At a dire time for ASX 200 tech, how are Computershare shares trading near all-time highs?

An executive in a suit smooths his hair and laughs as he looks at his laptop feeling surprised and delighted.An executive in a suit smooths his hair and laughs as he looks at his laptop feeling surprised and delighted.

The Computershare Ltd (ASX: CPU) share price has been on a roll lately. Not only has it dodged the carnage suffered by its S&P/ASX 200 Index (ASX: XJO) tech peers, it’s trading within a hair of its all-time record high.

The Computershare share price is launching another 5% today, closing trade at $26.13. That’s only 1.6% lower than its record high of $26.56.

That’s despite the broader ASX 200 tumbling 1.4% and the S&P/ASX 200 Information Technology Index (ASX: XIJ) slipping 0.56%.

In fact, the ASX 200 tech sector has plunged 30% so far this year. Meanwhile, Computershare’s stock has gained 30%.

So, why is the investor services operator outperforming the broader market while most of its peers have sunk deep into the red? Let’s take a look.

How are Computershare shares defying the tech downturn?

The Computershare share price is boasting major gains this year. At the same time, its sector has struggled to stay afloat.

Interestingly, the reason behind the tech sector’s suffering might explain the stock’s rise.

The major factor weighing on ASX 200 tech shares this year is arguably inflation. Inflation – and resulting rate hikes – tend to hit tech stocks harder than most, as they are more often growth-focused.

To put it simply, inflation can increase the cost of debt while reducing the value of a company’s future cash flows.

Thus, rising inflation can weigh on the share prices of companies valued on their expected future growth and cash flows. My Fool colleague Zach explained this phenomenon in more detail earlier this year.

But rising inflation is actually good news for Computershare, according to experts. And that could be what has helped to buoy the Computershare share price.

T. Rowe Price’s Randal Janneke previously noted the company’s business model sees it collect cash from its businesses before handing it out to investors. But before being distributed, the cash is placed in money markets where higher interest rates see it generate larger returns.

This sentiment is shared by Tribeca’s Jun Bei Liu, as my colleague Tony reports.

The post At a dire time for ASX 200 tech, how are Computershare shares trading near all-time highs? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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