In recent years, global technology stocks have been very popular. So, just in time for the weekend, I read a book about high-growth technology stocks and would like to share some of my views on them. (There are benefits at the end of the article.)

1. The global technology stock wave has arrived

This year, in the global capital market, whether it's the AI wave in the United States, the semiconductor industry in Japan and South Korea, or China's intelligent manufacturing, capital has regarded 'technology' as the core track.

Among the major global stock indices, technology stocks have significantly increased in weight. Taking the balanced S&P 500 in the United States as an example, the weight of technology stocks is close to 40%, making it a 'stabilizing force'. The combined weight of Microsoft, Apple, and Nvidia exceeds 20%, which has a decisive influence on the movement of the S&P 500 index.

In the mainland Chinese market, indices like the Science and Technology Innovation Board and the GEM, which are tech-oriented, are becoming increasingly influential, clearly outperforming the main board over the past year, with constituent stocks mostly being semiconductor, new energy, AI, and internet tech companies.

At the same time, traditional energy, banking, and real estate are gradually declining in market capitalization proportion, and the trend dominated by tech stocks is becoming increasingly evident.

2. How to select explosive tech stocks?

However, investing in tech stocks is very challenging because most tech companies change rapidly, their business models are unstable, and their product life cycles are short.

For example, Buffett rarely invests in tech stocks; he admits he does not understand them and cannot predict the competitive landscape in 10 or 20 years.

So how do we select explosive growth tech stocks?

I read a book called 'Investment Method for High-Growth Tech Stocks' and found it quite rewarding, listing some of its viewpoints as follows:

The author of the book is Mark Mahani, a top internet tech stock analyst on Wall Street, who has been ranked first among institutional investors for many years. He summarizes his over twenty years of research experience on companies like Amazon, Google, and Meta, proposing four principles for investing in high-growth tech stocks:

1. Growth

Sustained high revenue growth is the core criterion.

Ideal value: Revenue growth greater than 20% per year and can be sustained for many years.

If a tech company's revenue growth is consistently below 10%, it no longer belongs to the category of 'high-growth tech stocks'.

User growth should focus on 'active user growth + user stickiness', not just registered users, and the ability to continuously explore new markets.

2. Profitability

It's not enough to look at revenue; we also need to examine whether the business model can ultimately be profitable.

High-quality companies often achieve a positive free cash flow rate greater than 10% after scaling revenue.

Software/platform companies: Gross margins should typically be above 70%. E-commerce/hardware companies: May be lower, but should show a trend of improvement.

3. Moat

The competition in the tech industry is fierce, and the ability to establish lasting barriers is crucial.

Generally, only the top 2-3 players in a tech sub-industry can establish barriers.

Whether the number of users, platform transaction volume, or developer ecosystem forms a 'stronger with use' flywheel. The annual customer retention rate (Net Retention Rate, NRR) should ideally be greater than 120%, indicating that old customers not only stay but also increase their consumption.

4. Management

The vision, execution power, and capital allocation ability of the CEO and management team are decisive factors.

He prefers companies managed by founders, where a high ownership percentage by the founders (greater than 10%) usually indicates alignment with shareholder interests.

Historical execution power: Is there a record of 'keeping promises', such as achieving past performance guidance.

As a top analyst, Mahani believes that valuation is not the primary criterion: high-growth tech stocks often appear 'expensive', but if they can sustain growth, long-term returns remain substantial.

User experience first: Truly great tech companies place a high emphasis on user experience, which is the source of growth and moat.

In summary, finding tech companies that are growing rapidly, can ultimately be profitable, have a moat, and are led by an excellent team, and holding them long-term is the only way to enjoy the compound returns of 'winner takes all'.

Here are some of my personal views; it is undeniable that tech stocks have been leading the global investment mainstream in recent years, attracting a large amount of capital worldwide.

Some companies indeed have explosive performance growth, leading to soaring stock prices; however, on the other hand, many companies are fishing in troubled waters, riding on concepts for profit, and once performance fails to meet expectations or a black swan event occurs, the investor losses can be extremely severe.

Therefore, for individuals who want to participate in tech stocks without professional knowledge and background, a suitable method is to invest through tech-themed index funds. On one hand, this helps to diversify the significant volatility risk of tech stocks, and on the other hand, the index continuously refreshes its constituents, representing the mainstream direction of the market.

Recently, while researching holding varieties, I suddenly found a very attractive benefit in the Tencent Wealth Management mini-program.

From September 15 to October 31, Tencent Wealth Management offers benefits for fund investments over approximately one and a half months, where new users can receive a gift package worth 606 yuan, and old users can receive a 388 yuan regular investment benefit card.

The regular investment benefit card is a rights benefit card launched by Tencent Wealth Management for fund regular investment scenarios, which can deduct fund transaction fees under certain conditions. The savings vouchers can additionally deduct the subscription fee based on the platform's final purchase rate.

Regarding specific investment products, my personal view is that if you like tech stocks, you might consider the Science and Technology Innovation AI ETF (code 588790) at this stage. The off-market connection funds are: Boshi Shanghai Stock Exchange Science and Technology Innovation Board Artificial Intelligence ETF Initiated Connection A (code 023520) and Boshi Shanghai Stock Exchange Science and Technology Innovation Board Artificial Intelligence ETF Initiated Connection C (code 023521).

According to the latest periodic report, the top ten heavyweight stocks cover a range of companies that have performed well in the field of artificial intelligence. Against the backdrop of rapid global technological development, artificial intelligence, as a frontier of technology, is attracting more and more investors' attention.

If you do not want to place too many assets in equities and want to diversify risks, consider the gold ETF fund (code 159937); the off-market connection funds are: Boshi Gold ETF Connection A (002610.OF) and Boshi Gold ETF Connection C (002611.OF).

The gold ETF fund tracks the index of gold 9999 (AU9999.SGE), which is the core channel for individual and institutional investors in China to participate in physical gold trading. Moreover, with the expectation of interest rate cuts by the Federal Reserve, the future trend of gold is viewed positively by the market.

$ Science and Technology Innovation AI ETF (SH588790) $ $ Gold ETF Fund (SZ159937) $

Risk warning: Funds carry risks, and there is no guarantee of principal protection or profitability. The views expressed in this article represent the author's personal opinions and do not reflect the stance of the fund company. The content is for research and educational purposes only, and the stocks and funds mentioned do not constitute any investment advice to readers. Investment involves risks; choices should be made carefully. Investors bear all risks and consequences of their own investment actions.



Author: Cangdujiaman
Link: https://xueqiu.com/3213890140/352667260
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Risk warning: The views mentioned in this article only represent personal opinions, and the mentioned subjects are not recommended. Trading based on this carries risks.