Here are 10 standout up-and-coming tech stocks, according to a top-ranked fund manager who likes to bet on ‘big ideas’ (JGLTX, CSGP, MELI, AVLR, OKTA, TEAM, TWLO, ADYEN, WIX, MTCH, RNG)

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  • Denny Fish co-manages Janus Henderson’s VIT Global Technology and Innovation Portfolio, which has been one of the top tech funds over the last five years.
  • A big part of Fish and his co-manager’s strategy is devote about half of fund assets to up-and-coming tech stocks, what he calls the fund’s optionality portfolio.
  • These companies come with bigger risks, but they offer potentially huge rewards and have helped the fund outperform its peers, Fish told Business Insider.
  • Fish gave a list of 10 stocks that stood out among his fund’s optionality collection.
  • Visit Business Insider’s homepage for more stories.

Denny Fish gets a kick out of taking fliers on up-and-coming tech companies.

What’s more, he makes a living at it — and has gotten pretty darn good at it.

Along with Garth Yettick, Fish manages Janus Henderson’s VIT Global Technology and Innovation Portfolio, a tech-focused mutual fund that outperformed dozens of its peers to rank 8th in average annualized performance over the last five years, according to Morningstar Direct.

A key part of Yettick and Fish’s strategy is to invest about half of the fund’s assets in what they call their “optionality” part of the portfolio. These are typically newer and smaller tech companies that have big growth potential, but also greater downside risks than the big, mature tech companies that represent most of the rest of the fund’s investments.

In that portion of the portfolio, Fish and Yettick are “investing against what we think can be really big ideas,” Fish told Business Insider in an interview this week. 

Fish and Yettick typically make relatively small bets on each of these names — devoting somewhere between 0.1% to 1% of the fund’s $570 million or so in assets in each name. But those small stakes allow them to make many different bets — up to 60 at a time.

With investments of that size, the fund won’t be sabotaged if any one of those companies craters, Fish said. Conversely, it could benefit greatly if their stocks take off. That philosophy has seen the fund through the market’s ups and downs over the last five years, including through the massive selloff in March that was sparked by the coronavirus crisis.

“Our goal is to outperform on the down side and protect capital and then outperform on the upside,” Fish said. “That’s a tall mission.”

But, he added, “We’re really pleased at how over the past five years the portfolio has acted.”

Among the dozens of stocks in the optionality part of the Global Technology and Innovation Portfolio, these 10 names stood out for Fish:

CoStar Group

Ticker:CSGP
What it does:
Collects and sells commercial real estate data
Shares owned by the Global Technology and Innovation Portfolio (as of 3/31/20):
8,562
Value of the fund’s stake (as of 6/18/20):$6 million
Portion of portfolio’s total assets (as of 4/30/20):1.08%

MercadoLibre

Ticker:MELI
What it does:
Operates online stores in more than a dozen Latin American countries, as well as Spain
Shares owned (as of 3/31/20):
7,740
Value (as of 6/18/20):$7.2 million
Portion of portfolio (as of 4/30/20):0.7%
Fish’s take:“Think about it as the Amazon.com of Latin America.”

Avalara

Ticker:AVLR
What it does:
Offers tax-compliance software for retail stores and ecommerce vendors
Shares owned (as of 3/31/20):
51,566
Value (as of 6/18/20):$6.4 million
Portion of portfolio (as of 4/30/20):0.9%
Fish’s take:It “is a really fascinating software-as-a-service company … [that’s] benefiting from the proliferation of ecommerce … [It’s] disrupting what’s traditionally been an on-premise business.”

Okta

Ticker:OKTA
What it does:
Offers authentication and password management services
Shares owned (as of 3/31/20):
24,717
Value (as of 6/18/20):$4.9 million
Portion of portfolio (as of 4/30/20):0.45%
Fish’s take:It’s “been a really good success story in software-as-a-service, identity management.”

Atlassian

Ticker:TEAM
What it does:
Offers project management and collaboration software
Shares owned (as of 3/31/20):
29,272
Value (as of 6/18/20):$5.2 million
Portion of portfolio (as of 4/30/20):0.94%
Fish’s take:“They have a really unique distribution model. They’re disrupting the collaboration space … They’ve served a really unique market, in terms software developers, globally. Really unique management team. Really unique go-to-market model. And they just continue to increase their market size and their market opportunity and just create something that’s much bigger than anybody could have imagined five years ago.”

Twilio

Ticker:TWLO
What it does:
Offers a cloud-based communications service that enterprise companies can build into their own apps and websites, allowing them to send text messages and make audio and video calls with customers
Shares owned (as of 3/31/20):
10,770
Value (as of 6/18/20):$2.3 million
Portion of portfolio (as of 4/30/20):0.24%
Fish’s take:What Twilio is doing “sounds simple [but is] harder in practice, because you have to create an elegant platform that any developer could actually … develop to and easily embed in a number of applications … [Twilio] has a really unique opportunity ahead of it for many years.”

Adyen

Ticker:ADYEN (Amsterdam)
What it does:
Offers payments services for online and brick-and-mortar retailers
Shares owned (as of 3/31/20):
1,851
Value (as of 6/18/20):$2.6 million
Portion of portfolio (as of 4/30/20):0.36%
Fish’s take:“Them and Stripe are actually dominating that market right now.”

Wix

Ticker:Wix
What it does:
Offers a website development service
Shares owned (as of 3/31/20):
19,032
Value (as of 6/18/20):$4.4 million
Portion of portfolio (as of 4/30/20):0.55%
Fish’s take:“We’ve been big believers in Wix for years. They’ve been real beneficiaries of people being unemployed.
Younger people that are unemployed, what do they do? They start thinking about how they create a digital footprint.
And as a result, you end up with really, really robust demand for Wix through this downturn. And those are behaviors you don’t change.”

Match Group

Ticker:MTCH
What it does:
Offers online dating sites and apps.
Shares owned (as of 3/31/20):
36,486
Value (as of 6/18/20):$3.6 million
Portion of portfolio (as of 4/30/20):0.55%
Fish’s take:“People thought their business would get worse during Covid. It actually got better … They were really creative and innovated and pivoted to using video and doing some unique things that made Tinder and their applications even more valuable to their user base.”

RingCentral

Ticker:RNG
What it does:
Offers phone and messaging services for corporations and corporate call centers.
Shares owned (as of 3/31/20):
8,129
Value (as of 6/18/20):$2.3 million
Portion of portfolio (as of 4/30/20):0.36%
Fish’s take:“We like it a lot. They just have a really big road ahead of them … Effectively, they’ve created a software-as-a-service platform for communications over IP-based networks replacing [traditional phone systems] globally. Huge opportunity. Really good company.”

Got a tip about the tech industry or tech investing?Contact Troy Wolverton via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

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