An early digital adopter, an astute and well-researched investor and an AIA member, Hannah Schwartz* shares her investing journey and discusses emerging trends and opportunities in the tech and cybersecurity space

How and when did your investing journey begin?

I started investing in my late 20s. My father was an accountant and he taught me the value of compound interest and the importance of saving but it was my mother who was much more talented in stock portfolio picking.

In fact, I often joke about the fact that even the week before she passed (she knew she was dying) she was on her iPad, and when I asked her what she was doing she said, “I’m checking my portfolio”.

There was no internet or self-trading when I started investing, but I was fortunate to have found a trusted female adviser – who didn’t like the values of Wall Street and the way people were ripped off, so she went and started her own thing.

I had saved $20,000 by then and gave that to her for investing. She was my advisor for almost 36-37 years, and I had the benefit of being by her side and learning from her about the importance of portfolio diversification, dividend stocks and fixed income positions.

In 2004 when I migrated to Australia, I was with my partner and child and from that point on anything that I earned and saved I self-invested.

My financial advisor (from the US) continued to manage my investment portfolio and we rode the GFC together. She was conservative, so it was good having her manage my portfolio. I was working in the ‘.com’ world and took a broader view on trends and opportunities from digital transformation – I benefited from the GFC as I had cash at the time and took some positions such as CSL. Soon after the launch of the first iPhone, I remember regretting why I didn’t buy Apple stock at the time. 

I continued to follow emerging market trends and evaluate investment opportunities, particularly in the tech space. Also, my trusted advisor continued to advise me on investing and opportunities, and I have been a disciplined investor – whenever I received a bonus or some birthday money, I invested it with my advisor’s guidance.

Do you gravitate towards some specific sectors?

One of the things I learnt early on in my investing journey is to invest in things that you understand – professionally, I have been involved in the technology sector and can understand it.

For the past 15 years, my emphasis has primarily been on the technology sector, including medtech, fintech, the cloud and e-commerce.  I like to immerse myself in different industry sectors – for instance, when I worked in marketing capacity in the cloud hosting space, and did an in-depth analysis of the sector, understanding how it works, it’s impact and the digital landscape.

After seeing an increase in cyber attacks around five years ago, I started to watch the cybersecurity space. I decided to learn more about cybersecurity and soon realised that the entire ‘digital stack’ needs protection from cyber threats – this includes protection for apps, cloud solutions, websites etc. 

With any tech stock, one must be prepared for drawdowns and volatility. Before I enter a stock position, I like to see consistent revenue growth – that’s one of the biggest metrics. I like to see that a company carrying debt has revenue to cover the debt. I don’t like too much debt and tend to look at capital light businesses.

One of the first cybersecurity businesses I invested in Israeli cybersecurity solutions provider, CyberArk.  It is a software-as-a-service (SaaS) provider and has recurring revenue coming in.

With COVID-19 and the rise of remote work, more and more people continued to work from homes, cafes and other remote locations. The cloud-based systems they accessed for work needed protection, so in the recent past I have focused on investing in different pieces of the ‘digital stack’ that are vulnerable.

For example, right around or before COVID-19, I took a position in an American identity and access management company Okta. I also took positions in Cloudfare – an American content delivery network and DDoS mitigation company, American cybersecurity company Crowdstrike and cloud security company Zscaler.  

What’s your advice for early-stage tech and cybersecurity investors?

If you are not that knowledgeable about the tech sector, then one of your initial positions could be of a small size.

Another important thing to remember is that when your knowledge on a particular sector is limited, you can access trends and sectors, including cyber security, through ETFs.  In fact, just before this interview I looked at one of Beta Shares’ cybersecurity ETF – which is traded on the ASX, and noticed that Zscaler and CrowdStrike are part of their portfolio.

When I don’t have depth in a particular category or sector, I explore ETFs. I look at the top holdings of such ETFs to get investments ideas, then I go and do my own research on those positions and evaluate if I’d like to invest in them.

When it comes to tech stocks, it’s important for new investors to remember to be prepared for a more volatile ride – for example an earnings release could come out and the earnings might take a hit, exceed expectations, or not exceed enough. Or may be the market has already priced in the earnings and the stock has come down. I don’t stress myself about these things anymore.

Also, one must regularly take market’s temperature; monitor the stocks and industries you are invested in. What if something has changed drastically that may make you want to sell the stock? Remember, there is nothing wrong in existing a stock position.

One of the other things to keep an eye on is shares that go up quickly – I call that froth and will often sell a piece if I notice something is going up too quick. Remember, if something has gone up fast, it can also come down fast.

What else is on your investing checklist?

I tend to avoid newly ‘IPO-ed businesses’ for a certain time, because I like to see consistent earnings results and growth. When I enter a stock position, I look at a three-year chart – to see if the business is consistently delivering on what they had hoped for.

For more established businesses, one might look for price-to-earnings ratio, debt, cash flow and cash burn. If a business has debt, can the revenue service the debt?

I am a long-term investor, so I buy and hold positions for a long-period of time.

What were the key highlights for you at the AIA National Conference 2022?

I learnt a lot about emerging trends at the conference, including demographics and geopolitical factors affecting investments and market outlook.

The first keynote speaker Shara Evans opened my eyes to the fact that the next generation of cyber security solutions will be quantum computing based.

After the speech, I did a little research out of curiosity and according to the information I found there are probably around 65 quantum computing cybersecurity start-ups globally. I was excited to see that there is one in Canberra – it’s called Quintessence Labs and has been in existence since 2008. Some private funds and the Australian government are invested in the company – that was exciting to learn, but I haven’t done any further research.

What is your parting tip or thought you would like to leave with readers?

I’d say look around you – there are opportunities everywhere. If you walked into a shop or café pre-COVID-19, you may have seen a sign of Afterpay on the door of the shop and if you wondered what that is and looked it up, you’d see opportunities in the buy now and pay later space. Similarly, rarely do we use cash now, so if you explored how you could benefit from digitisation of money, you’d come across more opportunities.

Lastly, learn from your interactions with people around you. My advisor and my personal investment journey have taught me a lot, and I continue to share these lessons with new and young investors. I learn a lot about risk-taking and opportunities from these new and young investors too.  

*Hannah Schwartz is not a financial adviser. Information in this article is general in nature and should not be construed as financial advice. You must seek independent financial advice before making any investment decisions based on this article.