Meet the Manager – Magellan

21 Dec 2017

Gamma Advisory

We recently attended a Magellan Funds Management Investment Presentation.

We obtained an interesting insight from Kris Webster, the Global Technology and Communications Portfolio Manager.  Kris outlined that the next wave of technology developments is in AI (Artificial Intelligence).  He believes there will be three significant changes in the near future:

  1. Driverless Vehicles – he mentioned that autonomous driverless cars have been trialled on Californian roads over the past 2 years and have travelled 3000 miles without an accident. During this period, they had a safety driver within the vehicle but now they are at the stage to remove these drivers.  It may be the case that we see more and more driverless cars over the next decade and he spoke briefly about the effects whereby people will start living in outer areas of cities and people will be less reliant on inner city car parking.
  2. The boom of online advertising – traditional advertising via newspapers and TV is becoming less popular. While this isn’t anything new, it highlights that online advertising through social media such as Facebook and Google will have better traction and be better targeted to the individual and be more cost effective.  It looks like traditional media is dying a slow death.
  3. On-line Retailing – Kris outlined that on-line retailing has been largely dominated by the Amazon effect. But he brought it back to store closures in retail in the US.  This year the US has just surpassed their peak store closures that they achieved during the GFC in 2008.  This highlights that the traditional retail outlets are finding it tough and that a new wave of on-line retailing is taking over.  Amazon is leading the way and they know so much about an individual’s spending habits and can target consumers better.  Voice prompts like Amazon Alexa, a machine that has been around for years in the US sits on your kitchen bench and every time you run out of a kitchen product i.e. paper towel you say, “please order me new paper towel?”.  This order is automatically dispatched to Amazon and the paper towel is delivered to you the next day.  The ‘old days’ of writing your shopping list or going to the shops every time you need something are gone.  Amazon and companies like it are dominating the consumer space by knowing more about their consumers – where will this leave our Australian supermarkets like Woolworths and Coles if they don’t become technology based companies that are focussed on their customer habits?

Overall, this was a very interesting presentation and one that highlights that technology is changing the face of the world and we need to embrace its change on society.  The result of these technological advances may have both positive and negative effects for future generations.  Our investment committee decided many years ago to invest in the global technology sector and this has proven successful for our clients.

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