Why IT Stocks are Well-Suited for Quality Growth Investors

Investors today have the choice of many large and liquid IT companies for their portfolios. But with increasing size, the IT sector has become more complex. Technological innovation has given birth to new sub-sectors, new IT companies have sprung up, and older ones have branched out into new fields. Investors in IT companies must also be aware of the inherent risks, including new innovations leapfrogging older technologies or increased government regulation.

At the Vontobel Quality Growth Boutique, we think passive exposure to the IT sector is not enough. Investors need to differentiate between commodity-like IT companies and those with enduring business models that will generate profits into the future. In this paper, Senior Portfolio Adviser Douglas Bennett explains that, while the IT sector can be fertile ground for our investment style, only a handful of IT companies meet our high hurdle rates.

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