Guest Interview: Mark Cooke

(Edition Number: Twelve)

Good morning,

Today, we are bringing you the twelfth edition of the Investment Talk Guest Interview series, whereby I bring you some discussion with a selection of my favourite investors in the Fintwit environment.

In today’s interview, we have Mark Cooke with us, another young talent who I have had the pleasure of communicating with for some time now.

Mark’s approach to investing is one that has evolved over the years but now assumes a focus on keeping it simple, in the search for the next FAANG companies.


Mark Cooke

So, we have Mark Cooke with us today, and yes we will be discussing Peloton. Mark’s philosophy is one that blends the use of both technical and fundamental research, in the pursuit of finding long-term compounders who will dominate their industry.

Like many of the guests in this series, Mark is a vocal presence on Fintwit, where you can find him under the handle: @TheMarkCooke.

After graduating from Xavier University, in Marketing and International Business, Mark went on to pursue a lifelong career in sales, most recently at Straumann, the leading dental implant maker in the world.

Having spent 10 years of his life in Vienna, Austria, Mark is fluent in German and plans to retire in his 40s

My favourite quote from this interview:

If people aren’t screaming the stock is overvalued then I am most likely not interested in it.” - Mark Cooke


The Interview

Investment Talk:

Good morning Mark. I welcome and thank you today for agreeing to field some questions. When I announced that we would be doing this, some weeks ago, and asked Fintwit for some questions, that post generated an obscene number of responses. So, you can expect a batch of these questions a little later.

As far as introductions go, I always find it useful to kick things off by asking the guest to outline some backdrop for the readers who may not be aware of you, and for continuity too.

So, if you could introduce yourself, perhaps a little flavour into your backstory, and take us through the events that have led up until the present day. Perhaps also detailing what factors influenced your life in such a way that allowed you to discover investing.

Mark:

My story isn’t exactly exciting on how I started investing. When I was 21 my grandfather called me one day and said that I should start investing.

With little understanding I just said, sure let’s do this.

Before I knew it, I was investing in stocks like $EPD, $D, $SPG, $RDS-B. I had absolutely no idea what I was doing and for this reason, was investing in companies that I would never consider today. Mind you there is nothing wrong with these companies, but this wasn’t my flavour. Fast forward a few years I decided there has to be a better way to invest and that’s when I found FAANG.

Investment Talk:

After getting to know a little bit about your background it would be great to get a sense of your investment process.  

So, could you take us through your investment process, and perhaps outline why these areas of the market that are of most interest to you?

Mark:

My investment process has changed. When I was younger, I invested in dividends, then I started to become enamoured by brands and found out that some of these types of companies end up being the most successful. That is when I transitioned into FAANG and have now entered another crossroad. I am at the stage where I am hunting for the next set of/or what I believe to be the next FAANG.

My process is simple. Identify companies that are founder-led (obsessive mentality to win), can make sense of the business in 1-2 sentences (elevator speech), has to be able to be explained to me like I’m 5 years old, and my favourite part, fund sponsorship. I don’t necessarily have to be first in the company, but I like to see fund sponsorship increasing QoQ.

Lastly, if people aren’t screaming the stock is overvalued then I am most likely not interested in it.

Investment Talk:

I notice that you are an advocate of Bitcoin and allocate a portion of your capital there. I don’t really discuss crypto all that much here, so I think it would be interesting if you could outline the point in time when you discovered Bitcoin, what attracted you to it, and what your thoughts are on the idea of a decentralised currency, as well as the brief bull thesis that you are following.

Mark:

I got caught in the crypto craze in 2017. Everyone was screaming it was going to $100,000. I essentially bought the top and got absolutely wiped out with it. It was play-money nothing serious. Fast forward to 2020 and I started paying attention to Chris Perruna and his bullish tweets about it. That got me interested.

My thesis is simple like most things.

I am not some crazy deep guy that makes things complex. The way I see it… central banks are printing incredible amounts of money and currencies are weakening at a rapid pace. In essence, they are out of control and the USD doesn’t buy nearly what it used too. I wanted a hedge and Bitcoin was the perfect story.

You ask why not buy gold? Well… gold isn’t millennial-friendly it’s old-school, right? You also can’t take it onto your USB stick and the market cap is $11T whereas $BTC is only $1T a lot of room to run.

The last part about bitcoin that I am bullish with is that you will/are able to transact with it. Nobody is using gold to trade this isn’t caveman times.

Investment Talk:

You held a few companies that are based in China, in Nio and UP Fintech. Granted, these two were smaller positions for you, but I would be interested to hear your perspective on China as an investment-ground.

Mark:

I sold both because my highest conviction names dropped so much. Short-lived. China is of interest to me because their stocks have underperformed relative to US equities and wanted to catch a nice trade.

It does interest me, and that’s why I use them as trades. I do not like what happened to $BABA. Do we know where Jack Ma is yet? A wonderful company that trades at a relatively cheap valuation in comparison to its peers.

Investment Talk:

So, I don’t think we could do this interview without fielding some questions about Peloton, given that you are effectively a member of the PR team. There was a range of questions from Fintwit surrounding this company, so I figured I would round them up and direct them towards you.

5.1) Peloton is an amazing company. What do you see that makes you comfortable with the current valuation, as well as the potential that the stock is getting ahead of itself?

5.2) What is the end-game for Peloton? Do you see yourself eventually selling the position, or is this a set it and forget it situation?

5.3) In my mind, you were one of the early entrants into Peloton. What, at the time, made you think that this was more than a company with a stand-alone pedal bike and an iPad?

Mark:

5.1) Peloton is definitely an expensive company. So are most of the holdings I have. What makes me comfortable with the valuation is that it is a subscription revenue business, and the churn rate is best in class.

Nobody can compete except for Netflix. For me, the product is sticky, unlike most exercise equipment that sits in your basement. The tracking and engagement force you to use the equipment whether you like it or not. Nobody can fudge these numbers either and I think people are misunderstanding the TAM for treadmills in the US. Another thing that makes me bullish is that they still haven’t expanded into most countries, unlike Zoom.

They can also corner the clothing market and make Reebok, Puma, etc legacy brands and give Lululemon a run for their money. (This is long term)

Lastly, they are going to be expanding commercially & rower/strength equipment is coming. (Optionality)

5.2) This is a set it and forget it position for me. I explained above what I think they will do and how they can continue to expand. I love the brand, what they stand for, and how they are disrupting a traditional model. This is the first time a company has actually challenged exercise and is winning.

5.3) What made me bullish on Peloton is that every human being I knew that owned one told me they use it regularly, flaunted it in my face, and almost acted like it was cult-like. It reminded me of the Tesla type crowd. You don’t hear of many brands like that and I peaked at the numbers and got excited.

Investment Talk:

Next, I wanted to discuss position sizing and concentration. Everyone I interview has a different view on this topic, so I find it useful to gather perspectives from several different investors.

So, I am wondering if you can provide us with some colour on your allocation approach. Is there an upper-bound that you will allow a position to grow into? What are your thoughts on the sizing for new positions? How do you feel about concentration?  I would be keen to hear you share your thoughts on this matter.

Mark:

This is an interesting topic for me. I usually start a position with a 3% size and depending on how the company performs will increase. I also look at charts and if I like how it’s bouncing off the 21 ema, 50 sma, etc. I will increase my size. I am methodical about adding, but also do not worry about position sizing.

Sea Limited is now 17% of my portfolio it’s getting quite large.

I will give you an example of using charting to increase. I liked how Teladoc looked like it was going to break out, so I kept sizing up on it and then after the earnings it obviously imploded, and I took some of that risk-off.

Now that it came down quite a bit, I added some of that size back. I don’t trade all that much, but if something goes haywire in a position, I will resize a bit and allocate elsewhere.

Back to Sea Limited. There hasn’t been a reason for me to trim it yet. I am sure it will have a massive drawdown eventually and I will trim some, but for the time being. The business is firing on all cylinders and if I start trimming my flowers, I may end up holding more weeds and that’s not my goal. The most important thing for me right now is to take care of my winners.

Investment Talk:

Another one that I like to ask everyone. What are the three most influential books that have changed the way you think?

Mark:

Awaken The Giant Within, Tony Robbins

Creativity, Inc, Ed Catmull

Think and Grow Rich, Napolean Hill

The 10X Rule, Grant Cardone

Investment Talk:

When assessing a company. What are the must-have factors that must be present in the company before you would even consider allocating one ounce of capital into their business?

Mark:

Founder led

Forward-thinking

Disrupting traditional workflow

Brand

Makes life easier

Investment Talk:

I have heard through the grapevine, that you are considering a podcast. I was wondering if you could briefly discuss the idea behind this, and perhaps the format that you intend on going forward with?

This is a pod that I can’t wait to listen to, personally.

Mark:

I will start a podcast soon. I have been quite busy with work and didn’t realize how much work a YouTube channel actually is. I just need to dive in.

I want this to be completely different from everything I already see on Twitter. Most people are asking about the process, trading, etc.

I want mine to be more about the person and to learn why they are the way they are, who they are, and what makes them unique.

It would be much more chill and laid back and conversational. You should know my style by now ;)

Investment Talk:

As long-term investors, a great deal of the discussion can often circulate around buying, with less emphasis on selling. For me, I operate under the option that I never sell my positions, unless they trigger a pre-defined batch of sell-allowances. This can range from funky movements in management, an acquisition I do not like, the original thesis being broken, and so on.

What are some of the conditions that must be apparent for you to consider selling a position?

In addition to that, I am wondering if you could share with us your thoughts on the importance of time horizons with respect to the dynamic between buying and selling.

Mark:

I think it varies for me. Sometimes I take a bite of a company because I get excited and then realize it’s not everything I hoped for or a drawdown ensues, and I end up selling it to add to the companies I know I want to own for 10 years.

For selling: I never let a position go against me past 5-7% even if I like the company. I can reassess and wait and add back when the tide clears. No point in losing money that way. 

Another factor would be a company continuously underperforming and not giving the right answers. AYX was one of those sales for me. I luckily got out before the management switch.

That leads me to my next point any form of fraud I am out, new leadership out of the blue I am most likely out, or recently FSLY not able to really impress me. I know Compute at Edge will be big, but they can’t seem to WOW anyone with their execution. I can always circle back and buy this company back if they begin to execute. For the time being, I’d rather own $NET. I entered Fastly at $19 also and still sold it to buy a company with a nosebleed valuation because they are executing.

Investment Talk:

Lastly, I like to round-off this segment with my favourite quote, which comes from Graham. The one concerning the short-term voting machine and the long-term weighing machine. I find it helps me reconcile the irrational price action in the near-term.

I do not know who first coined it, but another of my favourite quotes is “If you don’t laugh, you’ll cry”. I find this quote helps me appreciate the randomness of life and the lack of control we have over external factors.

What is your favourite quote, and why? Feel free to pick a few if you like.

Mark:

I will give you three by the same guy.

1)     Spectators Pay – Players get paid. – Grant Cardone

2)     Don’t watch the news… make the news. – Grant Cardone

3)     If the people around you are giving you the advice to slow down or to take it easy – you are surrounded by the wrong people. – Grant Cardone

I picked three from the same guy because he is the reason I started to find purpose in my life and strive to win at the game of life. 


Questions from Twitter:

In this segment, we collected questions from the Twittersphere, and present them to Mark.

@irnestkaplan: “How do you always remain so cheerful and humorous – even during difficult times in the market?

Mark:

Good question. I am pretty honest… I think everyone knows that. I used to get made fun of a lot so I would try to make jokes to shield myself from the hate. Over time I used my personality to lighten situations and try to make people laugh. Life is too short not to enjoy it and smile.

@clueless_1337: “Favourite company that is not Peloton?”  

Mark:

Sea Limited

@clueless_1337: “Favourite company that you do not own?

Mark:

Coupang

@clueless_1337: “Which companies in your current portfolio would you likely sell in a downturn?”

Mark:

I sold some already: $FSLY $NIO $TIGR – next would be really difficult. I like them all. We. Talked about this. Saas valuations are at nosebleed levels so if that reset hit I may sell more. I really do like $TWLO $CRWD though. It’s so hard!

@StockMarketNerd: “Some private companies that you are especially excited about maybe possibly going public?”

Mark:

Bumble – already went public

Coinbase – good luck on that valuation

Robinhood – we need a depression to get a fair valuation on this one most likely.

@plantmath1: “Thesis on your two newer picks, $NIO and $TIGR?”

Mark:

Sold $TIGR to get a taste of Robinhood, but I’ll just wait for the real thing & $NIO was a shot at catching an EV company that actually stands out in the space in comparison to traditional automakers.

@sdub2019: “What is your hedging strategy, if you use any?”

Mark:

No hedging strategy. I do trim sometimes, (not often) When we have a drawdown I do shuffle the cards a bit if something looks more attractive.

@investrepeat: “If you are given $10,000 and have the following options: bitcoin, equities, gold, silver, how would you allocate that capital?”

Mark:

Who knows. That’s an easy question. It’s bitcoin the world isn’t going back in time.

I look at gold like I look at Blockbuster it’s being disrupted at a fast pace and nothing can be done about it. Investors agree with me too.

@martychargin: “Who is your investing mentor?”

Mark:

My mentor is Eddie V @thelagunapadre – he taught me how to trade (even though I am much more long term based)

Another guy I really look up to is Chris Perruna. I love his style we are extremely similar.

@BATBPhilly: “What is your 2021 conviction pick, and why?”

Mark:

2021 Conviction pick is…. Robinhood if it still IPOs in 2021.


Summary

That concludes today’s guest newsletter, which marks the twelfth edition of this series. I want to thank Mark for taking the time to answer these questions today, I know there was a lot of questions.

Don’t forget, you can catch Mark over on Twitter @TheMarkCooke

Stay tuned, as we have stockpiled a long list of future guests for this series.

You can find previous editions of the guest interview series below:

• Edition One: Bill Brewster

• Edition Two: Kris FromValue

• Edition Three: ValueStockGeek

• Edition Four: AdventuresInFI

• Edition Five: Brian Feroldi

• Edition Six: Brad Freeman

• Edition Seven: Mostly Borrowed Ideas

• Edition Eight: Richard Chu

• Edition Nine: Kermit Capitál

• Edition Ten: Liviam Capital

• Edition Eleven: David Belle

• Edition Twelve: Mark Cooke

• Edition Thirteen: 10-K Diver

• Edition Fourteen: Richard Moglen

• Edition Fifteen: Matthew Cochrane

• Edition Sixteen: Michael Mitchell

• Edition Seventeen: Pythia Capital


Conor,

Lead Analyst at Occasio Capital Ltd