US stocks performed well in the second quarter of 2019. Technology was a slight underperformer as the industry has faced criticism from the White House for being too large and too liberal. Europe has also been vocal about the monopolistic position of companies in the sector. Lingering concerns over an ongoing trade war with China continue to hurt the sector. Most hardware and semiconductor companies have significant operations in China and the uncertainty and threat of tariffs are helping to hurt many of these stocks. Since these two sectors are also often economically sensitive, they tend to be volatile in periods of uncertainty. Fortunately, at the recent G-20 Summit in Japan, China and the US agreed to at least continue talks in hopes of avoiding new tariffs and delaying others. The Saratoga Technology & Communications Portfolio is focused on companies that we believe can compound high returns of capital, profit margins, and cash flow. The trend to return capital to shareholders is also important, as more and more Technology companies recognize the value of respecting shareholder capital. We believe the industry continues to offer an attractive blend of defensive and offensive characteristics. With the Federal Reserve taking a more wait-and-see approach before changing interest rates, those companies that can grow independent of the cyclical nature of the economy are often rewarded. Going forward, tough rhetoric on trade is an area to watch closely, especially for semiconductor companies, but the we see robust cash flow, high returns on equity, and earnings growth potential in the sector. _____________________________
Information contained herein was obtained from recognized statistical services and other sources believed to be reliable and we therefore cannot make any representation as to its completeness or accuracy. Any statements not of a factual nature constitute opinions which are subject to change without notice.
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