S&P 500 COMMUNICATION SERVICES INDEXS&P 500 INFORMATION TECHNOLOGY INDEXS&P 500 INDEX–30–20–1001020304050%JANUARY 2020 APRIL JUNE SEPTEMBER JANUARY 2021JANUARY 20, 2021:
45.5%25.8%21.5%CUMULATIVE TOTAL RETURNS SINCE JANUARY 1, 2020 S&P 500 P/E RATIOS
INFORMATION
TECHNOLOGY
SECTOR
S&P 500
COMMUNICATION
SERVICES
SECTOR
3 5.7 S&P 5002 7. 930.2SOURCES: BLOOMBERG; S&P DOW JONES INDICES. P/E RATIOS BASED ON TRAILING 12-MONTH EARNINGS AS OF 1/19/2134 FORTUNE FEBRUARY/MARCH 2021 THE BRIEF — GLOBAL OUTLOOKportfolios for an economic recovery
in 2021, investors are wagering on
continued growth of innovative com-
panies (which may still accelerate as
the coronavirus wanes). “We believe
winners can keep winning for a very
long period of time,” says Rebecca
Irwin, comanager of the PGIM Jen-
nison Focused Growth Fund, which
was up more than 67% last year.
Lippert of Baron Opportunity has
been paring his highest-fliers while
building up positions in other stocks
that have gone relatively overlooked.
“We love Zoom Video, but they’re
not going to grow as fast in 2021
as they did in 2020; it’s literally
impossible,” he says. Lately he’s been
buying cloud companies, includ-
ing Guidewire Software (GWRE, $126),
which is digitizing the property and
casualty insurance industry. Guide-
wire and some other enterprise tech
companies lagged the sector last
year as their clients put big software
deals on hold. But Lippert thinks
such stocks will thrive over the nextvaluing it at $60 billion,
but “you can kind of get
this feeling that we’re just
scratching the surface,
now that this digital rela-
tionship has been estab-
lished,” says Tu.
Likewise, Fidelity’s
Kalra thinks certain quar-
antine-inspired behaviors
will last even when people
go back to offices. That’s
why he recently stocked
up on Wayfair (W, $294),
the online furniture and
decor retailer. “My sense
is that my appreciation
for my house will con-
tinue post-pandemic as
well,” he says. Those new
homeowner habits, shared
across the white-collar
workforce, are fueling
other changes at Wayfair:
The e-commerce company
turned its first profit in the
second quarter of 2020four years as corporate
spending bounces back.
“I’m not arguing these are
cheap companies,” he says,
“but I believe we can make
double-digit long-term
returns.”
Alan Tu, manager of the
$8.8 billion T. Rowe Price
Global Technology Fund,
which returned more
than 75% last year, has
been sorting out “COVID
winners” from what he
calls “COVID impostors”—
companies whose success
will fade with the corona-
virus. In the winning camp
he puts Twilio (TWLO, $393),
the company behind those
text messages alerting you
when your Uber is outside,
your takeout order is ready
for pickup, or it’s time to
vote for your candidate.
Twilio’s stock price more
than tripled in 2020,MORE ROOM TO RUN
The economy’s most tech-heavy sectors had a blistering 2020, but their share-price valuations aren’t far out of line with
the rest of the stock market.