Posted: 10 Nov 2021 16:28 GMT
Chamath Palihapitiya recommends betting on uncorrelated assets, those that behave independently of the stock market, such as Bitcoin or Solana cryptocurrencies.
The Billionaire Investor Chamath Palihapitiya warns that tech stocks could fall soon and points out several possible ways to hedge against inflation.
Although the founder and CEO of Social Capital has always been in favor of investing in the technology sector, whose shares have led the market in recent years, in a recent interview with All-In Podcast he warned that technology companies could get “really hit when rates go up”.
Inflation would cause interest rates to rise, causing investors to increase their demands for money up front and stop accepting low rates on their tech stocks, Palihapitiya, known as ‘the King of the SPAC’, a type of company with no operational activity that sells its shares on the stock market in order to acquire a specific sector, something like buying blank checks.
Faced with this eventual scenario, Palihapitiya suggests several assets to which investors could turn their gaze to protect themselves from inflation and its consequences.
First, he recommended investing in companies that show themselves capable of overcoming inflation, with a growth of more than 50 percent a year, what he calls hyper-growth companies, whose shares are particularly volatile. Palihapitiya highlighted three companies it helped go public through SPAC: personal finance technologist SoFi Technologies, real estate transaction platform Opendoor Technologies, and next-generation insurer Medicare Advantage Clover Health Investments.
Second, it recommended investing in assets that produce large cash flowTaking as an example the large mining companies, which he described as “healthy cash producers.” According to figures cited by Yahoo News, Australian giant BHP Group, one of the world’s largest mining companies, generated $ 27.2 billion in operating cash flow, during fiscal 2021, and free cash flow reached a record high. of 19,400 million. Similarly, the international business group Rio Tinto generated 10.2 billion in free cash flow during the first six months of 2021, showing an annual growth of more than 200% percent, according to the same source.
Third, he suggested the uncorrelated assets, that is, those that behave independently of the stock market, such as Bitcoin or Solana cryptocurrencies.
Finally, the millionaire offered as an option buying artwhich, while it used to be an option only for the ultra-rich, has become a viable option thanks to new platforms.
According to Palihapitiya, this would be the type of investment that can help investors hedge against inflation, while at the same time not as volatile as hyper-growth companies, mining stocks, and cryptocurrencies.