Difference Capital


Mary Meeker’s Manifesto

Written on June 10th, 2013

Every year, one of the most respected analysts of the Internet, Mary Meeker from Kleiner Perkins, publishes a review of all the major internet trends. “Queen” Mary’s note is a must read for anyone focused on the space. There is only one problem – it’s 127 Slides long. So below, we will save you some time and give you the top eight slides from our perspective. If you really want to see all slides, let us know.

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Why we have rapidly become one of Canada’s most active investors

Written on June 8th, 2013

Difference Capital may be just one year old, but most of us here have been in the investment business for at least 20 years or more. We’ve lived through gold booms and busts, tech bubbles and crashes, and the resource super cycle of the last decade. Our Chairman, Mike Wekerle, likes to say he’s the farmer’s almanac of market cycles – because he’s earned and lost enough money in previous cycles that he can read the tea leaves better than most.

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Canada’s Digital Mojo Returns

Written on June 3rd, 2013

Canada’s re-emerging technology strength is getting noticed south of the border. Not since the days of the fiber-optic boom (where Canada punched above its weight) have I seen it get this much attention.

Forbes recently has called Ontario the second largest technology cluster after California. It claims Toronto is an emerging tech hub, with 11,000 tech firms and suggests the next “Tumblrs” might emerge from this group. We do like the sound of that! See link below (you can also tell it’s not written by a home-sick Canadian because it refers to the “State” of Ontario):

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Here’s a Valuation Quiz:

Written on May 23rd, 2013

OK smart MBA grad / CFA type, what valuation would you give a private technology company that is six years old, had only $13 million in revenue, a 26 year old CEO, 175 employees and probably losing lots of money? A few times revenue? More if its growing fast in hot sector? Maybe 10 x revenue at the top end??

Wrong! Try $1.1 Billion or close to 100x revenue. At least that’s what Yahoo valued internet blogging site Tumblr at earlier this week. And this isn’t the first head scratcher in the internet space. I.e. Facebook’s $1 billion purchase of Instagram also comes to mind.

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The Stealth Bull Market in Canada

Written on May 14th, 2013

Wonder where the good times on Bay Street went? Yes the TSX is barely keeping its head above water year-to-date, but underneath the surface there is some interesting activity, particularly in the growth sectors.

The Info Tech sub-index (7 names) is up 26% and the Healthcare index is up 10%. It’s the Metals that are weighing us down (so to speak) with the materials index down about -22%. Financials and the Energy sectors are about flat for the year.

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Cheering for more than the Leafs – Cheering on the new Tech issues

Written on May 8th, 2013

It looks like Canada is about to have a couple of new quality public tech names. Halogen Software and Vixs Semiconductors are both doing a public issue. We have met both companies and are cheering them on. We don’t think we’ve seen this much activity in the Canadian Tech Patch since the days when Nortel was 30% of TSX! Now the whole tech sector remains below 3%, so there is lots of room for new tech issues. Especially as capital flees the collapsing commodity sector (yes, showing our bias here).

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Facebook Highlights Private vs. Public Tech Investment Opportunity

Written on May 2nd, 2013

Facebook (FB) reported its Q1 results yesterday. While it looks like the street was content with these results, the stock at $28 still remains well below its $38 IPO a year ago. So does that mean Facebook is a not a success? It didn’t create any value for its investors? Of course not! It just means that most of value creation was while it was a private company, while most of value destruction has occurred after it went public.

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Written on April 23rd, 2013

Netflix blows away the street – another sign that huge disruption and opportunity is coming in the media technology segment

Netflix is up 25% in afterhours after reporting quarterly results. It’s about to pass HBO in subs, it’s producing its own content (“House of Cards” with Kevin Spacey) and is a major new channel to market for other new content players. It is driving cord-cutting (cable cancelling), especially by younger viewers. Netflix can be used on TVs, tablets, smartphones and game consoles – and costs about $10/month. It also represents something like 30% of all net traffic. Amazon, YouTube (Google) and Hulu and others are also entering this space.

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Gold, Oil dropping, DCF to the rescue

Written on April 15th, 2013

After having a rough month and week, the TSX comp is again down today. Really down – over 250 points (2%) on the back of a 5%+ drop in gold along with oil and other commodities falling due to weakness out of China.

It’s not a pretty picture for the Canadian Capital markets with its 50% weighting in commodities and resources, and another 40% weighted in financial and real estate institutions that have prospered on the back of the 10+ year resource boom. Meanwhile Canada’s exposure to growth sectors at 3% pales in comparison to the 30% exposure in other balanced markets! That’s a 10x “Difference”. And speaking of difference, Difference Capital (DCF) is up over 10% today!

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