Whale Rock Capital Management

You love to cover hot tech stocks. You also know tech stocks move in both directions faster than any other sector. It ain't easy.

One fund has spent almost 20 years building a business around exactly this problem.

Whale Rock Capital is a leading technology long/short hedge fund based in Boston. Its founder, Alex Sacerdote, has a simple recipe for making money in tech, built on three ingredients:

1. The S-curve - exponential unit growth
2. The moat - a great business model
3. Underappreciated earnings power - seeing the profits before the market does

In this article, you will learn how Alex makes money in technology stocks, why the big money is made in inflection stories, how to value an exponential growth story, when to exit, and more.

Let's dive in.

The banker who wanted to be on the other side

Alex Sacerdote came from money, and from Wall Street.

His father, Peter, was a longtime partner at Goldman Sachs. He served as Chairman of the Investment Committee of Goldman's Principal Investment Area (PIA), the firm's private equity and venture capital arm.

Money management runs on his mother's side too. His late maternal grandfather, Robert H. Johnson, started the Franklin Group of Mutual Funds in New York. That firm later became Franklin Templeton.

Alex did his undergraduate at Hamilton College. He started his career in TMT investment banking at Smith Barney.

Here is the moment that changed his path.

On roadshows, Alex sat across the table from buy-side investors his own age. He noticed something. They often knew more about the business than the company's own management.

He wanted to be one of them.

First, he took a detour. Before the dot-com bubble, in 1997, he joined an internet advertising technology start-up as VP of Finance. That gave him a front-row seat to the AdTech industry. Then he headed to Harvard Business School for his MBA.

The Amazon pitch at Fidelity

At HBS, Alex went straight for the buy side. He landed an internship at Fidelity.

Because of his AdTech background, Fidelity had him cover e-commerce. Alex pitched Amazon as a long. Half of the investment team thought he was crazy.