The 2015 All-Europe Research Team: Technology/Hardware, No. 1: Gareth Jenkins & team
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The 2015 All-Europe Research Team: Technology/Hardware, No. 1: Gareth Jenkins & team

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The 41-year-old and his colleagues report on 21 names and hold a mixed view of the sector.

< The 2015 All-Europe Research Team

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Gareth Jenkins & team

UBS

First-Place Appearances: 9


Total Appearances: 52


Team Debut: 1986


Gareth Jenkins and his UBS cohorts “are unique regarding the depth of their market knowledge both in geographical terms and regarding the different hardware subsectors,” attests one portfolio manager. Little wonder then that buy-siders send the three-person London-based troupe to the top of this lineup for a second year running. The 41-year-old and his colleagues report on 21 names and hold a mixed view of the sector. Europe’s technology hardware shares leaped 24.8 percent during the 12 months through January, besting the broader market by 16.8 percentage points, but the analysts advise selectivity. “European Tech Hardware is a heterogeneous collection of subsectors,” says Jenkins, and his group’s views vary accordingly. “We are generally cautious on global semiconductors and the threat of competition in mobile devices, constructive on telecommunications [capital expenditures], positive on semi capex,” he advises. For the year ahead, managing balance sheet liquidity will be key, the team leader adds, because technology companies worldwide will have an estimated $1 trillion of gross cash on hand. “We expect the focus to again be on uses of cash — 2013 and part of 2014 were more about self-help and repointing company strategies — and we expect M&A to be a major feature in 2015, as we expected it to be in 2014.” Companies that have “the potential to surprise on cash returns,” he says, include Britain’s ARM Holdings, which dominates the market for mobile chipsets, and wireless networking powerhouse Nokia Corp. of Finland. Netherlands-based ASML Holding, the world’s largest manufacturer of semiconductor production equipment, also stands out on this front, notes Jenkins. His squad first recommended buying ASML shares in July 2011, at €26.20, and at the start of 2014 highlighted the stock again, based on the strong capex cycle and the potential of its extreme ultraviolet, or EUV, lithography machines. “We subsequently have ‘drawn a line in the silicon’,” he reports: The researchers downgraded ASML to neutral in November, on valuation. By then the share price had more than tripled over the life of the call, soaring 217.2 percent, to €83.11, and trouncing its regional peers by 210.5 percentage points. Over the trailing 12-month period alone, it jumped 23.5 percent, against the sector’s rise of 10.6 percent. ASML closed January at €93.28.



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