Few Tech Picks amid Bubble Talk

Chidem Kurdas

It’s like the dog that didn’t bark in the Sherlock Holmes story. Look at the portfolios of big hedge funds and you don’t notice a lot of technology names. Yes, there are some, but mainly the same few companies.

Matthew Griffin, portfolio manager for long/short sector equity strategies at The Boston Company Asset Management (part of BNY Mellon) says the there is a wide dispersion between tech winners and losers; you have to be highly selective. Business models are challenged, the macro environment is weak. But he sees excellent opportunities for long/short investing—which he does for mutual funds.

Which tech companies look good on the long side? From a small survey of 10 large hedge funds, I’m guessing Yahoo, held by Farallon Capital, Viking and Renaissance Technologies, among others. Also Google (held by Soros) and EBay (Eton Park), Facebook (Viking and Renaissance).

But bubble bugs short sell some of those names (e.g. Facebook) and recall that Yahoo was a darling in the previous bubble as well. That may sound like an ominous sign but the business has come a long way since.

Talk of a technology bubble has been heard at least since the summer. Yet for all the recent gains, the sector has not fully recovered from the collapse of the 1990s stock bubble. The Nasdaq peaked in March 2000 at 5133; yesterday it closed at 3931.

Historically, serial bubbles did not occur in the same asset class until a generation or two passed—people who remember the experience avoid making the same exact mistake. On the basis of that pattern, 13 years is too short for a recurrence. But that’s for markets left to their own druthers.

We’re living in an unusual policy era, with the Federal Reserve pumping up asset prices and apparently determined to continue doing so, at least for a while. Everything is distorted, says Nick Clay, a manager at Newton (also part of BNY Mellon)—central banks are conducting an experiment where they reverse the historic order of real economy horse pulling the asset cart. Now the asset cart is in front.

Is it time to break out the champagne for serial bubbles?

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