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In a "lower for longer" world, earnings growth exists in innovative and technology-focused companies that operate independently of the macroeconomic environment, says Marsico Capital Management.
In an update, US-based global equity manager Marsico Capital Management said companies that utilise technology and develop innovative business practices are likely to deliver strong performance over the next few years.
“We believe improving economic circumstances in the developed world will lift profitability in industries not directly competing with the developing world and not heavily dependent upon labour input,” the update said.
Marsico indicated that the technology sector today operates within a different "landscape" than that of the technology bubble of 1999-2001.
During the bubble, tech stocks made up 32 per cent of the S&P versus 21 per cent today. No start-ups had cash flow and many had no revenue, the update said.
This is markedly different from today, as most start-up business models generate real revenue. In 1999, Marsico pointed out that e-commerce revenue was $US12 billion, whereas today it is in excess of $US300 billion.
Furthermore, it is also less capital-intensive to start and run a company in 2016.
“Thanks to cloud computing – and the scale of mobile has enabled broader distribution of products and services, and therefore faster time to profitability. This is perhaps the biggest difference.”
Marsico said over the next few years, the market will reward market share-driven secular organic growth through stock price outperformance.
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