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🎯 Growth Investing & Technology Enablers

Participants: Drew Cohen (Interviewer) and William de Gale (Fund Manager, BlueBox)
Focus: Identifying companies that enable the digital economy, understanding growth investing, and managing valuation risks.

🔍 Investing Philosophy​

Core Idea:​

Invest in companies that are "tech enablers"—businesses providing the infrastructure, software, or tools that power the digital economy.

Why Enablers?​

  • Critical to long-term digital transformation
  • Less likely to be disrupted
  • Benefit from secular trends like:
    • Automation
    • AI
    • Cloud computing
    • Digital communication

🧠 William's Strategy in Practice​

Origin of Strategy:​

  • Developed during tenure managing the BlackRock Technology Fund (18% annualized returns over 10 years)
  • Now applies this with more flexibility at BlueBox

Sectors of Interest:​

  • Semiconductors (e.g., ASML, TSMC)
  • Electronic design automation
  • Software and data tools
  • Internet infrastructure
  • Specialized automation firms

💡 What Defines a Tech Enabler?​

Not all tech companies are enablers.

Enablers:

  • Provide essential building blocks to other businesses
  • Sell "picks and shovels" in a digital gold rush
  • Win regardless of which digital platforms succeed or fail

🥂 Champagne Glass Analogy​

William explains the structure of the digital economy using a champagne tower:

“Picture a pyramid of glasses. You pour champagne into the top one, and it overflows into those below. But the top glass is deep—it takes forever to spill over.”

  • Top Glass = Consumer-facing platforms (e.g., Facebook, Uber, Airbnb)
  • Bottom Glasses = Enablers (e.g., AWS, ASML, infrastructure providers)

💡 Takeaway:
Most investor attention flows to the top, but real value pools at the bottom—where enablers sit.

📊 Example Companies (Not Direct Endorsements)​

CompanyRole as Enabler
ASMLLithography machines critical for chip manufacturing
TSMCLeading chip fabricator, supplies Apple, Nvidia, etc.
Synopsys & CadenceDominant chip design software providers
Alteryx (historical)Analytics platform to improve decision-making
SPS CommerceRetail supply chain automation platform
ServiceNowWorkflow automation for enterprise IT
DatadogInfrastructure monitoring for cloud-based systems
SnowflakeCloud data platform (held briefly due to high valuation)

📏 Valuation & Risk Management​

Growth vs. Valuation​

  • Avoids speculative, overly hyped valuations
  • Prioritizes:
    • Sustainable, recurring revenue growth
    • Positive free cash flow

Market Froth Management​

  • Trims positions when valuations stretch beyond reality
  • Recognizes many tech companies “surprise to the upside”
  • But avoids baking optimism into base assumptions

Position Sizing​

  • Smaller allocations to high-multiple stocks
  • Allows for upside exposure with managed downside risk

“Let them surprise you—but size your bet like they might not.”

🔄 Adapting to Market Conditions​

COVID-era Bubble​

  • Reduced exposure during 2020–2021 valuation spikes
  • Saw underperformance in 2022 during tech drawdown
  • Focused on long-term compounding, not short-term speculation

Interest Rate Sensitivity​

  • Rising rates hurt long-duration growth stocks
  • Portfolio emphasizes cash-generative and rate-resilient businesses

🧩 Key Company Traits​

William seeks companies with:

  • ✅ Mission-critical products/services
  • ✅ High switching costs
  • ✅ Pricing power
  • ✅ Strong free cash flow
  • ✅ Long growth runways
  • ✅ Often underappreciated because they’re behind the scenes

🧠 Mental Models & Analogies​

"Picks and Shovels" Investing​

“Don't bet on the gold rush winner—sell them pickaxes.”

Best returns come from infrastructure providers, not consumer platforms.

"Oil of the Digital World"​

  • Data is like oil
  • William avoids buzzy “data sellers”
  • Focus is on those enabling flow, structure, and processing of data

🎙️ Final Thoughts from William​

  • Great businesses can and do surprise positively, but investors shouldn’t rely on it.
  • Stay disciplined:
    • Conservative assumptions
    • Careful sizing
    • Avoid overpaying
  • Enablers provide long-term compounding opportunities without speculative fads.

“You can’t control the market, but you can control your process, your sizing, and your assumptions.”

You can listen to the original podcast here