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I know that you still hold some of the large-cap tech names as well. Certainly their story has almost been the opposite of what we’ve just talked about, where they did very well during COVID and recently been quite challenged. What’s your view on that space, and why do you continue to hold some of those names?
Yeah. Well, first of all, I mean, we’re not in a lot of the parts of tech that have been decimated that are 30 times revenue. You call yourself a SaaS software company and you’ve got bid up to really crazy multiples. The pure COVID darlings like the Pelotons, the Netflixes, the DocuSigns of the world, we never really got too serious looking at those companies because we asked ourselves, okay, that’s great. Certainly during COVID…I mean, look, seeing Zoom go to what it did to whatever it was, I think at some market cap, at some point, I don’t know, it was certainly over a $100 billion. It might have been $200 billion. I honestly can’t recall. Because it obviously seemed like an obvious trade, but that was just the point, Matt, it was a trade.
As painful as it is sometimes, and you get FOMO watching this stuff go up every day, we just knew that the question we had to ask ourselves. Well, okay, well, what then? Assuming that the world normalizes and we’re all back at our offices, we’re travelling, we’re going out. What then? I certainly think behaviours have changed. We’re not recording this live. We’re doing it over a technology platform, right, and that’s not going to change. And I just got a request from the sales department about perhaps going out and seeing some clients in the summer and fall. I’m like, okay, well, maybe instead of going out for a week, I go out for a couple days, and instead of being on the road for a week, it’s two days and the rest are webinars, or we do it online. Those things haven’t changed, but the price you were paying for these companies was just unreasonable.
Now, I don’t think paying 15 times next year’s earnings for Google is unreasonable, which is what it is today. Or I think the same multiple for Facebook. Although, again, it’s moved around a little bit. I look at it this way, and we own Apple. I’ve owned Apple for over a decade now. Do we have these massive positions in these companies? No. That’s where I think you’re right. I mean, I think that there’s certainly some froth in parts of those markets. Maybe it’s at this point as you’re looking at the stocks. Maybe we’re near towards the bottom than we were, say, six months ago.
I don’t know. But I’ll tell you this. I feel very comfortable with the positions we have in those names. Again, they’re relatively small. They’re certainly relatively small compared to our benchmark, but I also feel like it wouldn’t be prudent as a long-term investor to bet against these companies. So I’m more than happy. I don’t lose one minute of sleep at night having a 1 percent position in Amazon. These are very unique companies. I think their moats have increased over COVID. Amazon spent more money in CapEx the last two years than they had the previous 20.
We own a company, Texas Instruments. This is an analogue semiconductor company, and we own a number of….We own Analog Devices, which is another analogue semiconductor company. These are businesses that are playing an increasingly critical role in the…call it the new economy, the digitization of everything, industrial products of not just your home networking and your PCs. It’s the number of semiconductors that go into automobiles or MRI machines. I mean, this is not going away and we’re happy to own companies like Texas Instruments or Analog Devices that have, if not dominant, very strong positions in what is a really important industry going forward.
Then Texas Instruments sold off because they announced that they were basically going to double their CapEx over the next several years. Why are they doing that? Okay, they’re doing that because there’s a massive amount of demand, because they’re ultimately trying to serve their customers better. You know what? It’s going to dampen near-term returns. The stock’s not going to do maybe as well as it would’ve otherwise, but they’re doing the right thing for the business and we’re okay with having—again, last time I checked—a 95 basis point position. We’re okay with that.
I mean, if you really want to get granular, we are underweight tech. I think we’re at 17 or 18 percent. I think the benchmark’s at 22. We don’t lose a lot. Again, we’re not sitting up at night going, Oh my God, we’re 5 percent underweight. We have a 5 percent weight in semiconductors across not just Taiwan Semiconductor. I mentioned Texas and Analog. We own a Broadcom, which has got dominant franchises. They sell chip sets into data centres. They also have, they call it an infrastructure software business, which is almost…it’s just that…it’s an annuity business. It’s about a quarter of their earnings. We’re more than okay owning those businesses. We own, I mentioned Amadeus. That’s considered a technology company, believe it or not. It’s more like a service company to the airline and hospitality industry, even though it’s in tech.
We own Visa. That’s considered a tech company, but at the end of the day, it’s, again, the long-term trends towards the transition from cheques and cash to online and to e-commerce. Again, there’s still the rails, the default rails, them and MasterCard, that enable all this stuff. So we’re happy to own Visa as opposed to Affirm or PayPal, or go down the list of companies that have gotten destroyed because we felt Visa, at 30 times earnings, was reasonable. But I couldn’t justify paying 200 times earnings for companies that had earnings.
So a long way of saying we own a number of these big tech companies. We think they’re reasonably valued here. We think the positions we have are prudent, and there’s going to come a time where, it’s probably going to make sense for us to add to them. I’m not saying it’s necessarily today, but if everyone thinks…15 times next year’s earnings for Google is not unreasonable—now maybe the earnings are a little bit high—it’s probably a fair assumption. But whether Apple generates 75 billion dollars in free cash flow next year or 70, these are still extremely well-placed, profitable, call it dominant businesses in their end markets. I think they’re getting more dominant. Now, again, rates going up, valuation-wise. How that’s going to play out the next six months, nine months, 12 months, who knows? But, their business certainly isn’t getting weaker.
So it’s just a valuation call. I can completely appreciate people thinking, Okay, Apple’s 23 times earnings may be a little bit much for a business that might be growing high single digits over the next several years. Maybe it goes to 20. Maybe it goes to 15 in a massive market sell-off. Okay, we can live with that. We’re happy with our positioning here, because, again, it’s what is this thing going to be worth in three years’ time, five years’ time, and beyond? That’s how we think about it.