Artificial intelligence and ChatGPT are likely to change our future just as much as the internet once did. Nevertheless, it is important to keep a sober look when investing, Kubilay Yalcin writes in an article on finews.first.

Continued interest rate hikes put tech stocks under pressure last year until Microsoft founder Bill Gates announced a «tech revolution»: «It will change how people work, learn, travel, get health care, and communicate with each other,» Gates said. Since then, the AI ​​euphoria has fueled stocks in the technology sector. Many stocks in this sector have been among the best over the past half year. Right?

In fact, the potential of this new technology is enormous. However, some use cases, such as the language models popularized by OpenAI, are still in their infancy. And history has shown that groundbreaking technologies take time – for example with the Internet in the early 2000s. Even harder to answer is who the winners (and losers) are.

«Only five of these seven companies still exist today»

Hopes were still high around the turn of the millennium – of the ten largest listed companies by market capitalization at the beginning of the year 2000, seven were technology or telecommunications companies. At that time, the possibilities of the worldwide web electrified the financial markets.

However, only five of these seven companies still exist today. For four of the latter, the share price development from December 31, 1999, to June 30, 2023, lagged far behind the global MSCI World share index. Only Microsoft shares performed significantly better during this period – although even here there was a long dry spell. That's why it's important for us to keep a level head even in times when stock markets are fueled by too much imagination. The past has taught us that, especially in these market phases, companies are often paid too much - whose profit potential has to be realized first.

«This form of portfolio management differs from speculation»

We have been focusing on shares of high-quality companies for years. And for us, «quality» means above all a strong future earnings development that is as predictable as possible. They are attractive business models with solid balance sheets that can withstand setbacks and should prove resilient in times of crisis. We find such quality companies worldwide and in many sectors – including technology.

We prefer companies where we can estimate future earnings development with above-average accuracy. A hype, a fashionable topic, even if the prices seem to literally explode in the short term, is far from being a good investment without a thorough analysis. This form of portfolio management differs from speculation, which usually involves a lot of uncertainty.

«Only first-class companies can survive times of crisis and grow their profits in the long term»

Not least because of this, there is always only a limited number of shares in our portfolios. Because only first-class companies that hold their own in their market year after year give us the confidence that they can survive times of crisis and grow their profits at a growth rate above inflation in the long term.

We do this with strict valuation discipline, the necessary patience and a clear view of the long-term value drivers. This is the only way for our customers to have the best chance of benefiting from the aforementioned «compounding» over the years, i.e. from the continuous and ultimately exponential growth of their invested assets.

Kubilay Yalcin has been Portfolio Director Equities at Flossbach von Storch since 2020. After assignments in London and Istanbul, he worked as Equity Sales at HSBC in Düsseldorf from 2012 to 2020. There he looked after institutional investors in Germany and abroad with a focus on the telecom, media and technology sectors. He studied business administration at the Munich University of Applied Sciences and is also a qualified banker.

Previous contributions: Rudi Bogni, Peter Kurer, Rolf Banz, Dieter Ruloff, Werner Vogt, Walter Wittmann, Alfred Mettler, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Albert Steck, Martin Dahinden, Thomas Fedier, Alfred Mettler, Brigitte Strebel, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Anton Affentranger, Yves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino Borini, Bert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. Rutsch, Dorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob Roth, Marco Martinelli, Thomas Sutter, Tom King, Werner Peyer, Thomas Kupfer, Peter Kurer, Arturo Bris, Frederic Papp, James Syme, Dennis Larsen, Bernd Kramer, Armin Jans, Nicolas Roth, Hans Ulrich Jost, Patrick Hunger, Fabrizio Quirighetti, Claire Shaw, Peter Fanconi, Alex Wolf, Dan Steinbock, Patrick Scheurle, Sandro Occhilupo, Will Ballard, Nicholas Yeo, Claude-Alain Margelisch, Jean-François Hirschel, Jens Pongratz, Samuel Gerber, Philipp Weckherlin, Anne Richards, Antoni Trenchev, Benoit Barbereau, Pascal R. Bersier, Shaul Lifshitz, Klaus Breiner, Ana Botín, Martin Gilbert, Jesper Koll, Ingo Rauser, Carlo Capaul, Markus Winkler, Thomas Steinemann, Christina Boeck, Guillaume Compeyron, Miro Zivkovic, Alexander F. Wagner, Eric Heymann, Christoph Sax, Felix Brem, Jochen Moebert, Jacques-Aurélien Marcireau, Ursula Finsterwald, Michel Longhini, Stefan Blum, Zsolt Kohalmi, Karin M. Klossek, Nicolas Ramelet, Søren Bjønness, Gilles Prince, Salman Ahmed, Peter van der Welle, Ken Orchard, Christian Gast, Jeffrey Bohn, Juergen Braunstein, Jeff Voegeli, Fiona Frick, Stefan Schneider, Matthias Hunn, Andreas Vetsch, Fabiana Fedeli,  Kim Fournais, Carole Millet, Swetha Ramachandran, Thomas Stucki, Neil Shearing, Tom Naratil, Oliver Berger, Robert Sharps, Tobias Mueller, Florian Wicki, Jean Keller, Niels Lan Doky, Karin M. Klossek, Johnny El Hachem, Judith Basad, Katharina Bart, Thorsten Polleit, Peter Schmid, Karam Hinduja, Zsolt Kohalmi, Raphaël Surber, Santosh Brivio, Mark Urquhart, Olivier Kessler, Bruno Capone, Peter Hody, Michael Bornhaeusser, Agnieszka Walorska, Thomas Mueller, Ebrahim Attarzadeh, Marcel Hostettler, Hui Zhang, Michael Bornhaeusser, Reto Jauch, Angela Agostini, Guy de Blonay, Tatjana Greil Castro, Jean-Baptiste Berthon, Marc Saint John Webb, Dietrich Goenemeyer, Mobeen Tahir, Didier Saint-Georges, Serge Tabachnik, Vega Ibanez, David Folkerts-Landau, Andreas Ita, Michael Welti, Mihkel Vitsur, Fabrizio Pagani, Roman Balzan, Todd Saligman, Christian Kaelin, Stuart Dunbar, Carina Schaurte, Birte Orth-Freese, Gun Woo, Lamara von Albertini, Ramon Vogt, Andrea Hoffmann, Niccolò Garzelli, Darren Williams, Benjamin Böhner, Mike Judith, Jared Cook, Henk Grootveld, Roman Gaus, Nicolas Faller, Anna Stünzi, Thomas Höhne-Sparborth, Fabrizio Pagani, Guy de Blonay, Jan Boudewijns, Sean Hagerty, Alina Donets, Sébastien Galy, Roman von Ah, Fernando Fernández, Georg von Wyss, Stefan Bannwart, Andreas Britt, Frédéric Leroux, Nick Platjouw, Rolando Grandi, Philipp Kaupke, Gérard Piasko, Brad Slingerlend, Dieter Wermuth, Grégoire Bordier, Thomas Signer, Brigitte Kaps, Gianluca Gerosa, Christine Houston, Manuel Romera Robles, Fabian Käslin, Claudia Kraaz, Marco Huwiler, Lukas Zihlmann, Nadège Lesueur-Pène, Sherif Mamdouh, Harald Preissler, Taimur Hyat, Philipp Cottier, Andreas Herrmann, Camille Vial, Marcus Hüttinger, Ralph Ebert, Serge Beck, Alannah Beer, Stéphane Monier, Ashley Simmons, Lars Jaeger, Shanna Strauss-Frank, Bertrand Binggeli, Marionna Wegenstein, George Muzinich, Jian Shi Cortesi, Razan Nasser, Nicolas Forest, Joerg Ruetschi, Reto Jauch, Bernardo Brunschwiler, Charles-Henry Monchau, Philip Adler, Brigitte Kaps, Ha Duong, Teodoro Cocca, Beat Wittmann, Jan Brzezek, Florin Baeriswyl, Nicolas Mousset, Beat Weiss, Pascal Mischler, Andrew Isbester, Konrad Hummler, Jan Beckers, Martin Velten, Katharine Neiss, Claude Baumann, and Daniel Roarty.