How to Avoid Big Tech and Still Beat the Stock Market

Can an investor outperform the market without owning shares of the biggest, best-known companies? That is the self-imposed mandate of Kevin Landis, founder of Firsthand Capital Management Inc., which runs the Firsthand Funds, and this week’s guest on the Masters on Business podcast. “You don’t need me to tell you to own Microsoft,” Landis says. “What value do we add owning Apple, one of the most widely held stocks in the world?”

Landis may be on to something. The firm’s Firsthand Technology Opportunities Fund gained 102% over the past 12 months without many of the biggest market drivers of 2020. In other words, no Apple Inc., Inc., Tesla Inc. or Netflix Inc. The fund was created in 1999, and has gained 21.1% annually over the past 10 years, compared with 13.9% for the S&P 500 Index and 18.5% for the Nasdaq Composite Index.

He sees his role as seeking out new technologies and business models that will shape the future of the economy. The key questions to be asked: “Just how big can this market become? How big is this opportunity? When a company is in the right place at the right time, on the right track, the question is: How high is up?”

Located in Silicon Valley and sitting several boards, Landis gets to see new ideas, entrepreneurs and start-ups in his backyard. In order to invest in companies that have yet to go public, he launched Firsthand Technology Value Fund Inc., a publicly-traded venture capital fund focusing on emerging technologies. The fund was a pre-initial public offering in companies such as like Facebook Inc., Twitter Inc., Solarcity Corp., Yelp Inc., and Roku Inc.

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotify, Stitcher, GoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Ben Inker, head of Asset allocation at GMO, which manages about $60 billion in assets. During the dot-com implosion, GMO’s US Aggressive Long/Short Strategy achieved 80% cumulative net returns for clients. Inker is widely regarded as founder Jeremy Grantham’s heir apparent.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2021 Bloomberg L.P.

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