhones is rebounding, having declined from a record $165bn in fiscal 2018. It is a testament to the group’s ability to refresh even the most mature looking of the group’s business sectors and keep it storming ahead much as the luxury goods giants in other fields manage to do with their products.

As befits the world’s strongest brand Apple is able to add value to everything it does and because of this it generates astounding quantities of free cash flow. This is used partly to drive investment with $430bn scheduled to be spent just in the US in the next five years. And remember that Apple outsources production to third parties so this is for building campuses and creating high level r&d jobs, not for building factories. It is also able to reward shareholders on a dramatic scale with nearly $23bn returned to shareholders in the March quarter ($3.4bn in dividends and $19bn through open market purchases of 147m Apple shares.

Significantly the company says – “We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. Given the confidence we have in our business today and into the future, our board has authorised an additional $90bn for share repurchases. We’re also raising our dividend by 7pc to $0.22 per share, and we continue to plan for annual increases in the dividend going forward.”

A significant ‘something new’ which is happening at Apple is the transition to M1 chips, designed in house rather than by Intel. This is an exciting piece of vertical integration that could prove significant going forward. “Apple in November 2020 released the first Macs with an Arm-based M1 chip, debuting new 2020 13-inch MacBook Pro, MacBook Air, and Mac minimodels. In 2021, Apple added the M1 iMac and the M1 iPad Pro. The M1 chip has received rave reviews for its incredible performance and efficiency, and it is the culmination of more than a decade of Apple’s work on chips created for theiPhone and the.”

Facebook. FB. Buy @ $334. MV: $951bn. Next figures: 28 July Times recommended: 17. First recommended: $191.78 Last recommended: $318. Lowest recommended: $146.83

Despite always seeming to be mired in controversy social media giant, Facebook, is steadily closing in on becoming a member of the trillion dollar club. It is this relentlessness rise of the giant US technology stocks that makes them so appealing as investments. Back in the day it was physical assets that often made shares exciting. Marks & Spencer owned all its freeholds so when sales rose this translated into higher profits not higher rents.

The world has changed. The new territorial imperative is part of a virtual world – numbers of users, scale of engagement, network effects and these Facebook has to an astonishing extent. As Mark Zuckerberg noted with the latest results. “This was another strong quarter. More than 2.7bn people now use one or more of our apps each day, and more than 200m businesses use our tools to reach customers.”

It is easy to forget that these are staggering numbers. The world population in 2021 is 7.9bn so a third of the global population are engaging with a Facebook app every day. I couldn’t find anything on how many businesses there are in the world but a useful fact is that businesses are being created at an accelerating rate, which bodes well for Facebook and the huge role its apps play in helping businesses of all sizes to reach their customers.

Facebook has always been about monetising that incredible audience and the sales performance indicates its growing success in doing that. Sales are forecast to roughly treble between 2018 and 2023 reaching over $160bn at the end of the period.

The big issues with Facebook are privacy and unsuitable content being posted on the site. These are problems that are never going to go away. It’s like offensive tweets and trolling. How do you stop people doing it? The answer is with great difficulty. Facebook’s apps are free. People love that but they have to be paid for somehow. The company collects data and uses it to help its paying customers, the 200m businesses, use the platform to reach their customers.

Stop the data collection and that won’t happen which would be a massive blow to those 200m businesses and all the jobs they create. There has to be compromise and there will be. Meanwhile Facebook is learning how to do its job in the most socially acceptable way possible and that becomes another huge barrier to entry for anyone who wants to break into the social media space.

Zuckerberg made this general comment about prospects for the business. “Over the past couple of quarters, our business has been performing better than we expected. And this has given us the confidence to increase our investments meaningfully and in a few key areas that have the potential to change the trajectory of the company over the long term.”

Investors and often analysts have a tendency to disregard these comments on the grounds that he would say that but I think it is perfectly reasonable to take them at face value and if you are a shareholder to be greatly encouraged by them. More specifically he said the group was “pursuing [opportunities] in augmented and virtual reality and around commerce, business messaging, and creators.”

What’s impressive about Facebook is that when they target any area the numbers start to scale very quickly. In commerce there are already over 1m active shops seeing 250m monthly visitors. In another venture Facebook wants to be the best platform for millions of creators to make a living and who is to say that won’t happen too.

It seems highly likely that a decade from now Facebook is going to look very different as a business and very possibly dramatically more valuable.

Microsoft. MSFT Buy @ $260. MV: $1.94 trillion. Next figures: 22 July. Times recommended: 20. First recommended: $75.56. Last recommended: $261.

Microsoft is leading the race to be the second company in the world to be valued over $2 trillion. Just for reference this is more than the GDP of Canada. Microsoft is yet another company, which began with a single product, software for desktop computers and has developed into a technology conglomerate with its fingers in a growing number if pies.

You start to wonder how a handful of individuals led by a CEO can manage these complex beasts but then how did emperors rule imperial Rome, Alexander manage his empire or Napoleon preside over the vast area of Europe which he briefly controlled. They set the direction, allocate the capital and allow the awesome talent these fast-growing behemoths can attract to drive forward the individual businesses. You start to understand how this works when you realise that a university graduate engineer’s starting pay at Microsoft will be around $115,000 before some considerable perks and valuable share options.

All the companies featured here have much in common with Europe’s leading football clubs. The names stay mostly the same year after year because nobody else can compete with them in the battle for talent and once you win that battle everything else tends to fall into place. It is a key part of the virtuous circle of growth in which these businesses find themselves. The more they grow the stronger they become and the more they can invest to keep growing in the future.

Indeed some of these companies are operating with such above average profit margins that they can invest at a furious rate in growth and fund jumbo-sized returns to shareholders. Microsoft’s operating profit margin in the latest quarter fell slightly but still came in at an astounding 40.9pc. In its latest quarter (Q3, 2021) Microsoft returned $10bn to shareholders in dividends and share buybacks.

CEO, Satya Nadella, described what is happening at Microsoft – “It was a record quarter powered by the continued strength of our commercial cloud. Over a year into the pandemic, digital adoption curves aren’t slowing down. In fact, they’re accelerating and it’s just the beginning.”

Nadella was head of the cloud businesses before he became overall CEO and in the latest quarter Microsoft Azure, the cloud business, grew sales 50pc to $17.7bn, which is not bad going for a business which barely existed a decade ago.

All Microsoft’s businesses are firing on all cylinders including productivity for business, which includes the original operating and application software businesses now sold as SaaS (software as a service), cloud referenced above, talent services like Linked In and the gaming related businesses.

Since 2013 Microsoft shares have been like a perpetual motion machine, rising 10 times in eight and a half years.I don’t see that trend changing any time soon.

Nvidia NVDA. Buy @ $745. MV: $443bn. Next figures: 12 August. Times recommended: 26. First recommended: $164.7. Last recommended: $688. Highest recommended: $704. Lowest recommended: $147.21

Nvidia is an incredibly profitable business with operating margins of around 45pc and net income margins around 33pc. This is because its products are so important to its customers. Nvidia supplies the brains for video games, data centres, autonomous driving systems, super computers and much else. It’s purchase of Arm, if that goes through, will take it into yet more exciting areas. Cambridge based Arm specialises in low energy consumption chips which are ideal for a world where computing power is increasingly in your pocket or on your arm.

Nvidia is still led by its founder, the dynamic and charismatic Jensen Huang, who always leaves listeners thinking that an incredibly exciting future awaits the world in general and Nvidia in particular. Here is a quote which gives the flavour of what Huang is all about. “This was a year that none of us will forget. But extraordinary companies rise in extraordinary times. We are building a once-in-a-generation company to tackle the world’s greatest challenges—one that made these extraordinary times into one of our finest hours.”

All this is happening against the background of a semiconductor industry which still remains somewhat cyclical but that is something with which investors just have to deal. The cyclicality occurs around a strong secular uptrend which has enabled the shares to rise from $20 to over $700 in the last six years.

The question of whether something new is happening at Nvidia is complicated by the fact that creating ‘something new’ is almost the reason why the company exists. The group spends approximately a quarter of revenue on r&d, which makes it hard to compete with them because they are always reinventing the wheel.

As long as this model remains intact the group looks set to retain its place at the heart of the technology revolution and keep driving onwards and upwards. Automotive is still a small part of the sales mix with lacklustre growth as infotainment revenues decline, while autonomous driving revenues have yet to really kick in. This is surely going to change and one day Nvidia’s autonomous driving division is going to be massive.

The group is also certain to be a key player in areas like artificial intelligence, machine learning, augmented and virtual reality. The company is less preoccupied with rewarding shareholders with share buybacks and the like. They see their role as driving the technology revolution and leaving shareholders to reap the benefits as that project becomes increasingly valuable.

PayPal. PYPL. Buy @ $275. MV: $315bn. Next figures: 28 July. Times recommended: 22. First recommended: $72.97 Last recommended: $255 Highest recommended: $267

Some idea of the pace at which Paypal is growing comes from this quote from the latest quarterly report. “On top of the approximately 73m users added last year, at our current pace, we’ll add more new users between last year and this year than we did in 2016, ’17, ’18 and ’19 combined.”

There may be a lockdown effect happening here although it is significant that CEO, Dan Schulman had this to say. “As much of the world begins to shift its attention toward a post-pandemic recovery, we continue to see strong demand for a comprehensive set of services from both our merchants and consumers. Over the coming year, we will accelerate our customers’ digital engagement through the rapid innovation of our digital wallet and merchant commerce platform. Our addressable market continues to significantly expand driven by accelerating secular trends and the proactive steps we are taking to become a full commerce and payments platform. We believe that the shift in consumer digital behaviour will remain essentially unchanged in a post-COVID world.”

The obvious conclusion is that we are moving towards an omnichannel world. Many experiences are best enjoyed in the flesh as it were but not only can so many things be done more conveniently digitally but things like payments are surely going to become almost wholly digital and Paypal is one of the leaders, perhaps the leader, in making this happen.

Paypal is morphing into a fintech conglomerate. It is amazing to thing that back in the day it was a wholly owned subsidiary of Ebay and derived much of its revenue from facilitating payments on that platform. Now Ebay is around three per cent of revenue and the group is bringing forward a constant stream of innovations. Paypal launched its buy now pay later (Pay in 4) product at the end of August 2020 and it has already processed $1bn in total payment volume (TPV) since then with over 30,000 merchants signed up and experiencing an average 15pc engagement lift as a result.

Numerous statistics show the benefits Paypal brings to merchants offering its service. “Merchants continue to turn to PayPal in record numbers as we are now an essential platform to enable their transition into the digital economy. Small businesses who used PayPal during the peak of the pandemic saw their overall revenues grow by 25pc versus a negative 9pc for all other small businesses in the same time period. Small businesses who used PayPal last year drove 75pc of their online sales from outside their local neighborhood, clearly expanding their addressable market. And 65pc of small businesses in the U.S. who use PayPal have cross-border sales versus less than 5pc of all other small businesses. Across the shopping journey, merchants who use PayPal see a substantial lift. According to market research reported by Nielsen, merchants with PayPal experienced 17pc more repeat buyers. Their checkout completion goes up by 34pc.”

Paypal’s Venmo digital wallet business is also growing apace and adding multiple new features. “Venmo continued its strong performance in Q1 with $51.4bn of TPV (total payment volume), up 63pc year over year. We recently launched the ability for Venmo customers to buy, sell, and hold cryptocurrencies. We are heavily investing in Venmo’s commerce capabilities, which include rapidly upgrading the Pay with Venmo customer experience with initial rollout beginning this quarter. The Venmo credit card is outpacing our expectations for both new accounts and transactions.”

At this stage despite its already considerable size as a business Paypal is growing at such a hectic rate that metrics such as earnings per share and returns to shareholders are not especially useful as a guide to the performance or value of the business. “A recent external survey of over 300,000 consumers across the globe selected PayPal as the second most trusted brand in the world.” Allied to everything else that is happening across the world and in the business this provides a formidable platform for Paypal to become a behemoth in the years to come.

Shopify. SHOP. Buy @ $1450. MV: $170bn. Next figures: 17 June. Times recommended: 21. First recommended: $118.84. Last recommended: $1450

There are two superstars at the helm of e-commerce platform, Shopify. Toby Lutke is the co-founder, CEO and the personification of an Uber-geek. Shortly after the company was founded he was joined by Harvey Finkelstein, who is the super articulate and impressive president, having previously been chief operating officer and before that chief platform officer. They are a formidable pair.

Shopify is smaller than the companies discussed above and at an earlier stage in its growth curve. It is more about growing at a furious pace and less about super strong cash generation, high profitability or other signs of greater maturity such as share buybacks and dividends.

The growth has been extraordinary. The company was only founded in 2006 as a simple platform to help retailers sell goods online yet it is projected to have sales of $7.9bn and ebitda of almost $1bn by calendar 2023. This is a good sign for long-term investors because I have noticed a correlation between companies which grow very rapidly in their early years and becoming a very large business later on.

It’s common sense. If you want to become very big you need to grow very fast. It is all part of winning the battle for territory. Amazingly in just 15 years Shopify has become the largest Canadian company by market value. One measure of success is the number of businesses using its platform. By May 2021 this had reached 1.7m businesses in 175 countries. It is notable that 700,000 of those businesses came onto the Shopify platform in 2020 and that number compares with the 4.4m businesses formed in North America in 2020.

Shopify has a very powerful mission which is clearly resonating with its customers. “We are here to make it easier for anyone with an idea and ambition to launch a business. Entrepreneurship is thriving and trends like omnichannel shopping and direct-to-consumer selling offer even greater opportunities. But entrepreneurship is still harder than it needs to be. And by building a future-proof retail operating system, we are more committed than ever to levelling the playing field for entrepreneurs and making commerce better for everyone. Shopify is truly becoming the world entrepreneurship company.”

The pandemic has triggered an acceleration in growth at Shopify as more businesses rush to have an omnichannel offering. “Overall revenue growth accelerated from last quarter, up 110pc year over year to $988.6m in our first quarter. To put this in perspective, our first-quarter revenue exceeded our fourth-quarter revenue, a remarkable achievement given we typically see a seasonal decline quarter over quarter coming off the holiday selling season. Subscription solutions revenue growth accelerated to 71pc year on year in Q1 to $320.7m, largely due to strong growth in monthly recurring revenue. MRR (monthly recurring revenue) growth accelerated to 62pc year over year to $89.9m in Q1 as demand for Shopify remained elevated.”

Shopify makes money from subscriptions, which grew revenue 71pc to $302.7m in Q1 and from fees on transactions taking place on its platform, which grew 137pc to $688m in Q1. It also grows and attracts more customers by adding more services to its platform, some of which like fulfilment require considerable investment. “We continue to expect rapid growth in gross profit dollars in 2021 and plan to reinvest back into our business as aggressively as we can with the year-over-year growth and operating expenses accelerating each quarter throughout the rest of the year.”

Newer services include items like payments, capital (loans) and shipping.

“The strong growth in merchant sales combined with increased GMV (gross merchandise volume) penetration of Shopify Payments and merchant adoption of Shopify Capital and Shipping compared with the same period last year drove revenue from these products higher. $17.3bn of GMV was processed on Shopify Payments in Q1, an increase of 135pc versus the comparable quarter last year. Payments penetration of GMV was 46pc versus 42pc in Q1 2020. The majority of new merchants coming onto Shopify opted to use Shopify Payments and Shopify Plus and international merchants expanded their share of GPV year over year.”

The success of these additional services reflect another powerful growth driver at Shopify which is the rapid scaling of many of its customers. They come in small but many of them are highly successful which means they need more services so pay higher annual subscriptions but they are also generating much more GMV so the transaction-relation fee income climbs as well.

Shopify is also building strong partnerships with giants like Facebook, as the latter tries to build a bigger e-commerce presence. “The number of shops actively selling on Facebook shops has more than quadrupled since Q1 a year ago, as well as the GMV through Facebook. While still small, the launch of Facebook shops in May of last year is clearly starting to make a difference here.”

Shopify is almost the bellwether stock of the digital/ e-commerce revolution we have seen happening in the new millennium and accelerating through lockdown. Lockdown itself has surely driven a spike in growth but the company believes we are in a new digital era and there is no going back. They expect to sign on more businesses in 2021 than in any previous year except 2020 and the big picture long term remains as positive as ever.

Square Inc. SQ. Buy @ $234. MV: $105bn Next figures: 4 August. Times recommended: 21 First recommended: $39.51. Last recommended: $245. Highest recommended: $250

There is an argument that neither Shopify nor Square really belong yet in this group of tech behemoths. I am sure if their leaders were asked they would say that they certainly aspire to be among the big boys in time given the speed at which they are growing and the size of the markets they are disrupting. Square is led and was co-founded by Jack Dorsey, who also cofounded and runs Twitter so he is a busy man. Twitter has the higher profile but Square is more than twice the size measured by market value.

Like Shopify with whom it to some extent competes Square had very simple beginnings, helping small traders to accept card payments. I see their little white square card readers all the time when I shop in the farmer’s market off Kensington High Street.

Based on that initial product Square has introduced a range of further products to help merchants and businesses operate in a digitally transformed world. It has also created an even faster growing business, Square Cash App, which offers similar services to individuals. The former business initially took a hit from Covid though it has since rallied strongly while the latter saw its growth accelerate.

Square is currently growing at a furious pace with the sellers business (merchants) growing gross profit 32pc to $468m. Key drivers were bigger sellers coming on board and geographical expansion with the largest overseas market, Australia, doubling year over year.

Cash App is storming ahead even faster with gross profit rising 171pc to $495m. Engagement has risen dramatically with monthly actives transacting an average of 18 times a month driven by products like cash card. Another driver is the inflows of cash into the ecosystem which increased 55pc month over month in March.

The group cautions that after this period of very strong growth that growth will moderate as comparisons are made with stronger periods. This is really a general point for all digital focussed businesses that have seen growth spike during lockdown. As lockdowns ease and consumers rush to enjoy real world experiences from which they have been barred for many months there will be a hiatus but the multi channel digital world is not going back into the box. There are too many advantages so growth will slow, may even pause for a bit but the big trend is not going to change.

As Square puts it – “With a strong start to 2021, we remain focused on disciplined investing to drive long-term growth. We see meaningful opportunities to continue expanding reach of our ecosystems and reaching new customers around the world.”

Star Trek’s Spock was obsessed with logic. Everything had to be logical. Logic tells me that the companies above are so important to the technology revolution that if the revolution continues they will prosper. If it doesn’t they won’t. So the question you have to ask yourself is do you think that the technology revolution will continue. If you do it becomes logical to purchase these names, which look like core holdings for a 21st century portfolio.

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