FAANG technology stocks, featuring Facebook, Amazon, Apple, Netflix and Google are increasingly popular in equity funds but WCM thinks that one stands out among the pack.
Paul Black, co-chief executive and portfolio manager of WCM believes that Netflix is the stock that that has the greatest potential, particularly in international markets.
“Consumers in international markets can easily stream Netflix content. This means Netflix has a much greater opportunity in emerging markets and developing countries; providing it with a growing competitive advantage and ultimately greater growth potential.”
Mr Black said that many people were buying into Amazon as they believed its competitive advantage was getting stronger, but WCM believed it was weakening.
“While it’s still a great business, we look for organisations whose competitive advantage is increasing, not weakening.
“One reason is that in some countries in Eastern Europe, Latin America and Asia – markets where Amazon is trying to expand into – consumers can’t have parcels delivered securely to their door,” he said.
Mr Black said Netflix also fostered a great corporate culture, which is a key value to any company that WCM put focus on.
“Corporate culture is as important to a company’s health and future as any financial indicator. In fact, I would argue that culture is the single best predictor of long-term performance and viability,” he said.
Mr Black said that companies with a positive culture consistently delivered superior returns and was how WCM had achieved excess returns relative to benchmark of over five percentage points.
“Engaged employees keep customers happy and deliver consistently on business objectives which translates to higher sales and lower financial volatility,” Mr Black said.
