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Morris Mark at SALT 2016: Bullish on Tech Disrupters and Residential Housing

Morris Mark founded Mark Asset Management in 1985 and is currently a managing partner of the fund. Mark Asset Management holds fundamental, long/short and long-only portfolios and has more than 35 years of research and investing expertise. Before he founded Mark Asset Management, Morris Mark had worked in the Institutional Research and Risk Arbitrage departments at Goldman Sachs. Yesterday, Mark participated in the In Search of “El Dorado: Identifying Investment Opportunities for the Year Ahead” panel at the SALT Conference in Las Vegas. In this article we will do a recap of his ideas and present some of Mark Asset Management’s top picks, which include some of the best-performing tech giants.

Mark considers that disruption represents one of the crucial aspects of a company that represents a good investment opportunity and his fund is betting on companies that are “beneficiaries of disruption.” These companies are focusing on providing services more efficiently and are taking advantage of the increasing popularity of the mobile segment. This can in fact be supported by Mark Asset’s equity portfolio, which is concentrated in Consumer Discretionary and Technology stocks, while the top four picks are represented by companies that are acting as disrupters and have shown commitment to mobile: Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL). In all four stocks the investor has raised its exposure during the fourth quarter of 2015 and reported holding a $29 million stake in Facebook, a $25 million position in Alphabet, and stakes worth $24 and $21 million in Amazon and Apple, respectively.

“The composition of the distribution of a lot of consumer goods is changing. And a lot of that distribution has been done by companies that […] rely on the use of fixed assets with high fixed costs. […] we continue to take advantage of companies that are building value and it involves much more than just media, it involves retail, it will involve education, it will involve healthcare and it will involve how computing is going to be done.”

At the same time, Mark Asset is trying to avoid leverage due to the volatility of stocks, which make it difficult for equity investors to take leveraged positions.

Housing is another segment, where Mark sees a lot of opportunities, having previously worked as a real estate analyst.  He considers that over the years, the United States have drifted “from a country that was overhaused, to a country that is very much underhoused.” The low interest rates and increasing employment are improving the situation in the housing market. However, Mark added that residential housing companies are buying back their own stock, which proves that they are generating cash flow, but don’t invest it in growth. This is due to the fact that the Federal Government has been more cautious regarding mortgages and the lawsuits that have been lost by mortgage originators make it more difficult for people to obtain financing now than 20 years ago. However, Mark thinks that the new administration (whoever will be elected) will focus on easing the conditions for residential housing financing, which will give a boost to stocks related to the residential property construction. This view is supported by Mark Asset’s last 13F filing, which showed several big holdings in residential builders, the largest of which was a $17 million position in Lennar Corporation (NYSE:LEN), which contained 356,000 shares.

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