30 BARRON’S February 15, 2021
TECH TRADER
The Jacob Internet fund soared 123% last year.
And it wasn’t because ofApple, Microsoft,
Amazon.com, Alphabet, or Facebook.
How to Benefit From
Tech’s Run, Without
Big Tech Exposure
R
emember Ryan Jacob?
The investor had a
brief moment in the
spotlight when he
started hisJacob
Internetfund in late
- But shortly after
the bubble burst in 2000, his fund fell
to last among the more than 5,000
mutual funds tracked by Morningstar.
As the jeering died down, Jacob went
back to work building his Los Angeles–
based asset-management firm. More
than 20 years later, he’s still at it. The
fund (ticker: JAMFX) soared 123% last
year and is up nearly 40% in 2021.
Jacob, a soft-spoken Drexel Univer-
sity grad with a distinct Philadelphia
accent (takes one to know one), shuns
most megacaps and takes a bottom-up
approach to finding growing busi-
nesses with strong network effects.
The resulting portfolio includes an
eclectic mix of microcaps.
Jacob notes that his fund underper-
formed in 2019, as megacaps domi-
nated tech’s growth. But his disdain
for large-caps has generally worked,
with the fund returning an annual
average of 23% over the past decade—
without a losing year since 2011.
As of Dec. 31, the fund’s largest po-
sition wasDigital Turbine(APPS), a
longtime holding that’s more than 9%
of the portfolio. The Austin, Texas–
based company handles app installa-
tion for non-Apple devices, working
with phone makers—in particular
Samsung—and carriers, including
Verizon Communications, AT&T, and
Telefónica.
Shares of Digital Turbine have gone
from $6 to $86 over the past 12 months.
By Eric J. Savitz
While the fund’s cost is under $2, Jacob
sees further gains for the stock. “There
was a lot of sputtering before the fly-
wheel started to go,” he says. “But
growth and margins are accelerating.
Just because something is up a lot
doesn’t mean it’s overvalued.” He
thinks Wall Street estimates are too low.
Jacob thinks thatOptimizeRx
(OPRX)—another of his top-five
holdings—could be this year’s Digital
Turbine. The Rochester, Minn.–based
company runs a communications plat-
form that sits between health providers
and patients. It uses ads, coupons, mes-
saging, and loyalty cards to drive pa-
tient compliance with prescriptions.
Jacob says OptimizeRx could be a
good acquisition target, especially for
GoodRx(GDRX), which focuses on a
related market, giving consumers infor-
mation on how to buy prescription
drugs more inexpensively.
Another obscure pick from Jacob
isSharpSpring(SHSP), a Gaines-
After the dot-com bubble
burst, Ryan Jacob had
the worst mutual fund
in America. Two
decades later, the fund
is thriving—thanks to
small-cap tech stocks.
Zillow expects revenue from that busi-
ness to double in the current quarter,
but Jacob thinks the opportunity could
be even greater once housing supply
improves.
Other more familiar bets from Ja-
cob includeTwilio(TWLO), the pro-
vider of communications services to
many online businesses; database
companyMongoDB(MDB); and
online-payments firmSquare(SQ).
And he’s bullish onTwitter(TWTR),
which he says remains undermone-
tized. “The challenge has been, what
does the financial model look like?” he
says. “They have to start proving out
monetization, and we’re starting to see
good ideas on that front.”
I
n my Dec. 28 column, I shared a
pair of stock picks from Jeffrey
Meyers, founder of Cobia Capital, a
New York–based hedge fund with
its own focus on obscure tech stocks.
So far, both picks have worked well.
Nordic Semiconductor(NDO.Nor-
way), a specialist in Bluetooth chips,
has rallied on better-than-expected
fourth-quarter results. “Forward reve-
nue growth would be even higher ex-
cept for the tight semiconductor-supply
situation that is gripping the industry,”
Meyers says. The stock is up 37% since
my column ran, but Meyers thinks that
it can still double from here.
Meyers’ other pick, antenna maker
AirGain(AIRG), has rallied 72%. Its
antennas are helping to strengthen
signals for AT&T’s FirstNet, a commu-
nications network for first responders.
Meyers sees a $500 million market
opportunity—for a company with an-
nual revenue of around $50 million.
I followed up with Meyers this past
week and asked for another pick. His
choice:Silicom(SILC), an Israeli com-
pany that makes specialized devices for
telecom networks. Silicom benefits
from the growth in software-defined
networks, and Meyers says it “has a
huge opportunity” in 5G network
buildouts.
He notes that Silicom trades
for just 2.4 times estimated 2022
sales and under 20 times 2022
projected earnings. He thinks that the
stock could double in 12 months—and
quadruple over the next four years.B Courtesy of Jacob Asset Management
ville, Fla., marketing-software com-
pany with a value under $300 million.
Jacob describes the company as “like
HubSpot[HUBS] at a fraction of the
valuation.” He says HubSpot’s soft-
ware has more features, but at a much
higher cost. Based on a multiple of
sales, SharpSpring trades at half the
value of HubSpot. “Marketing auto-
mation is hot,” he says. “I’m surprised
no one has tried to buy them.”
One contributor to the fund’s run
this year isVoyager Digital(VYGVF),
a New York–based, Canadian-listed
cryptocurrency exchange. Among
other things, Voyager makes a market
in the oddball Bitcoin rival called Doge-
coin, which has recently run up from a
penny a share to eight cents. Voyager
itself is now worth over $2 billion, up
240% in 2021. Jacob has taken some
profits, but he thinks the stock could
still get more attention—and rally fur-
ther—when better-known rival Coin-
base goes public later this year.
Not all of Jacob’s stocks are obscure.
He has a big bet onZillow(Z), which
ran up more than 25% last week on
strong fourth-quarter results. Jacob
notes that the online real estate firm is
benefiting from low interest rates and
a home-buying boost from the work-
from-anywhere trend. He’s particularly
bullish on Zillow’s iBuyer business,
which flips homes for its own account.