Process

• Mark invests in the 2 tails of the market, high valuation & high expectation and low valuation & low expectation
• As the market changes, new things move into the 2 tails
• Likes to be where things are changing the most - this is when Mark thrives
• Example of a current high-change sector: Utilities
  • ‘They are bonds in equity land’
  • Green revolution could transform this very boring sector into something more exciting
  • ‘I never thought they would change, they're regulated and boring but here we are’
• Doesn't care about labels of growth, value etc. just wants to own things that are getting better no matter where that is

 

Long-Term Thematic Ideas

• Mark likes to invest in long-term themes, industries & sectors exhibiting secular growth
• Likes to see a sector with 10 years of growth on the horizon because of a variety of reasons
• Great sectors to focus on, don't need to worry as much about price or entry point; focus on the growth potential and potential for change
• Some of these thematic trades can last for years; cloud computing has been going on for 8 years now
• Secular trades are very powerful, things are changing rapidly and a lot of opportunity is created
• Example of a long term theme: Hydrogen Economy
  • No one knows what it looks like today, 15 years from now we will
  • Likened it to building the internet - no one knew what it would look like, but the growth was incredible
  • For a traditional investor trained in a classic way it's hard to bucket what this will look like in a cash flow, earnings, etc. basis
  • Mark just wants to own the space and doesn’t worry about that

 

Clean Energy

• Mark thinks Clean Energy is the trade of the next decade and that we're in the first inning
• Has been a problem area for a while, but finally now a lot of the engineering has been kind of solved
• We have broad political support worldwide, consumer support is enormous
• Believes the world will move this way faster than people expect
• Too complex a problem for anyone to know the clear winner
• Does not know if it will be hydrogen, wind, solar etc. that is the answer
• “The amount of money that will come into this space is crazy”
• Solving the Global Warming problem reminds him of building the internet
  • We had boring telecom companies building the internet
  • Today, we have boring utilities that are regulated and “literally have to spend money” that are going to build this

 

Innovation

• Innovation can drive a business forward for years
• There are such powerful innovation stories and you can’t see it all when you start
• Example: Shopify
  • Made a great website that anyone can sell things on
  • Next, invented more and more widgets to make their business bigger and more powerful
• Example: Square
  • Started off with the dongle for the phone
  • Next, moved into payments, then a cash app, etc.

• Just kept innovating on a product

 

Market Bubble - thoughts on valuations

• Dot Com:
  • In the early 2000s the internet was so new, no one knew what we were going to do with it
  • Selling pet food on the internet is a huge business now, but the way we went about it was too new
  • Innovation can happen all at once and the market prices it in, then realize these companies won’t work
• Today:
  • Modern 'bubble stocks' (software) are very different than the dot com names
  • They come with earnings and cash flow and a real business, compares to the Dot Com era of companies not making any money and just taking shareholder money and blowing it
  • Need to understand what the company is doing, how they do it and if the economics make sense
  • In the dot com bubble no one could figure the economics of the businesses out
• Example today: Electric Vehicles
  • Tesla is clearly a winner, but now there are so many ‘me too’ companies
  • That's where the stock picking comes in - you can't just buy everything because they won't all work

 

Cryptocurrency

• Hard to see the value - feels it is a technology in search of a problem to solve
• Bitcoin is liquid/digital gold
• “A lot of really smart people are spending a lot of money to figure it out, which is usually a good sign”
• Bitcoin right now is speculating on the store of value trade
• Very interesting space but hard to invest in

 

Sell Discipline & Managing More Assets

• Selling is very important
• You need to weed out securities that you're not interested in
• “Can't hope a stock is going to get better - hope is a killer in this business”
• Degree of management difficulty goes up with assets, but your skillset grows over time
• “The longer you do this job, the better you get at it. I’m much better now than 10 years ago”
• Hasn't had any trouble moving the portfolio despite the increase in assets, liquidity is very available in areas he's playing in

 

Final thoughts

• Being able to pivot and change your portfolio when the world changes is very important
• Doesn't own the right things if we stay in lockdown for the next 2 years - very different portfolio than back in April
• Market has discounted a lot of good news but thinks there is still a lot of opportunity