A tech investor who crushed 97% of his peers in 2019 gives us his top 5 stock picks for the next 5 years
- Garvin Jabusch beat 97% of his mutual fund peers in 2019 as co-manager of the Shelton Green Alpha fund. He focuses on new technologies, and lists his five favorite stocks for the next five years.
- His favorites are companies that are making breakthroughs that their rivals will also have to build on, which means they could be in line for many years of royalty payments.
- The Green Alpha fund returned 43.7% last year as tech stocks climbed. It finished with the second-greatest return of any US large-cap stock fund.
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Garvin Jabusch bets on big ideas, and this past year his rewards were enormous.
Jabusch is the co-founder and CIO of Green Alpha Advisors and one of the mangers of the future-focused Shelton Green Alpha fund. It's the second-best large-company stock fund in 2019, according to Kiplinger, as its 43.7% return trounced that of its benchmark and 97% of its competitors.
The fund's top holdings include renewable energy, tech, and healthcare companies. Wherever Jabusch invests, he wants to find companies that have not only created something worthwhile, but which have made themselves essential within their industry. That means they'll also benefit from the work of their rivals.
Asked about the most promising investments for the first half of the decade, he names a group of companies in the technology and health fields that can count on license and intellectual property payments to go along with their own inventions.
"We think the companies that are upstream from everything tech-related, and therefore they have a lot of end-use cases, are interesting," he said in an exclusive interview with Business Insider.
(1) Qualcomm
Jabusch says he has little interest in mega-caps, but $100 billion Qualcomm is an exception because of its position within the communications industry.
"Qualcomm has a nice lead on really critical infrastructure technology, and we think that owning that IP means they're going to get a lot of royalties," he said. "[In] 5G chip technology, they've got at least a year or two lead there over their closest rival, which is probably Huawei, and Huawei's only started creeping up on them because of the trade war, and they've sort of been forced to."
(2) Lam Research
Lam Research's stock price more than doubled in 2019 as part of a broad rally in semiconductors, and Jabusch remains optimistic about the stock because its equipment is used to make a lot of other high-tech products including integrated circuits, LED lights, and solar panels.
"Only four or five companies around the world that are leaders in that space," he said. "These are very interesting names because whatever downstream use case you can think of, they're going to be involved in it and therefore have a great chance to grow."
(3) CRISPR Therapeutics and (4) Editas Medicine
Both of these genomic medicine companies have suffered dramatic ups and downs in the last few years, but Jabusch says they both have bright futures because they'll benefit from their own research and from future work done by other companies that build on what they've accomplished.
"While we hold a basket of seven or eight of genomic therapy firms, those are two that we can clearly identify as leaders because each was founded by one of the creators of the CRISPR Cas9 gene-editing technology," he said, referring to CRISPR co-founder Emmanuelle Charpentier and Editas co-founders Feng Zhang and Jennifer Doudna.
"Whoever else comes up with the gene therapy is going to end up having to pay them royalties," he explained.
(5) IBM
"General conventional wisdom thinks of them as sort of a moribund, busted old consulting shop," Jabusch said of IBM. But he has high praise for IBM CEO Ginni Rometty, saying under her leadership the company could reap huge rewards from its current work on quantum computing, artificial intelligence, and blockchain technology.
"They file and receive more patents every year than any other firm on the Street," he said. "They've got a bunch of moonshots almost in a way that Google does, that are very forward looking and that are going to be significant sources of revenue for them over time even though right now they're not."