9 MONTH FIXED COUPON NOTE ON TECH TITANS FB US, MSFT US, GOOGL US

USD | 10% P.A. GUARANTEED COUPON | MONTHLY KO OBSERVATIONS | EKI 65%


INVESTMENT OPPORTUNITY





WEEKLY INVESTMENT IDEAS - 20220118 - FB MSFT GOOGL FCN
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TECH TITANS – GROWTH AT REASONABLE PRICE


Facebook (FB US), Alphabet (GOOGL US) and Microsoft (MSFT US) are large technology companies ranking amongst the top five companies in the S&P 500 index by market capitalisation. Their stocks have not performed and are down 8- 15% from their recent peaks. One reason for the decline in large technology stocks during the period are rising expectations of higher interest rates. Higher interest rates have a larger impact on growth stocks compared to value stocks because they result in comparatively bigger discounts on future earnings streams for growth stocks. Still, these technology companies have not declined as much due to their strong current earnings and comparatively attractive valuations.


Higher volatility but steady earnings growth to prevail. Whilst interest rates may be poised to rise, we do not expect a significant move. The 10-year US Treasury yield is going to increase 75bps to 2.5% by year end. We expect increased volatility, but steady earnings growth will prevent major declines in these stocks. FB, GOOGL, and MSFT remain stalwarts of the tech industry and are estimated to post EPS CAGRs in the midteens until 2025, thus representing growth at reasonable price.