Podcast #17: Are Tech Stocks in a Bubble with Puru Saxena
Advisor: Matthew Cochrane
Beating the S&P 500 is no easy feat. Investors need to get so much right to do so over the long-term. Investors need to 1) Identify the best trends and sectors, where innovation will drive disruptive technologies that can achieve explosive growth; 2) Buy the best companies from those sectors, the ones that will take market share as the total addressable market (TAM) grows too; 3) Buy companies at the right valuation. Even the best companies, the ones growing revenue the fastest, can get over-extended.
Yet even when investors get all of the above things right, the world will still throw curve balls that keep all of the investors on their toes and off their A-game.
Puru Saxena, one of today’s great growth investors, has developed a strategy to not only identify the factors above, but also offset whatever violent volatility the market can throw at his portfolio.
In our seventeenth official podcast, Puru describes what it was like to manage money through both the 2000 tech bubble and great financial crisis, what trends he finds most promising, how valuations fit into his growth strategy, and why he uses hedges to reduce portfolio volatility during market downturns. He dives into some of his favorite stocks, including why he holds positions in Sea Ltd (NYSE:SE), Adyen NV ADR (OTC:ADYEY) and Alteryx (NYSE:AYX).
0:10 – Introduction
2:10 – What was it like to manage money and invest through the 2000 tech bubble. What lessons did Puru learn by going through that bear market as such a young investor?
5:15 – What lessons did a young Puru take away from the 2000 tech bubble? How did surviving that experience shape his investing today?
8:25 – What lessons did Puru learn by investing through the financial crisis in 2008-09? Why did Puru still lose money during the crisis, even though he warned his investors that the U.S. housing market was acting like it was in a bubble?
11:55 – Are cloud and software names today in a bubble? Shopify and some other tech companies are selling for as much as 50-times sales. Have these stocks gone too high?
15:40 – How does valuation fit into a growth investor’s buying process?
19:20 – When do you sell a company?
21:50 – Why Puru believes e-commerce is a great investment trend that will continue to grow and take retail market share.
23:50 – Why Sea Ltd is Puru’s favorite e-commerce investment right now.
28:00 – Fintech enables e-commerce, making it another one of Puru’s favorite investment trends today.
30:30– Adyen is a pure payments play with many advantages over legacy payment gateway companies, making it Puru’s favorite fintech investment right now.
35:45 – Software is a broad category, but the inherent advantages of the SaaS business model make it another one of Puru’s favorite investment trends looking ahead.
46:05 – There are many great software companies, but Puru explains why Alteryx is one of his favorite investments in the space today.
48:25 – Puru explains his hedging strategy and how he uses it to smooth volatility in his portfolio and sleep better at night!
1:00:25 – Puru explains why financial education is so important and what he’s doing to teach his kids about personal finance and investing.
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Publicly-traded companies mentioned in this interview include Adyen, Alibaba, Alphabet, Alteryx, AT&T, CrowdStrike, DataDog, Facebook, Ferrari, Ford, GE, Livongo Health, MercadoLibre, Okta, PayPal, Pinterest, Salesforce, Sea Limited, ServiceNow, Shopify, Square, Tesla, and Twitter. 7investing’s advisors and/or guests may have positions in the companies that are mentioned.