Thought on the last few weeks

• What we’re seeing is a collective panic from many investors who have the same bets.
• Normally this would be a busy time for him, but he has very high conviction in some of his largest bets (AirBNB, Nvidia, Roblox)
• He topped up his favourite positions, but there has been no turnover for him.

 

Inflation & Covid

• It’s easy to get caught up in the popular press.
• In his view, over the last 6 months, the market has left Covid in the dust. Mark is not concerned about Covid.
• The financial press is focused on interest rates, inflation, etc, but these are very difficult to get right and so he tries not to focus on them.
• Ultimately he thinks rates will be higher in a year from now, but it’s hard to tell by how much.
• The common saying is “sell growth because multiples will go down with inflation”. But in his view, when growth is so high, it doesn’t matter.
• What’s more important is the speed and duration of growth.
  • For some companies, he has a lot of visibility on 4-6 year of very high double digit growth. Those companies are buys.
• There are powerful trends in the market that have been around for a few years and will continue to drive growth, regardless of inflation.

 

Thoughts on the economy overall

• The economy is very strong, however it won’t stay this cyclically strong because stimulus will be removed and rates will eventually go up.
• This isn’t a bad thing. If we had out of control inflation that would be bad.
• Tech is inherently deflationary.
• Mark doesn’t think inflation will continue to go up from here as we’re already seeing signs that imbalances will be addressed. Inflation headlines may have peaked.

 

Commodities/oil

• For Mark, the key with oil and oil stocks is to disaggregate oil from the stock.
• He believes that as we go through this energy transition, energy prices will remain high because of supply constraints and the difficulty of bringing on more supply.
  • The end of oil is coming in the next 10-15 years.

• At the same time, demand is constrained.
• Because of supply issues, we’ll have higher oil prices as we decarbonize.
• From a fundamental point of view, he likes oil.
  • If we stay in this range of $60-80 oil, then oil companies are a buy.
  • No one owns them, and they will grow earnings and cash flow for years.
• Energy is a good diversifier for Global Innovators because energy moves in the opposite direction to tech.
• Do the rest of resources follow? Difficult to say. He believes energy needs to go to $100 for other commodities or resources to take off.
• Supply is an issue for all resources because of the ESG movement. As a result, he’s positive on these areas in general.

 

Metaverse

• Brands and artists are interacting more and more in these metaverse spaces because they are very immersive; these spaces will continue to grow.
• If names like Roblox can execute on their plan, there’s a lot of ways to monetize this traffic.
  • There’s a lot of utility for users in the metaverse.
  • Platforms can also incorporate VR.
  • Roblox is trying to figure out advertising on their platform.
    • It reminds him of Google and Facebook 10-15 years ago.
    • There could be more players in this space.
• Investors think of the metaverse as video games, but this is incorrect; It’s more like a new version of tv.

 

Payment processing

• Fintech is difficult because it’s heavily regulated.
• There are a lot of players and complexity. Many incumbents and lots of competition.

 

Positioning across his funds

• Special Situations: This fund is the most unique. It’s the smallest cap and has the most private exposure. It’s 50% Canada.
  • Small caps aren’t working right now because of market crosscurrents; they don’t do as well when clarity isn’t as high.
• Canadian Growth Company: Similar to Special Situations but more focused on Mid-Large Cap.
• Global Innovators: Almost no Canadian companies. A lot of San Francisco companies.
• Across the three funds, he holds a lot of the same stocks, but the proportions are different. There’s less tech in Canadian Growth and Special Situations.

 

Regulation for tech companies

• Mark doesn’t own mega cap tech.
• He believes regulation will become significant.
  • They are so large, and scrutiny is increasing.
• It’s difficult for governments to regulate when companies are providing value to customers (eg, Amazon is cutting prices).
• Mark prefers small-mid caps at the moment, though he owns Nvidia.

 

Digitization: cyber security/cloud

• Within the cloud, you can do more faster. You can use AI faster. All of this creates 10x the data.
  • AI is more data intensive.
• As we migrate to the cloud & AI, the amount of computing power needed goes up significantly. This is why chip stocks go up.
• Mark wants to own companies that are sitting at the edge of the cloud, that can drive forward.
  • Eg, Snowflake is sitting on the edge of everything in web computing.

 

Intersection of IPOs and private companies

• Mark has been meeting with a lot of private companies. You can learn a lot from meeting with smaller, private companies.
• He can see where disruption will ultimately come from but companies still need to execute on their plans.
• It’s interesting to construct the larger mosaic by talking to everyone, especially the private side.