Need to Know: Fund manager who rode out the dot-com bust sees cryptocurrency parallels and stock opportunities

What does the dawning of the age of the internet in the late 1990s have to do with cryptocurrencies? Ask Ryan Jacob, chief investment officer of the Jacob Internet Fund
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-3.32%
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whose five-star Morningstar-rated fund got its start in 1999 and survived the ensuing dot-com bubble.

“You have a new technology that people are still trying to grasp and don’t fully comprehend,” Jacob, also chairman of Jacob Funds, tells MarketWatch in a Monday interview. Still, there remains a big then-and-now difference between the two.

Cryptocurrency is really not driving the stock market today. The internet was driving the stock market in the late 1990s. We may get to that point, but we’re not there yet,” he said.

Jacob, whose funds look for companies with innovative technology and a wide investment moat, says they are approaching the crypto space with the same balance as Chinese internet stocks in the early 2000s, seen as risky at the time. “We know we want the exposure, but we also want to be extra careful in terms of how much risk we introduce in the portfolios,” he said.

One play he likes is Voyager Digital
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-9.97%

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-9.62%
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a top holding in both the Internet Fund and Jacob Discovery Fund
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It is a small Canadian cryptocurrency broker with robust technology and an impressive management team. Co-founder and Chief Executive Steve Ehrlich is a former E*Trade executive, while another co- founder, Oscar Salazar, was the founding architect and chief technology officer of ride-hailing technology group Uber
UBER,
-4.14%
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Up over 2,000% in 2021, shares have gained 382% so far this year.

Another holding in those Jacob funds is Silvergate Capital
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-5.95%
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a specialty bank focused on the digital currency industry.

It is a “traditional bank that decided that the crypto market needed an exchange network that can handle a 24-7 asset,” said Jacob. The bank is known for its Silvergate Exchange Network, an instant settlement network. As the existing financial system has been slow on this front, it leaves smaller, more nimble players more able to cater to what is needed right now. Shares are up 68% this year so far, after a 367% gain in 2020.

Cryptos are a “dangerous playground to be playing in for sure…but it’s also an area where there are exciting companies that will benefit greatly from this and should be around for a long time or eventually acquired,” said Jacob.

Watching earnings and cryptos

Stock futures
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-0.45%

YM00,
-0.41%

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are under pressure after Monday’s tech-fueled Nasdaq
COMP,
-0.98%

selloff. Stocks in Tokyo
NIK,
-1.97%

tumbled 2% amid rising COVID-19 cases. Elsewhere, bitcoin
BTCUSD,
-0.66%

continues to drift south, but Dogecoin
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+0.35%

is rising on “Doge Day” — a loosely organized effort to push to $1 the cryptocurrency that started as a joke.

Pharmaceutical giant Johnson & Johnson
JNJ,
+0.28%

and cigarette maker Philip Morris
PM,
-1.33%

will report earnings ahead of the open, with streaming giant Netflix
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+1.45%

the big headliner after the close.

Read: The pandemic’s differing earnings effects will be on display with tech, airline reports

Shares of International Business Machines
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-0.35%

are climbing ahead of the open, after the tech giant topped Wall Street estimates and forecast a return to pre-COVID-19 growth levels.

United Airlines
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-1.58%

lost more than $1.3 billion at the start of the year, missing Wall Street forecasts, but the airline promised new international routes for countries open to travelers. That is, if they can find any, as the State Department is now warning Americans not to visit 80% of the world due to COVID-19 risks. India has just put its capital under a weeklong lockdown amid surging cases.

A tweet by Tesla
TSLA,
-3.40%

Chief Executive Elon Musk appeared to boost shares of the electric-car maker in late trade. “Data logs recovered so far show Autopilot was not enabled & this car did not purchase FSD [Full Self-Driving],” he said on Twitter
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Elsewhere, an article in China’s state-run Xinhua News Agency said Tesla needs to do more to win consumer trust, after a protest by a customer at an automobile show on Monday.

In what looks like a win for cannabis companies, the House of Representatives has passed a measure making it easier for cannabis-related businesses to access financial services.

Apple
AAPL,
+0.51%

will host a virtual event on Tuesday — “Spring Loaded.” Analysts expecting the tech giant to roll out newer, faster iPads. Also, check out MarketWatch’s new quarterly review of Apple’s key metrics.

Random reads

After casting doubts on COVID-19, rocker Ted Nugent says he has it.

Tyrannosaurs may have hunted in packs like wolves, new research has found.

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