Last week, I told you I would circle back and share the latest buying and selling activities of some of the best energy and technology investors.
I covered SIR Capital, one of the best energy investors in recent years, but followed that with Donals Smith and Company, a deep-value firm with very little technology exposure.
Today, let’s talk about technology stocks…
Everyone is an instantly minted artificial intelligence (AI) genius right now.
Everyone is singing the praises of NVIDIA and other AI companies.
With all the chatter about how great the company is, one would expect that tens of thousands of new NVIDIA millionaires were minted this year.
Sadly, that is not the case because most people traded in and out of the stock and reacted to the news flow surrounding AI.
Very few investors have done what UK-based Baillie Gifford has done. The firm took its first stake in NVIDIA in early 2016 at a cost (adjusted for a 4:1 stock split in 2021) of about $8.60 a share.
The company sold some of its shares in the chipmaker as the stock price increased. It then bought more shares when the NVIDIA stock price fell in 2022, and still own a significant amount of the company.
The folks at Baillie Gifford ignored the headlines, the stories, the analysts, and everyone else who had an opinion. NVIDIA was a good business that kept improving, so they held the stock.
One of the best-performing tech stock investors, is a firm most people have never heard of before: Whale Rock Management is a Boston-based firm founded in 2006 to invest in the technology, media, and telecom sectors.
Without considering leverage, the firm has averaged well over 20% a year over the past decade. Simply buying the firm’s top ten holdings and rebalancing every quarter would have given you a 20% annual return.
However, the top ten strategy was down over 50% in 2008 and just shy of that in 2022. The recovery following the two worst years was epic, with gains of 89% in 20089 and 75%, but you had to stay in through the drawdown to participate in the recovery.
You would have to have held positions in market leaders like Microsoft and Amazon for years, not just weeks or days.
Here are your current ten stocks to own using the Whale Rock clone strategy:
- Meta Platforms Inc. (META)
- Microsoft Corp. (MSFT)
- Amazon.com Inc. (AMZN)
- Elastic NV (ESTC)
- DraftKings Inc. (DKNG)
- Pinduoduo Inc. (PDD)
- NVIDIA Corp. (NVDA)
- Hubspot Inc. (HUBS)
- Expedia Group Inc. (EXPE)
- Duolingo Inc. (DUOL)
If you are not prepared for wild swings in your account value in the short term, this strategy is not for you. If you get motion sickness on the financial equivalent of Dumbo’s Wild Ride, this will not be your best option. And if you insist on trying to trade every day, this approach will almost certainly fail.
I would venture a (strong) guess that you could use Whale Rock Management’s top ten stocks along with a trend-following approach that takes a signal from the Invesco QQQ exchange-traded fund.
Another tech firm worth tracking for ideas is Vista Equity, the private equity firm founded and run by Robert Smith. Vista Equity specializes in software companies, so the public holdings tend to be cutting-edge software companies the firm has taken public or has interacted with on some level.
Like every other tech-centric firm, Vista had a rough 2022 but bounced back nicely. Returns before the 2020 meltdown have been consistent since 2013.
Of course, the market has been moving up for most of that time, but stealing ideas from Smith and his team would have outperformed even the powerhouse that has been the S&P 500.
Technology investing has been a lucrative endeavor for the past decade. For most investors, the hard part is figuring out which companies have the real deal tech and which do not.
Stealing ideas from experts in the field can tip the odds somewhat in your favor.
The other major factor in scoring big wins in technology is true of every sector: Longer holding periods usually equal larger profits.
— Tim Melvin
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Source: Investor Place