Forward Thinking
February 17, 2021

The Tailwinds to Many of Pender’s Equity Strategies are Secular

Written by Felix Narhi

Pender’s equity funds have been performing strongly of late. We believe there are some commonalities to our strategies which relate to the “forward thinking” part of our company slogan.

We don’t own Enbridge… Or TransCanada Pipeline… Or Barrick Gold…  In general, many Canadians have overexposure to the past and not enough exposure to the future. You can’t build a modern economy on antiquated technology. Likewise, you shouldn’t build your core investment strategy around it either.

Pender has had a long-term focus on technology and the future, and one of the consequences of the pandemic has simply been the acceleration of this secular trend in our direction. Investors are now rapidly turning away from potential value-trap industries and commodity-related business models that are in danger of obsolescing and moving towards companies that represent the future. More than ever before green themes are taking precedence, related to the “E” in ESG[1]. Pender simply doesn’t have much exposure to yesteryear’s industries, where profit pools are moving to alternative business models that are more efficient and provide far more value to consumers than doing things the old way. When something is 10x better or 10x cheaper, magic happens. That’s what technology-driven models can bring to the table.

For example, we believe that Square Inc (SQ) is faster, more inclusive and more intuitive than traditional banking; that Prontoforms Corp (PFM) is more efficient at processing data inputs digitally; that SharpSpring Inc (SHSP) is better at reaching end customers than past marketing techniques; that Zillow Group Inc (ZG) offers a better way than the costly and stressful traditional route of selling your home; that Stitch Fix Inc (SFIX) is a better option than traditional ways of sourcing clothes at department stores, going through racks of clothes that don’t fit and are not your style; and that PAR Technology Corporation (PAR) excels at bringing food to people via restaurants in a modern digital-friendly way that consumers now expect in everything they do. We believe Bitcoin[2] has some similarities to gold in terms of a store of value, but it also moves across space more efficiently and at a far lower cost (as noted by Bitcoin proponent and Founder of MicroStrategy, Michael Saylor, who recently tweeted, “If institutions want to move billion dollar blocks of money around the globe, gold is a million times more expensive than Bitcoin and a thousand times slower.”[3]).

Where do you want to invest? The past or the future? “The future is already here — it’s just not very evenly distributed.” – William Gibson. We skew to companies we believe will keep winning as that future becomes more evenly distributed.

Felix Narhi, CFA
February 17, 2020

[1] Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Investopedia

[2] Pender does not invest in Bitcoin directly but has indirect exposure through holdings like MicroStrategy that own Bitcoin.

[3] https://twitter.com/michael_saylor/status/1359918967587024898?s=09