32 FORTUNE FEBRUARY/MARCH 2021
GLOBAL OUTLOOKThe Overlooked Tech Portfolio
During the pandemic, investors have flocked to Tesla, Zoom,
and the “FAAMG” stocks. But the pros expect a very different
cohort of market winners in tech this year. BY JEN WIECZNER
IF THERE WAS anything in 2020
that went better than expected,
it was the stock market. Mike Lippert
can attest to that. The manager of the
Baron Opportunity Fund remembers
feeling in April the bleak dread of
recession. Instead, his fund returned
roughly 90% last year—his best
performance to date and perhaps,
Lippert thinks, his best ever. “I am
very realistic that it’s a career year,”
he says.
But Lippert doesn’t owe his out-
size returns to any major dip-buying
back in March, during the blink-
and-you-missed-it bear market.
Rather, his best bets had been years
in the making—including stakes in
Tesla (up 743% in 2020), Netflix,
and of course Zoom. “We were
investing in mostly digital trends,
and they became must-haves, must-
dos during the pandemic,” explainsingrained part of our lives.”
Besides Amazon, Kalra
has recently bought more
of big tech companies
including Apple, Alphabet,
and Facebook. Those four
stocks, plus Microsoft,
are the “FAAMG” com-
panies, which went on a
tear in 2020 that left them
accounting for almost a
quarter of the market cap-
italization of the S&P 500
by year’s end.
Still, with most FAAMG
companies valued at up-
wards of $1 trillion apiece,
the math just makes it
harder for them to con-
tinue delivering the multi-
bagger returns investors
strive for. That’s why
growth-oriented investors
are now looking for gains
from a younger generation
of companies that are sim-
ilarly promising to change
the way we live and work,
from finance to entertain-
ment. Starting from a
smaller base than the tech
giants, these companies in
the U.S. and abroad have
more potential to get a lot
bigger—but in many cases,
their stock prices haven’t,
shall we say, zoomed quite
as much over the past 12
months.
Indeed, with many tech
stocks already trading
at all-time highs, money
managers are looking past
valuations and prizing
solid balance sheets over
bargains—particularly as
risks abound with much
of the economy (notably,
travel and hospitality)
still in tatters. “Pretty
much every good company
trades at a high valuation
today,” says Lippert. Rath-
er than reshuffling theirLippert.
It’s a lesson that has
increasingly been borne
out in the past decade:
Many tech companies have
proved they are much less
sensitive to downturns
than anyone thought,
while any company that’s
not on a digital trajectory
puts its investors at risk.
Put another way: If you
want to make money in
today’s market, why own
anything but technology
stocks? “A lot of these
technology companies
have become the con-
sumer staples of today,”
says Sonu Kalra, man-
ager of the $48.4 billion
Fidelity Blue Chip Growth
Fund. “They’ve become anTHE BRIEFILLUSTRATION BY
NICK LITTLE