Our CEORater equal-weight mock Technology portfolio leverages various CEORater investing principles and has outperformed by a significant margin. (tickers mentioned: ADBE, AMZN, CSGP, GOOG, MA, MSFT, NOW, SSNC, TWLO, VEEV, VRSK)
We kicked off an experiment in Q1 of 2019. This experiment – not to be confused with the CEORater Technology Founder CEO Index – was to create a concentrated Technology stock portfolio (you may view at the end of this article) that would leverage various CEORater investing principles. For example, we prefer founder-led Technology companies to those led by “manager” CEO’s. We prefer Technology companies that have a definable, sustainable competitive advantage(s). We prefer Technology companies that generate healthy EBITDA margins with ample operating cash flow. Importantly, we aim for low turnover among other attributes we look for.
We built the portfolio with an eye toward the long-term. In fact, the only position we traded out of was PayPal (tkr: PYPL), when COO Bill Ready moved on in June. We view Mr. Ready as a certified payments product genius who was PYPL’s innovation catalyst.
We expect for the portfolio to enjoy smooth sailing for the remainder of 2019 coming off of Q3 EPS calls that were generally in-line with expectations.
We expect Technology names in general to perform well in coming years given the mega-trends around cloud computing, data consumption and broadly-defined artificial intelligence which is providing real benefits to companies and customers. Further, in this low interest rate environment investors have few alternatives to generate yield.
Changes for 2020 will likely include expanding the portfolio so as to reduce concentration risk.
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