Evercore ISI’s Mark Mahaney, who has been covering Internet stocks on Wall
Street since 1998, joins Caroline Hyde to introduce his new book “Nothing But
Net,” taking a look at the underlying drivers of tech outperformance and how
investors can identify future winners in the space.
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Brave to take on writing a book not for the faint hearted not
for those with. With out as much time as you have as well as

when you’re trying to work on the side. What what sparked the
idea. Why sign up for such a Herculean task.

Well I do enjoy writing. I’ve been covering tech stocks and
Internet stocks for 25 years. I didn’t want to take a chance a

stab at stepping back and thinking about big lessons. And then I
was a little bit inspired by a classic book. Peter Lynch is one

up on Wall Street written in 1980. Just great fundamental advice
for four retail investors even institutional investors about how

to tap into the market. My thought I want to do something
similar except using today’s household names like Amazon Netflix

Facebook and Google. I thought I could pull together those
lessons. I enjoyed the process. And let’s talk about some of

that fundamental advice because a lot of it comes down to
perhaps not looking at fundamentals in the way we used to

suddenly with value stocks.
I think that’s true. You know I if I step back if there’s one

thing I try to get across to people one thing only it’s remember
that the phrase D.H. Q where the acronym GHQ dislocated Naipaul

the companies I think the best way you can invest in the market
is trying to mitigate valuation risks and mitigate fundamentals

risks. And you do the first by looking for stocks when it
corrected 20 or 30 percent. The second though is the more

important thing. And you try to find these high quality assets
that is facing large total adjustable markets. Excellent

management team super strong consumer value propositions and
companies that are really good at product innovation. If you put

that package together those can be really good sustainable
investment long. I think that’s another thing I’m trying to get

across in this book. You don’t need to trade to make really good
money you know with lots of caveats. Rather you’ll need to trade

and make really good money investing in stocks. If you invest
rather than trade yeah

sort of buy and hold. And many didn’t when it came to the likes
of Apple and Amazon if I can sort of be paid a dollar for every

story of someone who says that they sold out at the wrong time.
How how much perseverance how much patience that investors need

to ride out the promise of no job today. But John tomorrow.
We’re investing for the business but in longer term you’ll get

your profit. You needed to have that. One thinks I’m going to
cut this both ways. Caroline Hyde I look for management teams

that are truly relentless. I would love to see founder led
companies. They don’t always succeed of course. But if you look

at the history of tech stocks the biggest winners have almost
always been founder led founder Ron obviously but founder led

for multiple years. The biggest tech market cap names in the
world the founders the ball for two decades. You know you get

that kind of consistency in investment parlance. Sources saying
that you know past performance is no indicator of future

performance. That’s true when it comes to management teams and
especially product innovation which is so critical in tech.

Actually I think that good successful product innovation is
usually a harbinger of the ability of a company of a management

team more to do more than that.
So you stick with that that stock that company through the ups

and the downs of the markets and through company missed risks. I
haven’t seen really even the most successful companies avoid

misfits from time to time.
We’ll talk about some of the funny moments within the book some

of them particular anecdotes or experiences they really had to
share. Well I’ll tell you about one of my worst stock calls

wasn’t funny for me at the time but I had a sell on Google at
the time of its IPO. Right on TV right after the first earnings

when the stock was gapping up and I was referred to as Chapter 3
a bomb right on my face from one of the wiser tech columnists

strategists on the street. And he was right. But it was a great
learning. A moment for me kind of step back and think about well

you know where’s the real product innovation going on sector.
Leave aside valuation. Valuation is super important. But to me

it’s almost the last thing you should do. Should we check off
the boxes find a high quality asset and then think about

valuation. I mean one of the mistakes I made early on was
focusing on valuation. First find a really good asset and then

think about entry prices rather than go the other way. Well then
bring it to the here and now. Because it’s very hard not to look

at valuation first and foremost. You’ve had the run up in stocks
that we have. And when you see that like the darlings of today

the Tesla suddenly take a nosedive to the tune of 11 percent.
They will have idiosyncratic reasons and reasonings around that.

But what now valuations. Is it now a good time to still be
looking at growth names.

I think so. You can always find dislocated stocks. So that was
one of my learnings lessons in the book. Even the best highest

quality assets gets to get dislocated trade off 10 20 30 percent
from time to time sometimes because of company mis missteps. But

sometimes just because the market rolls over it happens. Even
the mighty Amazon has had a 30 percent roll off. And when you

see that in the highest quality assets that’s why you should buy
or add to positions. So I look at companies today the highest

all of the Internet companies that I look at. Which would I say
are most dislocated today. Three ideas come to mind. First is

Amazon. It hasn’t dramatically corrected but stocks flatlined
for about 18 months now. I think that the cash future cash

potential is broad. I think that’s great stock to buy if you’re
willing to look out 12 months or more. Second is Facebook highly

controversial. The great business model wonderful value
proposition. That’s the second and third controversial is Uber.

And I think that that’s the least it’s least proven to be is
still relatively new. But the total just bull markets are

massive here. And it’s one of the leaders in that market. Lots
of great value propositions consumers drivers merchants etc..