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Technology Leading the Way
At Round Table Financial (RTF), we are excited to share our latest insights and strategic moves in the ever-evolving financial landscape. Our focus stays on the technology sector, particularly companies involved in artificial intelligence (AI), microchips, GPUs, connectivity, hardware, and software. We believe these areas offer the most significant upside potential.
Strategic Overweight in Technology
More than five years ago, RTF intentionally began to overweight the technology sector, recognizing its pivotal role in driving future growth. Our conviction is based on the transformative impact of AI and related technologies on various industries. Companies at the forefront of AI, microchips, GPUs, and connectivity are poised to lead the next wave of innovation and economic expansion. It is our view that technology will lead the markets despite economic headwinds for the next decade. While we previously leaned into the electric vehicle (EV) and lithium battery arena, we have seen this sector has become more commoditized. Consequently, we are disappointed with our position in Albemarle Corp. However, we continue to see potential in Tesla, driven by Elon Musk’s visionary yet unconventional leadership in battery and lithium applications.
Fixed Income and Interest Rates
The past months have been challenging for fixed income investments, with a 500-basis point increase by the Federal Reserve. Despite this, RTF believes that long-term interest rates will stabilize for the next year or two, with a slight decrease over time. Given the recent volatility, we see equities as a more favorable position to provide solid returns, especially after experiencing a 20% loss in fixed income pricing over the last six months. As a result, we are buying 2–5-year Federal Agency bonds with a 6-month call protection to lock in yields of 5.00-6% or better.
Equities and ETFs Performance
For accounts using ETFs (Exchange Traded Funds) as an equity proxy, we are pleased with their performance. However, we have been actively buying individual stocks in accounts that can bear the risk and avoid the ETF’s fees. This strategy has yielded higher overall returns compared to ETFs, which can sometimes lack the same level of growth potential. Like mutual funds or index funds that follow the Standard and Poor’s 500 Index, ETFs own many equities we are not interested in owning. We want to own the best-in-breed stocks that will lead the market, not those that follow along or pull down the performance we are looking for.
Conclusion
As we navigate the financial markets, RTF stays committed to finding and capitalizing on opportunities within the technology sector along with solid growth prospects in Health Care and Infrastructure. It is an exciting time, and the markets are quite active. We believe in the CEOs of the Technology companies we own and consider them visionaries for the continued future. As Peter Lynch of Fidelity Magellan Fund fame was known to say: Buy what you know!
We will continue our core strategy of buy and hold “best in breed” equities unless the company changes their management style. Bob likes to say: “Time in the market is more important than timing the market” and we adhere to that motto. Our strategic overweight in AI, microchips, GPUs, connectivity, hardware, renewable energy, and software reflects our confidence in these areas as key drivers of future growth.
Thank you for your continued trust and partnership. Let us know how we can help you!
Best regards,
Round Table Financial Team
Alex, Bob and Thomas
