Tech stocks have been losing ground for weeks. The fund house BIT Capital, which was celebrated in previous years, is also feeling the effects. However, founder Jan Beckers sees the damper as an opportunity – and wants to add millions
Jan Beckershelped shape the Berlin start-up scene and has been investing in tech stocks as a fund manager since 2019. In 2020 and the first half of 2021, his funds were among the top performers in Europe.
Tech stocks have had a tough time for a few months now. Recently, the prices of many big tech stocks have also collapsed. How do you view this development?
JAN BECKERS: The interesting event you’re seeing right now is we have more than 500 companies on the Nasdaq right now that are down more than 80 percent of their value from the 2021 peak. That’s a lot of companies that have both grown well and better than analysts’ expectations. In other words, the result is that they are even cheaper than before, as only the 80 percent discount shows. This is a development that is really massive.
Why?
Many of these stocks peaked in Q1 or Q2 last year, then slid slightly and from November experienced a real crash with full fear of inflation and interest rates. If you look at that for the Nasdaq, the one without the seven largest stocks has fallen decently over the past year and has risen decently with the seven largest stocks. That basically means: Apple and Amazon, Google, Facebook and Co. kept the whole index up and there was a lot of turbulence underneath.
Your funds have also been shaken by this in recent months. How have your investors and investors reacted to this?
It’s painful for all of us, of course, when almost every stock we could own in our universe has some massive downsides. That’s not nice for us either, but unfortunately it’s part of it. The good thing is, our investors are mostly quite mature.
In what way?
In webinars and podcasts we tried to explain what happened and showed examples. Many have seen the market phase as an opportunity and are taking advantage of it. The data and the courses of the companies show that. For investors who have understood how cheap some of the companies in the portfolio are, it is reassuring because they know: it will come back at that point.
Which titles have deservedly lost ground and which haven’t?
Of course, there are titles that have been rightly punished, like Peloton, where management and technical errors have been made. But there are also companies like Upstart. Upstart is an AI landing platform and has grown its revenue by 245 percent in the last year. Since then, the company has lost more than 80 percent of its value at its peak – although Upstart has exceeded all forecasts and analysts’ expectations. Here we see an exaggeration that will correct itself over time.
Are there certain stocks that were particularly vulnerable to this development?
Companies that have been on the stock exchange for less time and tend to grow faster saw a broad sell-off. If you look at the USA, for example, the best-known fund of this type, Ark, was already heavily in the red in 2021 precisely because of this development – and now it is even stronger. We managed that our funds, which have been there since the beginning of the year, were able to achieve a double-digit increase in 2021. BIT Global Leaders brought in more than 30 percent returns for its investors.
Keyword Ark – fund manager Cathie Wood has already issued the slogan that one should now invest in cheap tech stocks. Are you right?
Now or in the coming weeks and months, you will be able to get into good tech titles at prices that were not thought possible in the last five years – and which probably will not be the case in the next five years. We see it the same way. Almost everyone who invests in this environment sees this.
When will that be?
You can never say exactly with the timing. As investors with a medium and long-term orientation, we at BIT Capital have just invested an amount in the double-digit millions. I myself have personally invested an amount in the tens of millions and will continue to invest in the coming weeks.
Which sectors and areas have the most potential?
In many cases, fintech has been hit disproportionately hard and in many cases very, very unfairly. Here we will know how to use the opportunities. We have also been seeing interesting opportunities in software for a long time. We almost never invested in software before. Many of the companies have simply become too expensive in recent years. Currently, some have lost massively in value, although their business prospects have not necessarily changed.
What about Chinese tech stocks?
China has its own risks. These risks are often priced in. But in China you have to take a risk premium. That means you have to have an additional safety margin for your investments because the regulatory risks are quite real.
Crypto has also lost value in recent months. What are your expectations for the next few months, also with a view to the two crypto funds from BIT Capital?
Crypto has performed well in 2021 – with all the ups and downs. Course corrections only began when inflation and interest rates became the dominant issues. Since there are often similar or the same investors who understand tech and also invest in crypto, there is a high correlation in these phases. Nevertheless, the technology has progressed well, the number of users has increased significantly and regulatory risk has decreased worldwide. You never know exactly what’s going to happen in the near term, but there’s a strong possibility that now is another good time to enter.
What does that mean for BIT Capital – are there plans to get back into crypto and make additional investments?
Definitely: We also made gains with the BIT Global Crypto Leaders fund not so long ago. But you should keep in mind with crypto: The potential upside is high, but the downside is also potentially always higher than with stocks. In this respect, we think it is good to have a broader portfolio. Our investment strategy is therefore: We invest in proven crypto companies and we invest in proven coins. This is the sweet spot: Disproportionate returns are possible here without the many total failures that will occur with crypto.
How will the Fed rate hike now due in March affect prices?
Above all, I can speak from our equity perspective: There are companies that are trading below their tangible book value or have recently lost 80 percent, even though they have delivered very solid numbers. Interest rates would have to be at an entirely different level to justify that. We don’t pretend to be the absolute macro specialists, but we’re pretty good at finding companies that are growing consistently. We can think of few scenarios where these companies will grow and become cheaper at the same time. In this respect, we follow suit and hope that many investors can also understand this and end up on the winning side with us.
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