Digitalization is a secular trend that has spread out across our society and all sectors and industries.

Each work day I use Microsoft 365 Office, use my i-Phone from Apple to communicate with my friends, I “google” to search information on the internet, I shop via Amazon, we protect our systems via Cloudflare, connect and socialise with Facebook, Instagram and send text messages to friends and our loved-ones via WhatsApp.

The COVID-19 pandemic gave the digitalization secular trend a just immense boost. Big Tech will be the big long term winner. Companies like Alphabet are kind of “new defensive” plays, as were businesses like Coca Cola, PepsiCo or Nestlé thirty years ago.

It became clear to me, that I want to take some exposure to the tech sector and that I litterally HAVE TO OWN pieces of these wonderful businesses.

Since April 2020, I have so far been investing into a separate “Tech Mini-Porfolio” in which I put the amount of roughly USD 40’000 to work so far (funded with cash withdrawals from our P2P/crowdlending portfolio).

As of October 2021, the Jmarket value of our “Tech Mini Portfolio” is above USD 80’000 and represents around 18 % of our total investments into stocks (roughly 80 % is invested in our Dividend Stock Portfolio).

Our Tech Portolio currently consists of following twenty five positions. Their relative share of the Tech Portfolios market value is shown in the apple chart. Below that graph, I put a list showing when we took stakes in these companies and how much we have been investing.

• Alphabet (GOOGL): USD 2’400 invested in April 2020.
• Amazon (AMZN): USD 2’400 invested in May 2020.
• Alibaba (BABA): USD 2’000 invested in May 2020.
• Shopify (SHOP): USD 2’100 invested in May 2020.
• Microsoft (MSFT): USD 2’000 invested in June 2020.
• Facebook (FB): USD 4’000 invested in June 2020.
• Cloudflare (NET): USD 2’000 invested in June 2020.
• Slack (WORK): USD 2’000 invested in June 2020. Position sold in March 2021
• Prosus (PRX): USD 2’000 invested in June 2020.
• Fiverr (FVRR): USD 1’800 invested in June 2020.
• Tesla (TSLA): USD 1’400 invested early in Agust 2020
• Square (SQ): USD 1’500 invested invested early in August 2020
• Netflix (NFLX): USD 1’000 invested early in August 2020
• Apple (AAPL): USD 2’000 invested early September 2020
• Peloton (PTON): USD 400 invested late September 2020
• Pinterest (PINS): USD 450 invested late October 2020
• Fastly (FSLY): USD 430 invested late October 2020
• Etsy (ETSY): USD 492 invested early in November 2020
• Draftkings (DKNG): USD 430 invested early in November 2020
• Adobe (ADBE): USD 1’000 invested in February 2021
• Zoom (ZM): USD 500 invested in March 2021
• Nvidia (NVDA): USD 500 invested in March 2021
• Nio (NIO): USD 1’000 invested in March 2021
• Paypal (PYPL) : USD 500 invested in March 2021
• Sea Group (SE): USD 1’000 invested in March 2021
• ARKK (ETF): USD 1’000 invested early in May 2021
• Nintendo (TYO): USD 3’000 invested in September 2021
• ASML (ASML): USD 2’200 invested in October 2021
• MercadoLibre (MELI): USD 3’000 invested in October 2021

Let’s have a closer look at these companies:

Investing in Google parent Company Alphabet

Each and one of us uses products and services of Alphabet on a daily basis by searching the internet with Google.

The bulk of Alphabet’s revenues come from Google searches and user activity on platforms like Gmail, Google Maps, Google Play and YouTube. The majority of that money comes from ads.

But there is much more, like Chrome browser or the Android mobile operating system. Furthermore, Alphabet has made considerable investments in the Stadia cloud gaming system, Waymo self-driving vehicles, and other technologies.

Beside its huge economic moat, I like the company’s strong financials with a very robust profit growth while sitting on a cash pile of USD 130 Bn.

Amazon – synonym for e-commerce and cloud computing

Amazon sets its focus on e-commerce, cloud computing, digital streaming and artificial intelligence. Its strong business profile is supported by its ubiquitous brand name, its global reach and of course there is the increasing strength and profitability of Amazon Web Services (“AWS”), which accounts for the majority of the company’s operating income. Amazon Web Services offers scalable cloud computing services. Amazon is an ever growing giant, supported by its significant cash flow generation and excellent liquidity profile. This excellent liquidity is centered around nearly $20 billion of free cash flow, cash and equivalents of around USD 27 bn, and marketable securities of around USD 22 bn.

From online shopping to AWS to Prime Video and Fire TV, the current COVID-19 Crisis with lock-downs all over the world has been demonstrating the adaptability and durability of Amazon’s business model as never before.

Alibaba – the Chinese e-commerce giant

Alibaba Group Holding Limited provides online and mobile commerce businesses in China and other international markets. Alibaba operates in four segments:

• e-commerce,
• cloud computing,
• digital media and
• innovation initiatives.

While the company expects meaningful growth from all four segments over the medium and long term, its core commerce business is currently by far the most important one, generating almost all the earnings of the company. The growth prospects are just massive, Alibaba can monetize tons of services and in my view it’s one great way to take some exposure to the giant Chinese market.

Microsoft – the software giant with an edge in cloud computing

Microsoft is known to be one of the world’s largest and most successful technology companies. Few businesses have had such an impact on the way we work and communicate.

Historically, profits came from licensing its software and operating systems. But today, it’s so much more. Over the years Microsoft expanded and diversified and today has following three business segments:

• Productivity & Business Processes,
• Intelligent Cloud and
• More Personal Computing.

In each of its operating segments Microsoft is in a leading position with stable growth in revenues. Microsoft clearly has many levers for further growth and increasing profit margins.

Facebook – the global social network and its multi billion properties

Facebook is so much more than a social network. With properties such as Facebook Messenger, Instagram and WhatsApp it provides people with an ecosystem. Facebook is networking, messaging, photo, style, promotion etc. and with its service Facebook Shop it’s a huge player in e-comerce.

Facebook has a pristine balance sheet, sitting of tens of billions of cash and is highly profitable. Given the fact, that Facebook has not yet fully monetised all its properties such as WhatsApp there is plenty of room to grow further.

Shopify – delivering tech infrastructure to small businesses

Shopify Inc. is a Canadian multinational e-commerce company offering online retailers a suite of services “including payments, marketing, shipping and customer engagement tools to simplify the process of running an online store for small merchants.

Want to compete with Amazon as a small business owner? Well, Shopify provides you with the tools.

Shopify has plenty of levers for growth. And amid global lock-downs businesses more than ever rely on services Shopify is providing.

Cloudflare – a disruptor in a huge tech infrastructure market

Cloudflare is a US-based web-infrastructure and website-security business, providing content-delivery-network services to businesses and institutions around the world.

Cloudflare has a large customer base and broad services and product portfolio – and it’s growing pretty fast. More than 13 % of the Fortune 1’000 companies are paying Cloudflare clients.

The virus-related lockdown has helped Cloudflare grow its service offerings and the business is as well-positioned to benefit from the cybersecurity cloud shift.

Cloudflare’s solid cloud offering focusing on reliability, security, and performance is disrupting the strong position of network hardware giants like Cisco or Juniper.

Slack – Making (remote) work more productive and more fun

Position sold in March 2021.

Slack is a US based tech company that helps making homeoffice and the communication of (global) teams much more productive and easier. Its tools are just amazing, the company is very innovative.

Clearly, the COVID-19 pandemic gave that business a huge boost, revenues are set to increase massively.

Prosus – the secret European tech leader

Prosus is a Dutch holding company with an amazing portfolio of tech businesses. The most important participation is the 31 % stake in Chinese tech giant Tencent.

Tencent owns social media network WeChat with over one Billions user – one of Facebooks largest competitor. Tencent is also the world’s largest video game company. Tencent is just a massive giant. Its services include social network, music, web portals, e-commerce, internet services, payment systems, smartphones etc.

What’s also very interesting is the fact that Tencent is one of the world’s largestventure capital firm. In 2017, Tencent bought 5 % of Tesla and took a stake in photo app company Snap.

Fiverr – a global market place for freelance services

Fiverr provides a two sided platform for people to buy and sell services typically offered by freelance contractors.

Services offered on Fiverr include writing, translation, graphic design, video editing and programming. Fiverr’s services start at USD 5 (a fiver), and can go up to thousands of dollars. The service offered are called “gigs”.

Square – the mobile payment and fintech industry transformer

Square started as a mobile payment company with a very strong focus on small businesses in the US. Square is building powerful ecosystems of financial-, merchant and Peer to Peer services (payments, stock- and cryptocurrency trading etc.) which are completely transforming the fintech industry. Square’s growth is impressive, but more importantly, it is building a very broad economic moat around its business model, laying the ground for long term sucess in the financial services industry.

Tesla – much more than just cars

Electric automaker Tesla disrupted the car industry by storm. And it has just started. With the rollout of new models and several factories starting production very soon, Tesla’s global market share will grow rapidly. But that’s just one area where the business is tremendously successful. The company is so much more, it’s hugely innovative with a competitive edge in several areas sch as battery, solar technology, automotive driving software etc.

Netflix – the undisputed streaming services king

Netflix has a uniquely strong position in streaming services, a huge base of constantly growing subscriber count which find great value for their money in form of high quality content and huge quantity offers of TV-shows, movies, documentaitons and internet-connected devices. Netflix can be seen as a entertainment industry disruptor, having a forever changing impact on the way people spend their leisure time.

Apple and its amazing ecosystem

Apple has a unique way of combining great products and services, connecting them in its ecosystem and provide customers with great user experience. Apple is a fantastic hard- and software company. Investors often look only at the devices such as of course the iconic i-phone, i-pad, Mac, AirPods, Apple watch etc.. But let’s look at Apple Services, including a number of recurring revenue streams such as iCloud, Apple Music, Apple TV and various paid subscriptions. This ecosystem offers many services making it difficult to leave. Apple is already one of the strongest cash generation machine of mankind, and there is plenty of potential for further growth.

Peloton – a leader in the connected fitness market

Peloton makes fitness equipment and offers interactive classes. The products and services offered are convenient, quiet, compact, motivating and connected. Definitively in a sweet spot when it comes to the home workout trend which got an incredibly strong boost due to the Covid-19 pandemic. Peloton has a very loyal customer base which is growing fast. Peloton combines elements of a hardware (fitnesss equipment) and software company. The fitness content offers for subscribers makes it a kind of “mini-Netflix” for fitness.

Pinterest is creatively building a unique business platform

Pinterest is an image sharing and social media service designed to enable saving and discovery of ideas and information. If you want to find some inspiring images and creative ideas, Pinterest is definitively the place to go.

Pinterest also belongs to the largest and best known social media platforms among Facebook, Twitter, Instagram, Snapchat, Linked-In etc.

But with Pinterest, it’s much much mor than a social platform. It’s about connecting and sharing IDEAS. It’s about creativity and inspiration.

I cannot think of another platform that works the same way and therefore, I cannot think of any real competitor for Pinterest.

When users find something they like on Pinterest, they can pin those images to specific boards. The platforms’ algorithms then suggest more new pins based on the user’s interest and previous activities. And here lies the huge business potential because some of those suggestions can be advertising.

Pinterest as a company is relatively young, founded in 2010, the growth story has just begun. It’s operating in a huge and thriving market such as online advertising, and what we can be see is that Pinterest is increasingly venturing into e-commerce.

Fastly – a super fast growing content delivery, compute and security edge platform

Fastly is a competitor Cloudflare where we have initiated a position some months ago.

Fastly is smaller than Cloudflare, operating an innovative content delivery, compute and security edge platform.The company was founded in 2011 and has very strong partners and clients. That list includes names like Google, Shopify, Etsy, Pinterest, Slack, Microsoft, Vimeo, The ew York Times, Reddit, Stripe … and TikToc.

In fact, TikToc the Chinese video-sharing social network service (which is owned by ByteDance) is Fastly’s largest single customer, accounting for 12 % of revenues. Amid a looming ban from U.S. app stores, Fastly’s stock price got hammered in October.

When a businesses of the quality and potential of Fastly get’s 30 to 40 % “cheaper” due to rather temporary setbacks and uncertainties, well that catches my attention. I am more than happy to having initiated a small position and will buy more over time.

Fastly provides an edge cloud platform which is designed to help developers extend their core cloud infrastructure to the edge of the network and consequently closer to users. Fastly’s technology is essential for customers around the world, its edge cloud platform includes their content delivery network, image optimization, video and streaming, cloud security, and load balancing services. Fastly’s cloud security services include denial-of service attac protection protection, bot mitigation, and a web application firewall.

Etsy – a wonderful niche e-commerce website

Etsy is an American e-commerce website focusing on handmade and vintage items as well as craft supplies. You can find a wide category range, it includes bags, clothing, jewelry, furniture, toys, art items and alsow craft tools and supplies.

All vintage items must be at least 20 years old. The site follows in the tradition of open craft fairse, giving sellers personal storefronts where they list their goods for a fee per item.

What’s very obvious when going through the financial statements of the cmpany is that Etsy has found ways to effectively monetising its market place and that it has a very capital light business model. It’s operating in a niche, growing very fast, giving the company economies of scale and margin expansion.

When people sell on Etsy, there are various fees like listing fees, transaction fees, payment processing fees (if Etsy Payment is used) etc..

Draftkings, the largest fantasy sports and mobile sports betting operator

DraftKings is an American daily fantasy sports contest and sports betting operator.

It’s quite an interesting concept and business model. DraftKings allows users to enter daily and weekly fantasy sports-related contests. The users can win money based on individual player performances in sports (baseball, football, hockey, basketball, golf, tennis, martial arts, auto racing etc.).

So how does fantasy sports work?

In fantasy sports, users can create their own teams which are real players of a professional sport like tennis, football or basketball. Players may be from existing leagues (NFL, NBA, NHL, MBA etc.) or even college teams.

And how does DraftKings make money?

The company makes money off player entrance fees. For example, DraftKings may collect a fee resp. a percentage from users who pay for league buy-ins. The main amount from each user is placed into the pool, which is paid out to the winner at the end. DraftKings also makes money by selling ads on their sites and partnering with other big names like NBC, Sports Illustrated, Comcast, and Sporting News.

DraftKings is the clear leader in an interesting, growing niche and the platform is a beneficiary from economies of scale and network effects.

Several U.S. states consider fantasy sports (including daily fantasy sports) a game of skill and not gambling. There are some risks as well as opportunities from changes of regulations resp. legislative requirements.

Adobe – the software jewel with its sticky products

Adobe has a range of applications, including Photoshop, Adobe Acrobat and Creative Cloud that have an incredibly strong positon in their segments, making the company litterally a money-printing machine.

Adobe has a market cap of over USD 250 Bn, but compared to Microsoft it’s tiny. Adobe has huge growth potential, either organically or externally through acquisitions.

Zoom has become synonymous with video conferencing

It always a strong sign when a company or a brand become interchangeable with products or an activity.

For instance, when we make an internet search, we “Google”. Or Kleenex, the trademark of Kimberly-Clark is used interchangeably with “tissue”.

Well, Zoom has become the interchangeable with video conference. Yes, there are some competitors, like Microsoft Teams, Skype, Cisco Webex. But Zoom is the most popular video conferencing solutions particularily for businesses.

NVIDIA is the ultimate digitalization beneficiary

NVIDIA produces graphic processors, among others for the gaming industry. Furthermore, it makes gaming consoles, micro-chips for personal computers, tablets etc. You can find NVIDIA components in self drifing cars and the company is a leader in the space of artificial intelligence. NVIDIA also makes cryptocurrency mining processors. NVIDIAs economic moat is incredibly deep and broad. NVIDIA is one of the very few high growth Tech Companies that has been paying out a growing dividend. Free Cash Flow generation is strong, and has litterally been taking off in the last few years.

Is NIO the next Tesla?

Nio is a Chinese premium electrice vehicle maker. Like Tesla, Nio is committed to a environmentally friendly future and competes with Tesla in innovative technologies such as autonomous mobility, batteries, connectivity. And artificial intelligence as well. Nio not only has the world largest car market as growth basis, but it has already successfully started its global roll-out. Car deliveries are showing amazing Year over Year growth and of course, Nio has invest heavily to keep that momentum going.

PayPal, the company that became synonymous with fintech

The story of PayPal goes back to 1998, when five founders, amongst them Elon Musk (who lateron created the electric car giant Tesla) laid the background to create a at that time unique financial technology company to operate online payments. PayPal operates as a payment processor for online vendors, for auction sites etc. for which it charges a fee. Paypal makes moving money online faster, simpler and more simple. PayPal is for personal and business transactions, for transfers, payments and credit services. Millions of websites around the globe accept PayPal and being used in over 200 it is the first truly global fintech company, set to disrupt many banks around the world.

Sea Limited – the Southeast Asean e-commerce, gaming and paments giant

Sea Limited has shown phenomenal growth in the past few years on the back of its three business segments and services:

• Garena provides global users access to popular and engaging mobile and PC online games that it develops, curates, and localizes. Garena serves as a social and entertainment platform on which its communities can engage and interact.
• Shopee is the leading e-commerce platform in Southeast Asia and Taiwan. It offers a wide product assortment, supported by integrated payments and seamless fulfilment. Shopee is highly tailored for each market in which it operates.
• SeaMoney includes mobile wallet services, payment processing, credit, and related digital financial services and products.

ARKK is probably the world-best existing actively managed ETF

ARK Investment Management LLC is an investment management firm that manages following of the world largest actively-managed exchange-traded funds (ETFs) with a strong focus in following areas (Name/Sympbol of the ETF):

• Disruptive Innovation (ARKK)
• Autonomous Tech and Robotics (ARKQ)
• Genomic Revolution (ARKW)
• Next Generation Internet (ARKG)
• Fintech Innovation (ARKF)
• Space Exploration (ARKX)

Their ETFs consists of stock holdings in companies that ARK Investment Management considers as disruptive innovators. Through these ETFs, investors participate in long-term growth in the public markets with low correlation to traditional investment strategies.

ARKK, the ETF that takes stakes in disruptive innovator had a fabulous performance in the last years. Its top ten holdings (making up for about 50 %) consists of Tesla, Square, Teldadoc Health, Roku, Zillow, Baidu, Zoom, Shopify, Spotify, Crispr Therapeutics.

Investing in gaming giant Nintendo

Japanese multimedia and gaming giant Nintendo is a pure gaming play with an incredible brand portfolio and franchises. You find numerous names we all know, such as:

• Mario
• Donkey Kong
• The Legend of Zelda
• Animal Crossing
• Pokémon
• etc.

Nintendo also holds a major stake in The Pokémon Company.

Nintendo has a broad array of entertainment products including

• portable and console game machines,
• home console hardware (Nintendo Wii, Nintendo 3DS etc.),
• software for home console and portfable gaming machines,
• trump card and Karuta (Japanese-style playing cards),
• consumer electronics
• etc.

Nintendo has an incredible IP (intellectual property) which it can potentially leverage significantly. Take for instance the theme park Super Nintendo World.

Nintendo was founded in 1989 and for decades, its consoles and games have been popular with hundreds of millions around the globe. Nintendo has staying power and benefits of strong brand loyalty.

ASML – probably the most important tech company in the chips industry

ASML Holding N.V.  stand for “Advanced Semiconductor Materials Lithography” is a Dutch corporation Dutch corporation specialized in the development and manufacturing of photolithography systems.

The machines manufactured by ASML are used in the production of computer chips. In these machines, patterns are optically imaged onto a silicon wafer that is covered with a film of light-sensitive material photoresist.

ASML controls about 90% of this market, making it a crucial cog in the semiconductor industry, and its top customers include the world’s top foundries: Taiwan Semiconductor Manufacturing, Intel and Samsung

MercadoLibre – the Latin American Amazon

MercadoLibre is an Argentine company operating online marketplaces dedicated to e-commerce and onine online auctions. Mercado Libre has over 170 million users in Latin American and is the region’s most popluar e-commerce platform by number of visitors.

MercadoLibre is very well-known in Lating America and not only has the largest online commerce ecosystem but also the largest payments system in in the region with Mercado Pago.

The company is present in 18 countries including: Argentina, Brazil, Mexico, Colombia, Chile, Venezuela and Peru. Based on unique visitors and page views they are market leaders in each of the major countries where they are present.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action