John Coumarionos: Hi. This is John Coumarionos, Senior Mutual Fund Analyst at Morningstar, and I am here at the Morningstar conference and delighted to have Rob Gensler with us, he is the Manager of the T. Rowe Price Global Stock fund.
First thing I wanted to ask about, Rob, is you came to the fund, of course, after a successful stint on the T. Rowe Price Media & Communications Fund and it seems like you brought some of your expertise in the sectors you were studying and analyzing and investing in, in that fund to this fund, and you have a fair amount of technology exposure. Namely, Google, Apple, Juniper, Amazon and Qualcomm are among your top holdings. Talk about the technology sector broadly. Tell us how you are valuing these companies, how difficult it is sometimes to do that with tech companies?
Rob Gensler: Yeah. You are right, tech valuations are maybe difficult, but the way I think about technology is really, it's all about product. It's all about individual companies and their products. The backdrop is, yes, consumers are spending a bit more on technology than other things, so it's taking a little bit of share and there is a bit of an IT refresh cycle, but that's not affecting how I think of technology today. It's really all about product evolution.
So every name I own is that. It's a funny thing about technology because there is so much failure, there is also so much success, there is so much innovation. So each one of those names – Google, I barely think of as a technology name. It's really a media name and its taking share of global advertising, and other than the mistakes they've made in China, they are really taking share.
Apple is a consumer products company. It's a solutions company. It might be priced for success, which it is, but boy, are they executing well. So we've actually sold that down a bit and have moderated the position. Although, in fact, every sale in Apple has been a mistake, so I mean, it's that kind of thing.
So, Juniper is IT, routers and all. It's taking share in the enterprise now finally a bit from CISCO, but it's got a very good base in carrier. So, it's really about looking out three to five years and thinking about the product evolution, the market share they can gain, and the opportunity.
And quite frankly some of our tech like in Accenture IT services, what a great global business trading at 12 times earnings and quite frankly a lot cheaper than Infosys or Wipro, and a really nice business segment. And even in Google which is our largest holding, it's dangerous to do, but ex the cash they have, it's only about 13 times earnings, if you don't do that, its 15 or 16 times for great growth.
In fact, technology today in aggregate is as cheap as I've ever known, but that's not a reason to buy them, because quite frankly, technology should have never traded at real premiums to the market. The failure rate is much higher in technology.
Coumarionos: Product cycles are short.
Gensler: Product cycles are short, you've got to get it right and the execution is not of the companies, it's errors of judging their products, it has to be done right.