With the prospect of higher interest rates looming, 2022 has already been a tough year for the tech sector. The Invesco QQQ ETF has fallen sharply year-to-date but one tech investor is braving the turbulence.
Ulrike Hoffmann-Burchardi recently launched a new strategy within Tudor Investment Corp. called T++ with a specific focus on technology stocks. She sat down with Delivering Alpha to discuss her current hedging strategy along with where she’s finding alpha in the technology sector.
(The below has been edited for length and clarity. See above for full video.)
Leslie Picker: What’s it like being a tech investor right now, given this whole regime change that’s really gone on in the market?
Ulrike Hoffmann-Burchardi: We have this exciting step of a next generation of digital transformation, one that is fueled by data. We predict that data is going to grow more than 100 times over the next 10 years. And this gives rise to tremendous investing opportunities in data infrastructure, in semiconductors, but also in digital and data-first businesses. So lots to be excited about. And then to the second part of your question, what is going on right now? It’s less to do with the prospects of these new technologies but the fact that we have come up with unprecedented levels of fiscal and monetary stimulus. And that has led to inflationary pressures in our economy that now the Fed seeks to rein in with higher rates.
And so with that backdrop, everything else being equal, this means low equity valuations. So we are discounting future cash flows with higher discount rates. But I think one thing that’s important to recognize is that this tide of fiscal and monetary stimulus has lifted all boats, not just technology. And it’s interesting to see what is still floating when this tide recedes. And here’s who I still see standing: those companies with stronger secular tailwinds, the best business models, and world…