Millennial Investment Podcast: Tech Investing and Bitcoin
March 04, 2022
This week, Beth spoke with Clay Finck of the Millennial Investing Podcast about the Metaverse, the Fed, Wall Street flops and how to find winning stocks.
The discussion began with Beth’s investing strategy, namely how she distinguishes a marketing tactic from real revenue growth. She explained that real revenue growth among young or growing companies is often buried in other revenue segments, making it difficult to track growth in emerging trends. Beth explains that companies who have been working at something for years and now serendipitously found their market are usually the ones that find long term success.
Aside from companies that serve established markets, Beth also has a very realistic time frame. She emphasized that Tech gets beaten up, with 40 to 60% drawdowns per year, while drawing parallels to the fact the best Tech investors, which are venture capitalists, are not able to touch that money in five to seven years, even if there is a recession. They must wait that long for an exit which is why they do so well compared to public investors who get skittish and withdraw their money during macro concerns.
When Finck asked her for opinions on the Metaverse, Beth estimates Metaverse to become an $800 billion market, driven by movies and gaming integrating themselves with augmented reality. She explained that what the Metaverse will do to entertainment is add another layer to that market, expanding it.
Going back to her earlier comments about having a realistic time frame, she cites Nvidia – a long time favorite of the I/O Fund – as an example. Beth understands the company’s products, its capabilities as well as its long term trajectory, and that she has no intention of exiting her positions. In this sense, people who don’t like high beta, or have a short time horizon, should be wary of the Metaverse as it will take years to see gains here.
When Finck asked about entries and exits, Beth said that the IO Fund may trim and manage risk, but they rarely close long-term conviction stocks unless the fundamental story has changed. Essentially, the process is driven by fundamentals forward but their exits are driven by technicals.
When asked if the Fed has any effect on the I/O Fund’s strategy, Beth explained very little with a few caveats. According to her, “the Fed does not innovate,” whereas tech is all about innovation, so anyone who wants to invest in tech stocks should not rely on the Fed’s policies. On the other hand, she also emphasizes that the I/O Fund does not fight the Fed, and that their strategy reflects that.
As for rate hikes, Beth said she doesn’t believe that there will be as many rate hikes as the Fed claims, but also adds it’s important to be flexible to address different scenarios. The I/O Fund maintains a policy of flexibility, both for the market as well as individual investments. If something changes, they are prepared to adapt to the situation.
Finally, there was the issue of Bitcoin. Beth remains bullish on Bitcoin, and she believes that it could reach six figures. Currently, the I/O Funds holds a large allocation in Bitcoin. She explains how the I/O Fund’s thesis from 2019 on Bitcoin is playing out now and will continue to play out with economic uncertainty, institutional interest and mobile payments.
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