Running money in today's changing market

• Mark has been running money for 14 years
• Last year was unlike any market he's ever seen - 100 stocks worked really well
• Now, the market is trying to price the world coming out of a lockdown and unwinding what we saw work well last year (high growth, technology)
• As economies emerge from the pandemic it will be with lots of money in consumers wallet and pent up demand - "it will be a Roaring 20's scenario" and the market is trying to price that
• This post-pandemic booming economy will be driven by everything we haven't been able to do over the last 12-18 months
  • Last year there were 100 stocks you could buy, now the market is broadening out in a big way
• Mark defines himself as a 'positive change investor', he does well in markets where there is a lot of change
• As the market is currently shifting gears, Mark's portfolios are shifting gears
• His portfolios look very different now than they did even 3 months ago

 

Global Innovators - defining 'innovation'

• Mark thinks of innovation as change
• Innovation can be a company changing how they do business
  • Example: GM is not necessarily thought of as 'innovative' but they are changing their business to focus more on electric vehicles
• Innovation is not just technology, but technology can be an enabler of innovation
• Example: Cloud Computing
  • The first order move in the rise of cloud computing was to own the cloud company (ex. Amazon)
  • Now that this technology is moving its way through all companies, you want to own the 2nd order move
  • Second order move is to own companies that are using cloud technology and applying it to grow their business

 

Growth vs Value

• Mask has more 'value' exposure than he has had in years
  • Thinks the most earnings growth in the next 2-3 years will be here
• Markets are trying to digest the pace of change right now
  • Yesterday the market sold off as virus concerns rose
  • Doesn't change the winners coming out of the mess
• Historically Mark has made most of his money by picking out of favour stocks and sectors as they get better

 

Green Energy - a new 'Super Cycle'? 

• Thinks environmental investing is at the beginning of a 10-20 year super-cycle
• Right now only a few ways to invest in it, many companies are still 'science projects', inventing new technology that may or may not work
• Bottom line - the world has a huge problem with massive political will (and $) to make some sort of change
• The amount we need to spend on green energy is in the trillions - it's going to be a huge market
• The green energy space has been volatile
  • Stocks got bid up last year and peaked when the Democrats took the Senate
  • Stocks have fallen back once the market realized how long it will take to solve this problem
• Cloud Computing dominated the last decade - "you could see Cloud coming like a freight train. This is the same"
• Bullish on Hydrogen and 'electrolizer' companies
  • Take stranded power and turn it into Hydrogen
  • Elegant solution to a big problem
  • There are really only 3 companies in Europe who are doing this
  • "The engineering is there, we just need to throw capital at it"

 

Tesla & green energy

• Mark sold his entire Tesla position in January
• He has seen 12 different SPACs for EV - the space is raising tons of money
• Every major car manufacturer has announced they are going EV in the next 10 years
• Before, Tesla was the only company doing it. Likely they will stay the best, but is it worth a $1 trillion valuation considering the amount of new competition?
• Mark also eliminated his Tesla position because of significant 'green' exposure in other areas
  • Thinks the headwinds for Tesla are greater than other stocks in the green energy space
• Portfolio execution:
  • Exited Tesla, which was a top 10 position in 1 day
  • "The fund may seem big for Canada but in the US I'm like a minnow"

 

Green Energy - geographic opportunity

• A lot more opportunity in Europe right now because they've been there the longest & have the technology
• European stocks are also a lot cheaper - traditionally Europeans don't like growth stocks they way US investors do
• Ideally we get the US on board because they're happy to spend money, starting to see this now

 

Fidelity & ESG

• Fidelity has 2 new analysts who's sole purpose is to cover green energy
• We have a huge push internally to analyze companies from an ESG lens
• Every company is getting drilled with questions like: 'what is your water usage, what is your carbon footprint' - companies need to deal with it
• Green is the solution, there's no way around it

 

Global supply chains

• COVID has interrupted supply chains all over the world across all industries
• Will result in higher inventories for virtually everything because shipping containers are in the wrong places
• Thinks there will be a 'supercycle' in goods orders
  • Seeing this now in semiconductors. Companies are double or triple ordering because it takes so long to receive shipment

 

Adding value through selling 

• Sells his mistakes quickly - take the loss and move on
• Sells when fundamentals get less good - fundamentals may not be bad, but they're no longer moving in the right direction
• Tesla: fundamentals were really good and now they are less good, to him it's the same as getting worse

 

The rise of retail investors

• Talked to Robinhood 2 days ago
• Robinhood is trying to make it easy for people to invest
• Mark thinks it is healthy to have more participants in the market - with more investors, the smarter, deeper and more liquid the market becomes
• Thinks a lot of people will realize how hard it is to do well

 

Cryptocurrency

• Still the solution that hasn't found the problem to solve
• Paying attention, but still hard to invest

 

Opportunities in Canada

• Thinks the vaccine roll out has been terrible, our economy is still stuck
• Canadian market has had a bid because financials and oil have gone up - huge allocations on the TSX
• Mark can't get excited about oil - doesn't see why it will work long term & does not want to invest in a secular declining industry
• Canada has some great industrials that are levered to global industrial production - some big opportunities here
• Mark currently has more Canadian content than he has in a while through materials and industrials, some financials as well given a steepening yield curve