Even before Covid-19 got its teeth into the stock market by the end of March, it was evident that all things tech were the new Gold rush for investors. This was especially evident in the small cap area of the UK market, the astronomical gains of the Nasdaq notwithstanding. However, despite sizeable share price rises for Pires Investments, which specialises in new ages technology investments, the overall rating for the company at the present share price is just around NAV.
A Question Of Value
This seems very unfair. The stock market appears to be using the traditional model for investment companies such as Pires in judging them by their most pedestrian holdings, and only attaching a value to assets once sold. It is also questionably as to whether for the type of tech companies Pires is holding there should be any discount at all. Indeed, why not a premium on it being involved in a potentially disruptive, world beating unicorn?
The anomaly here is that in recent months Pires has had multi bagger winners, and has taken a turn on several, but this has not been reflected in its market cap of less than £4m.
However, it may be argued that the anomaly is the opportunity: access to the Pires portfolio is still effectively at pre 2020 prices. We may be looking at a case of “don’t get mad, get even.”
Timing, Timing, Timing
As most of us are aware, to be successful on the housing market, “location, location, location” is the mantra. For the stock market, it can be said that, “timing, timing, timing” is everything. The latter is something which Pires Investments changed its investment focus to the technology space from resources in September last year. Perhaps ordinarily this would have been a wise move given the way that as has been shown by the macro economic picture a decade after the Global Financial Crisis, we were looking at a plateau for the old economy, but a soaring tech space underlined by the rise and rise of the Nasdaq in the US.
Of course, from the beginning of 2020 we have gone into extraordinary times, with software technology and online for media content, as well as retail activity putting almost everything else into the shade. Pires has had a near 6 months head start, and the benefits of this prescience are already starting to bear fruit. Q2 2020 has arguably been one of the best in the tech space since the Dotcom Bubble 20 years ago. The fact that Pires went into this period with a cutting edge and diversified portfolio means that while the market may not be adding any froth to the timely gains, those kicking the tyres of the company are looking at an opportunity to get on the share register of a situation which is threating to copy some of the best performing non pharma / Covid 19 stocks of the year to date.
These include All Active Asia (AAA), Asimilar (ASLR) and Dev Clever (DEV), where we have seen multi bag, even 10 bagger gains. While some may feel that assuming Pires could assume a similar trajectory is optimistic, there are two key factors at play. The first is that given the uncertainties in the old economy there is a relative dearth of new economy real estate to shoot for, with tech becoming something of a hedge against the downside in the “real” world. Secondly, there is little doubt that in a “Zoom” world, and one where it is likely that a great percentage of our lives will be lived at home, we need technological advancement to help us augment our lives.
A Sure Valley Start
This is literally the space that the bulk of Pires and its investments occupy: as well as the augmented / virtual reality space, artificial intelligence, machine learning, the internet of things and cybersecurity all feature. It can be said that the initial anchor of Pires in terms of its strategy has been the 13% investment in Sure Valley Ventures.
Sure Valley ensured that Pires hit the ground running with 10 investments, a core set of holdings which it has added to directly via GetVisibility. Now it is likely that Pires will be able to run with the ball, and identify new targets with increasing pace and deftness.
But to remind us that it is not all about buying and holding, Artomatix has already been sold off at a decent profit, with the proceeds used to fuel further purchases. This answers a gripe which can exist in investment companies being “maxed out” in their holdings and having to keep tapping shareholders. In terms of the criticism of investments being illiquid, VR Education (VRE) is listed on AIM and has more than doubled since the beginning of this year, up 400% on the original Pires entry.
If, as it appears so far, Pires and its listing can be a public markets conduit for the cream of VC opportunities and keep the deal flow seen to date, it could prove to be a unique proxy for private investors to gain access to one of the strongest growth areas around in 2020.
The Next Unicorn
As far as the outlook for the rest of 2020, it looks as though we can expect more of the same. Cutting edge concepts, bought early stage and relatively cheaply, with plenty of interest in the market developing and funding them. Perhaps the one to watch out of the many is same day grocery delivery group Buymie. Here the latest funding round of €5.8m of which an offshoot of the Grosvenor Estate took a major chunk. The rollout of Buymie in the UK and Ireland includes The Co-op. This may only be an embryonic Ocado disruptor, but the potential upside is clear and we await the first Unicorn.
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.