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EMJ Capital Eric Jackson Bullish on Tech Post Fed Meeting

Bullish on Tech Christmas

Jackson’s Take: Fed Meeting Breathes New Life into Tech Stocks

On Friday, in a dynamic and ever-changing tech landscape, identifying investment opportunities requires a keen eye for emerging trends, promising companies, and a thorough understanding of market dynamics. Eric Jackson, Founder and President of EMJ Capital, shares his insights into the current tech and media market, highlighting potential opportunities in the realm of technology, telecom, and media.

Navigating the Tech Terrain

2023 marks a pivotal year for tech, following a rather challenging 2022. Smaller-cap tech companies faced adversity, and even 2021 did not provide the desired boost. The tech sector’s roller coaster ride has been dominated by what some call the “MAG 7 Rally,” but beneath the surface, many tech companies have experienced significant pain.

Eric Jackson believes that the recent announcement by the Federal Reserve will create positive ripples for tech stocks that missed out on the MAG 7 Rally. The Fed’s signal of stepping back from its earlier stance carries significant implications. To contextualize, February 2021 witnessed a downturn for many tech companies, an event that left a mark. Some tech stocks have remained down by 70%, 80%, or even 90%. While the MAG 7 has thrived, there remains a substantial degree of pain in the broader tech landscape.

The Shopping List Strategy

As a portfolio manager, the approach to creating a “shopping list” of potential investments is multifaceted. Jackson underscores that announcements from companies like Roku, Palantir, and Shopify emphasize the health and potential in several tech-related businesses. These businesses have been investing in e-commerce, artificial intelligence (AI), and other emerging technologies.

When adding companies to the shopping list, several factors come into play. Jackson examines how much these companies have declined in value, their anticipated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) growth in the coming year, and the multiples at which they are trading. Notably, many of these multiples, such as Enterprise Value (EV) to EBITDA, have not yet returned to their 2017 levels; instead, they harken back to the levels of 2013 and 2014.

Jackson finds this situation exciting and sees an opportunity in these undervalued companies that the market may have overlooked.

Profitability: Not a Necessity

One intriguing aspect of Jackson’s investment philosophy is that a company need not be profitable at present to attract his attention. He is particularly interested in companies that are not yet profitable but show the potential to achieve profitability in the near future. Rivian, a company on the path to profitability, is an example. While such companies may be seen as unattractive or unprofitable now, they hold the potential to turn profitable in a year or two. Jackson believes these companies often present the best opportunities for investors.

Eric Jackson’s Positive Outlook for Tech Momentum During the Holiday Season
Eric Jackson Bullish on Tech Christmas Momentum

Apple as a Bellwether

Apple’s performance is a bellwether for the entire tech market. Given its significance, a poor earnings report from Apple could have a substantial impact on the broader market. Stan Druckenmiller’s recent comments underscore this point. Any significant downturn in Apple’s stock could potentially affect other MAG 7 companies, resulting in far-reaching consequences.

Despite this, Jackson does not currently own Apple but has owned it at various points this year. He remains optimistic about Apple’s potential, as the company recently experienced a pullback but has since rebounded from the 160s to 177. As Apple reports its earnings, many are questioning whether consumers will upgrade to the new iPhone 15. Jackson, like many others, believes that Apple often faces skepticism but has consistently delivered positive surprises. It remains a stock to watch closely.

the tech and media landscape present numerous opportunities for investors who can navigate its complexities and nuances. Eric Jackson’s perspective underscores the potential for undervalued tech companies, even those not yet profitable, and the importance of watching bellwether companies like Apple to gauge the broader market’s direction. The tech terrain continues to evolve, and astute investors can find their way to profitable destinations.

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