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Value Investing with Legends Show Notes

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Season 3, Episode 6 - Kim Shannon  - Value Investing - Bringing it All Together

Today’s conversation is with Kim Shannon President and Co-Chief Investment Officer at Sionna Investment Managers. Kim founded Sionna Investment Managers in 2002 and has more than 35 years of industry experience, and previously served as the Chief Investment Officer and Senior Vice President at Merrill Lynch Investment Managers Canada. Kim is also a board member with the Canadian Coalition for Good Governance, the author of The Value Proposition: Sionna's Common Sense Path to Investment Success, and the recipient of numerous awards, including Morningstar Fund Manager of the Year (2005).

I've been looking forward to meeting Kim for quite a while and I finally had the opportunity to do so recently at a panel that we did during the last Berkshire shareholder meeting. Kim has had a fascinating career so far, with a unique perspective as a rare woman in the asset management industry. Near the end of her undergrad degree in science, Kim had an opportunity that showed her a new side to a career in business. That realization set her on an entirely new path toward the investment industry, where she worked her way from the very bottom to top positions at Merrill Lynch Investment Managers, eventually opening her own firm.

On this episode, Kim and I discuss why she became a believer in value investing, the importance of mentorship for building your reputation and career, her approach to portfolio construction and investment philosophy, and so much more!

Key Topics:

  • Kim’s journey from a degree in science to a corporate career in the investment world (2:50)
  • Why Kim became a believer in value investing (4:23)
  • The value of viewing business as more than the profit motive (5:42)
  • How worked her way up from the bottom at Royal and Sun Alliance to being pursued by Merrill (7:02)
  • The state of the asset management industry for women in the early 1980s (11:02)
  • How mentorship helped Kim build her reputation and career (11:36)
  • Why the meritocracy of the asset management industry is beneficial for women (13:00)
  • The deteriorating situation for women in the asset management industry (14:49)
  • Shocking statistics for women in leadership positions in the industry (16:04)
  • The mission of Variant Perspectives (16:41)
  • The principles Kim has built into Sionna’s investment approach (19:11)
  • Kim’s approach to search, using a quant model as the first step (23:28)
  • How Kim’s team performs fundamental analyses on potential investments (27:57)
  • How knowledge analysis is structured at Sionna (30:20)
  • Why being a specialist can increase your biases (31:32)
  • Sionna’s perspective on assessing relative value (32:37)
  • The importance of the financial services sector (34:04)
  • The unique aspects of value investing in the Canadian market (35:08)
  • How Kim thinks about sizing positions and risk management (39:17)
  • The three main reasons to exit (41:13)
  • Why this down market is unique (45:03)
  • The Canadian market opportunity which has opened up (47:30)
  • Analyzing the current crisis from the perspectives of big tech and energy (49:04)
  • The problem with over-anticipating the next move in the market (50:09)
  • Why you need to understand financial history (51:18)
  • Getting curious about what happens when value underperforms growth (52:56)
  • Why Kim thinks this is one of the best times to buy value (56:47)
  • The tricky balance between the success of passive investing and the need for active managers (58:54)
  • And much more!

Mentioned in this Episode:

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 3, Episode 5 - Dan Davidowitz & Jeff Mueller  - Compounding with Polen Capital

Today’s conversation is with Dan Davidowitz and Jeff Mueller of Polen Capital, which is a firm that is dedicated to researching and analyzing the highest-quality companies around the globe and investing for the long haul and with a business owner’s mindset. Dan is the co-head of the Large Company Growth Team and the lead portfolio manager of the firm’s flagship Focus Growth strategy. Jeff is co-portfolio manager of the Global Growth strategy and earned his MBA from Columbia Business School, where he was a graduate with honors and distinction of the Value Investing Program.

This episode is our third recording since the coronavirus health crisis, and we have kept doing it remotely. Since Spring Break, Columbia Business School has gone fully online and I am absolutely in awe of how the school has been able to pivot to this new format almost seamlessly and we owe this to the terrific people who have been working tirelessly throughout this challenging period and who deserve all our appreciation.

My goal with these episodes is to bring guests on who can help us navigate the investment environment and the enormous uncertainty surrounding the economic impact of the virus, which in my opinion is far from clear. I believe our listeners should be focusing on a rigorous, bottom-up approach or on funds that practice a bottom-up approach that is resilient to a variety of scenarios. Thus far the economic impact is probably a bit under-estimated, but it affects different sectors differently and thus the opportunity to build a resilient portfolio is there.

On this episode, Dan, Jeff and I discuss how they developed their investment philosophies, what value means in today’s market environment, what you need to know about investing in compounders, the value of guardrails, and so much more!

Key Topics:

  • The impact of the current coronavirus pandemic on life at Columbia University (1:02)
  • How Dan found an interest in business and finance while pursuing studies in Public Health (6:13)
  • What Dan’s first buy-side job taught him about value investing (7:54)
  • Why frustration led Dan to learn more about the modern approach to value investing (9:00)
  • Polen’s compounder approach to value investing (9:42)
  • The importance of being with an organization whose approach aligns with your investment philosophy (11:07)
  • How the events of September 11, 2001 re-routed Jeff’s career (12:15)
  • Why Jeff set himself the goal of attending Columbia University (13:02)
  • Jeff’s philosophy on wealth generation and investment (14:24)
  • The evolution of the US financial markets since Graham’s first writings (15:20)
  • What does value mean today (21:00)
  • The key elements to consider when analyzing compounders (24:32)
  • Why Polen doesn’t seek new investment opportunities based on economic trends (29:53)
  • Polen’s approach to quality analysis of potential investments (34:57)
  • Investing within a small pool of potential companies (40:22)
  • The never-ending quest for knowledge (42:51)
  • What moat attacks reveal about barriers to entry (44:53)
  • Polen’s perspective on building resilient portfolios (50:07)
  • How the Polen Focus Growth portfolio has been adjusted in light of the coronavirus crisis (54:57)
  • The importance of Polen’s guardrails (57:44)
  • The changes to the Polen Global Growth portfolio in the current crisis (59:25)
  • Dan and Jeff’s outlook for the future of value investing (1:02:08)
  • And much more!

Mentioned in this Episode:

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 3, Episode 4 - C.T. Fitzpatrick  - Value Investing in Times of Deep Distress

Today’s conversation is with C.T. Fitzpatrick, Founder, Chief Executive Officer, Chief Investment Officer at Vulcan Value Partners. C.T. founded Vulcan in 2007 and since then, all five strategies have peer rankings in the top 1% of value managers in their respective categories. Before starting Vulcan Value Partners, C.T. worked as a principal and portfolio manager at Southeastern Asset Management and over his 17-year tenure, his team achieved double-digit returns and was ranked in the top 5% of money managers over five, ten, and twenty-year periods consistently.

We’re again taking a different approach to this episode of the podcast. The health crisis has worsened significantly since our last episode and though there has been some stabilization in valuations, the market’s fragility is still apparent as the uncertainty about the extent of the economic shutdown and the long-run impact of the crisis remains.

In light of the extraordinary circumstances we find ourselves in, I couldn’t think of anyone better to talk about investing in the current environment than C.T. Fitzpatrick, with the benefit of his more than 30 years of experience in financial markets.

On this episode, CT and I discuss how Vulcan has improved their portfolio over the past few weeks, why it’s critical to stress-test your portfolio, how this crisis will accelerate the demise of certain industries while benefitting other companies, the parallels between the global financial crisis in 2008-2009 and the current market behavior, and so much more!

Key Topics:

  • Using your investment horizon as your main risk management tool (3:57)
  • Why Vulcan prioritizes value stability over discount (6:32)
  • How Vulcan has improved its portfolio over the past few weeks (7:28)
  • What it means to stress-test your portfolio (8:14)
  • Why thorough analysis is critical in light of this extraordinary event (8:46)
  • The benefit of a strong balance sheet for weathering this crisis (11:22)
  • Vulcan’s approach to different asset classes (12:58)
  • The strategy behind concentrating portfolios in periods of volatility (15:13)
  • Why CT considers the margin of safety to be the most important risk metric (18:01)
  • How the crisis will accelerate the demise of certain industries (19:44)
  • The evolution of the airline industry and its weaknesses during this crisis (21:24)
  • Companies that will benefit from the behavior changes triggered by lockdowns and quarantines (22:58)
  • The parallels between the global financial crisis in 2008-2009 and the current market behavior (25:17)
  • How the political climate has colored policymakers’ response to market volatility (28:16)
  • A key difference between the global financial crisis and the current crisis caused by the pandemic (29:52)
  • Analyzing potential scenarios and outcomes for companies (33:45)
  • Why you need to monitor the economies in countries which are at a more advanced stage of the pandemic (35:48)
  • The Vulcan investment philosophy (37:26)
  • How CT analyzes a company’s valuation (40:10)
  • The importance of value stability (41:47)
  • Why CT believes value investing is here to stay for the long term (43:23)
  • And much more!

Mentioned in this Episode:

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 3, Episode 3 - Michael Mauboussin  - Investing in times of the Coronavirus Crisis

Today’s conversation is with Michael Mauboussin, Head of Consilient Research at Counterpoint Global. Before joining Counterpoint Global, Michael was the Director of Research at BlueMountain Capital Management in New York and previously the Head of Global Financial Strategies at Credit Suisse and Chief Investment Strategist at Legg Mason Capital Management. Michael has also authored several books and has been an adjunct professor of finance at Columbia Business School since 1993, where he is on the faculty of the Heilbrunn Center for Graham and Dodd Investing.

As of this recording, the university campus is quiet and empty, with classes moving online for the spring semester. Of course, this is due to the coronavirus global pandemic which hit the world quite suddenly and has required extreme public health measures. The markets have responded as expected to the crisis and the economy is in a tailspin.

In light of all of this, I wanted to take a slightly different approach to today’s episode and have a discussion about not only how to think about markets, but also the psychological stress caused by the crisis. For that, I couldn’t think of anyone better than our first repeat guest, Michael Mauboussin.

On this episode, Michael and I talk about the debate on the economic impact of the coronavirus pandemic, the argument for the centralized implementation of public health solutions, using the expectations infrastructure to analyze companies, how stress affects investment decisions, how risk attitudes are shaped by loss and crisis, and so much more!

Key Topics:

  • The two main sides of the debate on the economic impact of coronavirus (5:11)
  • What pandemics and wars in the past demonstrate about the resilience of the economy (7:14)
  • How Michael believes the economic impact of coronavirus will compare to previous world wars and pandemics (8:48)
  • Why the response to the coronavirus crisis has been so different in Asia, Europe and the US (12:05)
  • The argument for the centralized implementation of public health solutions (14:57)
  • Framing the current crisis as an externality (16:21)
  • Our theories about the sharp correction in equity prices (18:15)
  • Will the current crisis measures result in long-term changes to our collective behavior? (20:03)
  • The consistency of the underlying reality of financial markets (21:38)
  • Assessing the effect of increasing concentration (24:11)
  • Why it’s so important to have a protocol in place for tackling the crisis (26:30)
  • Using the expectations infrastructure to analyze companies (30:37)
  • Measuring volatility as an indicator of risk in the short-term (35:01)
  • Why psychological stress can have a bigger impact than physical stress (38:07)
  • The conditions for psychological stress (38:44)
  • How stress affects investment decisions (39:24)
  • The interaction between psychological and agency issues during periods of massive uncertainty (40:28)
  • How to reduce the stresses of social isolation during the coronavirus crisis (42:51)
  • Teaching without in-person classes (45:04)
  • What is myopic loss aversion? (46:42)
  • How risk attitudes are shaped by loss and crisis (47:44)
  • And much more!

Mentioned in this Episode:

Thanks for Listening

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 3, Episode 2 - Francisco García Paramés  - Value Investing for the Long Term

Today’s conversation is with Francisco García Paramés, chairman and chief investment officer at Cobas Asset Management, which he founded in 2016. Before founding Cobas, Francisco was with Bestinver for over 25 years. During that time, he built a legendary record and posted an average annual return of 15%, outperforming the reference benchmark by more than 700 basis points.

Francisco is based in my home country of Spain and his reputation has extended far beyond its border. As a self-taught follower of Warren Buffett’s investment approach, he is a vocal advocate of the core ideas behind value investing. Francisco is also the author of a book that I highly recommend, called Investing for the Long Term, in which he explains the underpinnings of his investment approach and experience.

On this episode, Francisco and I talk about his self-taught route to becoming a value investor, his experiences over more than 25 years in asset management during huge events in the financial markets, how he approaches valuation and portfolio construction, what it was like to run a one-man shop, and so much more!

Key Topics:

  • Why Francisco recommends to always keep your options open (4:46)
  • How basketball helped Francisco in his business studies (5:37)
  • The influence of Peter Lynch on Francisco’s investing philosophy (7:45)
  • From portfolio analyst to manager in less than two years (9:28)
  • Finding value in the Spanish market during the early 90s economic crisis (11:21)
  • Francisco’s self-taught approach to growing as a value investor (12:30)
  • The importance of patience and having a long-term perspective (13:05)
  • How Francisco managed the Bestinver portfolio analysis in his first decade (14:15)
  • Francisco’s approach to valuation (15:27)
  • Shifting to a quality and growth perspective (16:56)
  • The lessons learned over 25 years of bubbles and crashes (19:30)
  • How Francisco builds up the resilience of a portfolio (22:00)
  • How to think about cash in a bottoms-up approach (24:43)
  • Francisco’s portfolio construction strategy (28:02)
  • Building conviction as a one-man shop (31:10)
  • Francisco’s journey to becoming an author (36:40)
  • Getting started with Cobas Asset Management (38:58)
  • Why Francisco values a team approach at Cobas (40:32)
  • The importance of client relationships in developing a strong base (42:10)
  • Analyzing the growth of Limited Holding Group [AS1] (43:15)
  • Analyzing the growth and quality of Melia (47:48)
  • Aligning the long-run outlook of the team, clients, and management (48:42)
  • Francisco’s thoughts on the market’s current underperformance relative to growth (50:39)
  • And much more!

Mentioned in this Episode:

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 3, Episode 1 - David Samra  - Leveraging Fundamentals to Remain Relevant

Today’s conversation is with David Samra, managing director of Artisan Partners and founding partner of the Artisan Partners International Value Team. He is the lead portfolio manager of the Artisan International Value Fund, which he has managed since its inception in September 2002. Mr. Samra also was co-portfolio manager for the Global Value Fund from its inception in December 2007 through September 2018. Before joining Artisan Partners, David was a portfolio manager and a senior analyst in international equities at the legendary Harris Associates.

David enrolled in Columbia Business School (CBS) in 1991, right before the value investing program was re-launched and he considers his classes in the fundamentals of investing and internship with value investor Mario Gabelli to be critical in the development of his investment philosophy. Since leaving business school, David has focused on international investing and under his leadership, his team was twice named Morningstar, Inc.’s International-Stock Fund Manager of the Year in 2008 and 2013.

On this episode, David and I talk about his early drive to pursue a career in money management, why he was drawn to work in international investments, what he learned from working with value investing legends, the contrast between the traditional and modern value investor, the most effective way to select securities, and so much more!

Key Topics:

  • When David uncovered his interest in becoming an asset manager (3:56)
  • How David’s inclination towards value investing showed up in school (5:00)
  • David’s early steps towards a career in money management (6:53)
  • Attending CBS before the value investing program was revitalized (8:43)
  • The CBS class that taught David about the difference between a good and a bad business (9:44)
  • How working with Mario Gabelli helped David to develop his investment philosophy (11:01)
  • Why David took a pay cut to work in international investing at Montgomery Asset Management (12:09)
  • Travelling around the world to assess non-US securities (14:46)
  • How working with David Herro complemented David’s approach to security analysis (16:37)
  • The contrast between the traditional and the modern value investor (18:11)
  • Leveraging the opportunities created for value investors during a financial crisis (24:17)
  • What the global financial crisis taught David about risk management (25:54)
  • Finding the balance between price and quality to put yourself in the best position from a risk/reward profile (26:39)
  • Why many value investors had to shift their thinking because of the tech bubble (27:31)
  • Using screens to for investment idea generation (29:44)
  • David’s most effective method for finding securities (30:49)
  • Why the artisan research team is made up of generalists organized by geography (32:36)
  • The benefits of making investment decisions on a company-specific level, rather than economic trends (34:50)
  • The business analysis and valuation process David uses for international investments (36:14)
  • How some European banks have become more appealing for value investors (41:03)
  • Analyzing the price and quality of the Spanish Bank, Bankia (44:43)
  • Analyzing the success of Compass Group (49:18)
  • David’s views on the future of value investing in the face of rising passive investing (51:29)
  • And much more!

Mentioned in this Episode:

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Season 2, Episode 6 - Bruce Greenwald  - Staying on the Right Side of the Trade

Today’s conversation is with Professor Bruce Greenwald, guru to Wall Street’s gurus. Bruce holds the Robert Heilbrunn Professor of Finance and Asset Management Emeritus at Columbia Business School and is the former Academic Director of the Heilbrunn Center for Graham & Dodd Investing. He has been the recipient of numerous awards, including the Columbia University Presidential Teaching Award and his classes are consistently oversubscribed, with more than 650 students taking his courses every year.

Columbia Business School’s unmatched tradition in value investing started with the teaching of Ben Graham and later David Dodd and Roger Murray. But for almost a decade after Roger Murray retired, that tradition lay dormant. That’s when Bruce joined Columbia in 1991, after leaving Harvard Business School and has since played a critical role in reinvigorating value investing.

On this episode, Bruce and I talk about how he revitalized value investing at Columbia Business School, why you should be a specialist, how to approach valuations, why investment managers can’t build a portfolio, how to remain relevant despite the growth of passive investing, and so much more!

This is our last episode of the season but we will be doing our first live podcast at the Columbia Student Investment Management Association (CSIMA) Conference on February 7, 2020, at Columbia University. There will be a wonderful collection of speakers, many of whom have been past guests on the podcast, as well as some very distinguished value investors who will be visiting from Europe. We hope to see you there and until then, thank you for listening and Happy Holidays!

Key Topics:

  • How Bruce received the Heilbrunn chair (3:58)
  • Bruce’s unintentional initiation into value investing (4:51)
  • The start of the value investing course at Columbia (6:12)
  • Becoming the “Guru to Wall Street’s gurus” (6:46)
  • How the value investing course developed into a full program (7:14)
  • Bruce’s career journey from Bell Labs to Harvard Business School (8:16)
  • The value investing oral tradition (10:30)
  • Applying a value orientation to your investment search strategy (12:11)
  • Why you need to be a specialist (13:24)
  • What you can learn from Warren Buffett about specialization (14:56)
  • Paul Hilal’s approach to investing by first spending the time to learn (16:28)
  • How the economics of the business fits into the valuation (18:21)
  • The implicit role of economics in Ben Graham’s methodology (20:11)
  • How to approach the valuation of a moat business (24:11)
  • The factors to consider when calculating your return (26:51)
  • Why you have to pay attention to management behavior (30:48)
  • How Intel’s acquisition of Altera showed a shift in management’s strategy (31:50)
  • The importance of active research for value investors (34:14)
  • The evolution of value investing away from a sole focus on asset values (36:11)
  • Why investment managers can’t build a portfolio (36:56)
  • Bruce’s approach to risk management (38:31)
  • How economic changes are creating new opportunities for value investors (41:07)
  • The role government will have to play in the changing economy (45:01)
  • How regulatory uncertainty affects businesses (49:10)
  • Why Bruce isn’t worried about the growth of passive investing (53:28)
  • And much more!

Mentioned in this Episode:

Season 2, Episode 5 - Matthew McLennan  - The Power of Selectivity and Patience

Today’s conversation is with Matthew McLennan, head of the Global Value team and a portfolio manager of the Global Value, International Value, US Value and Gold strategies at First Eagle Investment Management. Matt is interested in the field of education, and he is a trustee of the Trinity School in New York City. He serves as co-chair of the Board of Dean’s Advisors of the Harvard School of Public Health and as a board member of the University of Queensland in the United States of America. He is also a trustee of the Board of Directors for the Library of America. After sparking his interest in investing in boarding school, Matt went on to study at the University of Queensland where he was given a unique opportunity to take part in the management of a $10 billion pool of capital at the Queensland Investment Corporation. This was to be the first of many successful career moves as that experience positioned him perfectly to join the Goldman Sachs team in Sydney. After rising through the ranks at Goldman Sachs, Matt joined First Eagle in the heart of the global financial crisis and where he once again proved the importance of fundamentals, selectivity, and patience. On this episode, Matt and I talk about what sparked his interest in investing, why learning how to think is more valuable than specific finance theory, his investment approach, the role of temperament in investing, his career at Goldman Sachs, how joining First Eagle during the global financial crisis ended up being a blessing in disguise, why you shouldn’t try to predict market activity, and so much more!

Key Topics:

  • Why the First Eagle Investment Management Foundation Scholarship was created (3:09)
  • How the First Eagle fellowship will benefit the recipient and the firm (4:07)
  • Matt’s early life growing up in a small town in Australia (6:04)
  • Looking at his parent’s land as a metaphor for the power of selectivity and patience (7:08)
  • How a boarding school investment club sparked Matt’s interest in investing (7:40)
  • Matt’s opportunity to work in asset management for a large capital pool (9:23)
  • Why learning how to think was more valuable to Matt than specific finance theory (10:33)
  • How the state of the markets in the 80s provided an interesting environmental backdrop for Matt during his studies (11:34)
  • How working with the Queensland Investment Corporation helped to shape Matt’s investment philosophy later in life (12:51)
  • Matt’s investment approach and the role of temperament (14:18)
  • Leaving the backyard to join Goldman Sachs (16:12)
  • The role of mentors at Goldman Sachs in developing Matt as a value investor (17:14)
  • Why you need to consider the two important assets missing from the balance sheet (17:54)
  • How the market’s perspective on value investing changed during Matt’s career at Goldman Sachs (20:00)
  • Why the late 90s was a difficult time to be a value investor (21:33)
  • The reason that joining First Eagle was appealing for Matt (23:43)
  • How joining First Eagle during the global financial crisis ended up being a blessing in disguise (26:54)
  • Why instead of trying to predict market activity you should take advantage of markets after the fact (29:20)
  • Matt’s perspective on measuring growth (32:06)
  • How Matt identifies potential investment ideas (34:54)
  • Why Matt invests in businesses with scarce intangible assets (35:51)
  • The challenge you face when buying companies in competitive industries (36:46)
  • The role of specialized knowledge in investment analysis (38:53)
  • Why First Eagle reinforces a culture where continuous learning is valued (40:47)
  • How First Eagle decided on hedging with a real asset (43:02)
  • The usefulness of gold as a hedge in comparison to other commodities (45:12)
  • Matt’s views on the current unusual state of the markets (48:51)
  • The right portfolio response to the current state of the markets (53:47)
  • Why Matt attributes a lot of the success of passive investing to the poor approach taken by some active managers (58:04)

And much more!

Mentioned in this Episode:

Season 2, Episode 4 - Joel Greenblatt - Investing Off the Beaten Path

Today’s conversation is with Joel Greenblatt, Founder and Managing Partner of Gotham Asset Management. Since founding Gotham in 1985, Joel and his partner Robert Goldstein have developed the firm into a large asset management company, well beyond the traditional hedge fund model and offering mutual fund products for the retail investor. Throughout his career, Joel has been a very successful adjunct professor here at Columbia Business School and has also published several successful books. Growing up, Joel intuitively learned about business from his father, a shoe manufacturer. From these dinner table lessons, his biggest takeaway was the idea that stocks are not simply pieces of paper that bounce around and to remember you own a piece of a business. After completing his MBA at Wharton School of the University of Pennsylvania, Joel started his investment career and quickly progressed from analyst to partner, and soon started Gotham where he has successfully bridged theory and practice for over 30 years. On this episode, Joel and I talk about his introduction to Ben Graham and value investing, why he switched from law school to a career in the investment world, his early role in risk arbitrage, why he decided to start his firm, how he turned a tough negotiation with Mike Milken into a win for Gotham, why he advocates for a value-based approach to investing, and so much more!

Key Topics:

  • What Joel learned from his father about business (2:46)
  • How Joel developed his core perspective on investing (3:13)
  • Why Ben Graham’s stock-picking rules resonated with Joel (4:35)
  • How Joel ended up writing an article for the Journal of Portfolio Management while a student at Wharton (5:51)
  • How trading options at Bear Stearns helped Joel realize he wanted to pursue an investment-related career (7:23)
  • Joel’s experience as the only analyst at a startup hedge fund (7:58)
  • Why Joel’s early role in risk arbitrage was a good foundation for his Special Situations course at the Heilbrunn Center (9:28)
  • The lucky situation Joel found himself in when he went to Wall Street (10:51)
  • Why Joel decided to start his firm (12:26)
  • Joel’s tough negotiation with Mike Milken (13:17)
  • The influences that shaped Joel’s initial investment approach at Gotham (15:01)
  • How Joel succeeds without specializing (19:09)
  • The advantage of investing off the beating path (19:41)
  • Why Joel decided to become an author (23:29)
  • How writing and teaching have helped Joel become a better investor (24:23)
  • Why it returned the outside capital from Gotham (25:38)
  • Joel’s investment philosophy (28:02)
  • Joel’s career-long rebellion against the efficient market hypothesis and portfolio management theory (28:49)
  • The fascinating results from Joel’s benevolent brokerage firm (35:11)
  • Why the strategy from The Little Book That Still Beats the Market can be difficult readers to implement (37:48)
  • Why Joel advocates for a valuation-based approach to investing (42:14)
  • The prudent approach most people should take when investing in the market (48:22)
  • And much more!

Mentioned in this Episode:

Season 2, Episode 3 - Leon Cooperman '67 - Looking for More for Less

Today’s conversation is with Leon Cooperman, billionaire investor and Chairman and CEO of Omega Advisors. After getting his MBA from Columbia Business School, Leon joined Goldman Sachs as a Junior Analyst and ultimately built up Goldman Sachs' asset management division, GSAM. In 1991 Leon decided to follow his passion for money management and started his hedge fund, Omega Advisors, which became a family office in 2018. Leon is a member of The Giving Pledge and he takes great pleasure in giving back to those organizations and institutions that made a difference in his life. From humble beginnings, Leon benefitted greatly from the public education system while attending high school and college in the Bronx. Intuition has always played an important role in Leon’s life. After years of hard work to fulfill his goal of becoming a dentist, he followed that intuition and dropped out of dental school after just 8 days, forfeiting a full year of tuition and expenses. That misstep into dentistry put Leon on the path that would lead to Columbia Business School and a job at Goldman Sachs right after graduation, which he credits with changing the trajectory of his life. On this episode, Leon and I talk about how Leon went from dreams of dentistry to a successful career in the investment world, Leon’s approach to value investing, Leon’s career path at Goldman Sachs, why Leon founded Omega Advisors, how politics affects policy, Leon’s take on the current state of the financial markets, Leon’s approach to philanthropy, and so much more!

Key Topics:

  • The two factors to which Leon attributes his success (2:56)
  • Why Leon wrote a letter to President Obama (3:12)
  • How getting an MBA from Columbia Business School changed the trajectory of Leon’s life (4:22)
  • Why Leon dropped out of dental school (4:36)
  • The key role intuition played from early in Leon’s life (6:05)
  • How Leon ended up working at Goldman Sachs right after graduating (6:56)
  • Leon’s introduction to value investing at Columbia Business School (8:12)
  • Leon’s career at Goldman from Junior Analyst to Partner (9:36)
  • The benefits of the close working relationship between sales, trading, and research at Goldman (11:08)
  • The dual roles Leon had to play in the 70s (11:42)
  • Leon’s favorite aspect of doing investment research (12:37)
  • Why Leon keeps up to date with the micro- and macro-activities of the business world (13:44)
  • The origin of Goldman Sachs Asset Management (14:42)
  • The inception of Omega Advisors Hedge Fund and its evolution into a family office (16:50)
  • Why Leon decided to retire (18:05)
  • What Leon told Warren Buffett about The Giving Pledge (18:48)
  • Why Leon decided to leave Goldman Sachs (19:16)
  • How Leon’s brush with the U.S. Securities and Exchange Commission (SEC) positively impacted him (21:18)
  • Leon’s investment strategy when he started Omega Advisors (22:24)
  • The importance of surrounding yourself with knowledgeable people (23:06)
  • How regulatory changes have driven up the cost of business (24:01)
  • Why Leon attributes value orientation as the driver behind the success of Omega Advisors (25:35)
  • Leon’s current investment strategy (26:02)
  • Leon’s perspective on the current state of the financial markets (27:33)
  • Why we should be worried about the amount of debt currently being created in the economy (29:46)
  • What Leon considers to be a “normal” state for the markets (31:07)
  • How government policy has contributed to the current income disparity (33:14)
  • The problem with wealth tax (34:31)
  • Why Leon believes America’s commitment to capitalism is so important (37:55)
  • How the current state of politics is affecting the creation of sensible policy (39:42)
  • The four things you can do with money (42:37)
  • Leon’s philanthropic endeavors (43:54)
  • And much more!

Mentioned in this Episode:

Season 2, Episode 2 - Ross Glotzbach - The Power and Strenth of Experience

Today’s conversation is with Ross Glotzbach, the CEO and Head of Research at one of the great names in value investing, Southeastern Asset Management, the firm founded by Mason Hawkins over 40 years ago. Ross is also the co-portfolio manager on Longleaf Partners, Small-Cap and Global Funds, as well as the Longleaf Partners Global UCITS Fund. Before joining Southeastern in 2004, he was a Corporate Finance Analyst at Stephens, Inc. after graduating from Princeton University. From a young age, Ross was fascinated with investing in businesses where he could turn 50 cents into $1. By the time he was starting college, Ross was introduced to the concept of value investing and got the opportunity to manage real money of his own, which he attributes as a key step on his path to becoming a value investor. Not one to take the passive route, Ross set out to learn as much about value investing as he could and determine whether it was the right strategy for him. After multiple internships and valuable experience working at Stephens, Ross joined Southeastern with their culture of “true value investors”. On this episode, Ross and I talk about his introduction to value investing, why he values his time at Stephens so much, his experience as an analyst at Southeastern, what it means to be Head of Research, why he places so much importance on having conversations with management, the engaged approach to investing, and so much more!

Season 2, Episode 1 - Jenny Wallace '94 - Identifying Value at the Summit

Today’s conversation is with Jennifer Wallace ’94, a wonderful expositor to the main ideas of value investing, but also a very deep thinker when it comes to the interaction of value investing and the market at large. Jenny is the co-founder of Summit Street Capital Management, where she is the portfolio manager of the US equity value fund. She's also a Columbian through and through as she holds a BA from Columbia College and an MBA from Columbia Business School. Jenny is a member of the advisory board of the Heilbrunn Center for Graham & Dodd Investing and a great mentor to me. While working towards her MBA, Jenny joined the first cohort of students to take the value investing class offered by Bruce Greenwald. After being introduced to value investing, it became clear to Jenny that to be successful she needed to develop a skill set that would allow her to assess businesses, independent of conventional wisdom. To gain that perspective, she first went to work for McKinsey & Company. After leaving McKinsey, Jenny worked alongside investing legend Bob Bruce, before ultimately co-founding her firm. On this episode, Jenny and I discuss her studies at Columbia Business School as a student in the first cohort of the value investing class, her early career with value investing legends, how Summit Street was started, how Jenny developed her investment philosophy, her approach to data analysis, the impact of the growth of the passive investing industry on active managers, and so much more!

Season 1, Episode 7 - Connecting Theory and Practice through the 5x5x5 Student Investment Fund

Today’s conversation is with Tom Russo, the master of consumer brand investing, and two of our best students, Jeffrey Johnson '19 and Michael Allison '19. We’re talking about the 5x5x5 Student Investment Fund and having a deep discussion about some of the specific stocks in the portfolio. The concept for the 5x5x5 fund came out of Tom’s concern that conventional investment funds for students offered limited learning potential due to their short-term nature and was made possible by a generous gift given by him and his wife, Georgina.

The 5x5x5 fund is run by the students of the Value Investing course at Columbia Business School, with ideas being submitted by the students each year. Students then have the opportunity to connect value-oriented investment theories to real-world practice as they participate in the management of the fund. Importantly, they are also connected with alumni and are afforded valuable networking opportunities. At the end of five years, the inflation-adjusted original amount is invested back into the fund and any other gains will be used to support scholarships for traditionally under-represented members of the class.

On this episode, Tom, Jeff, Mike, and I discuss how the 5x5x5 Student Investment Fund got started, how this fund differs from student funds at other schools, what goes into the investment decisions, how participation in the fund benefits students, why some of this year’s investments were selected, and so much more!

Season 1, Episode 6 - Jean-Marie Eveillard - Taking a Top-Down Approach to Value Investing

Today’s conversation is with international value investor, Jean-Marie Eveillard. As portfolio manager of the Société Générale International Fund, later becoming the First Eagle Global Fund, where he returned an annualized 15% for over 25 years. In 2001, Jean-Marie and co-manager Charles de Vaulx were named Morningstar International Stock Fund Managers of the Year and later in 2003, Jean-Marie was chosen as one of the two inaugural awardees of the Morningstar Fund Manager Lifetime Achievement Award.

Shortly after starting as an analyst with Société Générale, Jean-Marie became exposed to Ben Graham and the principles of value investing. Despite his passion and insights, it was many years before he was given the position of portfolio manager and finally able to put those principles to work. During his tenure as portfolio manager, Jean-Marie has been at the helm during some of the most challenging times for value investors. His ability to adapt his investment approach to the changing conditions has been key in his ability to produce above average results.

On this episode, Jean-Marie and I talk about his changing roles over his years at Société Générale and then First Eagle, why he was so intrigued by Ben Grahams and Warren Buffet’s investment approaches, the lessons he learned about client management while his fund was underperforming compared to market, and so much more!

Season 1, Episode 5 - Chris Davis - Investing with Curiosity

Today’s conversation is with the Chairman of Davis Advisors, Christopher Davis. Christopher oversees approximately $30 billion of client assets worldwide. Christopher currently serves as CEO and Portfolio Manager and Davis Advisors continues to be recognized as a leading independent investment management firm and one which wholeheartedly embodies the basic principles of value investing.

Christopher received an early education from his father and grandfather who shared their passion and enthusiasm for investing and business with the family but when it came time to start university, he decided to go in a completely different direction. From veterinary school to seminary, Christopher took the long way around before settling into a career in investing. From his first job at the State Street Bank, Christopher quickly found his own passion and has thrived in the field for the past 30 years.

On this episode, Christopher and I talk about the impact his family had on him on a young age, the importance of finding the right investing style for you, why he placed so much importance on developing a strong accounting foundation, why Wall Street needs to embrace globalization, his approach to assessing competitive advantage, and so much more!

Season 1, Episode 4 - David Abrams - Applying a Fundamental and Value Oriented Approach to Investing

Today’s conversation is with investor David Abrams, who was described by the Wall Street Journal as a “one man wealth machine.” David is the CEO and Portfolio Manager of Abrams Capital, an investment firm that he founded in 1999. Abrams Capital is unlevered and long-term oriented and currently holds over $9 billion in assets under management. David is notoriously private and is not keen on interviews and appearances so I’m especially grateful to him for sharing with us today.

After graduating with a BA in History from the University of Pennsylvania, David made an unplanned entrance into a career in investing. It was then that he discovered his love for the field and he went on to work with another value investing legend, Seth Klarman of the Baupost Group, before starting his own firm. David is a member of the Board of Trustees of Berklee College of Music and an overseer of the College of Arts and Sciences at the University of Pennsylvania.

On this episode, David and I discuss how his experience working on merger and risk arbitrage transactions led to his decision to join the Baupost Group, what it was like to start Abrams Capital in the midst of economic uncertainty, why David prefers a generalist approach, the importance of the fundamentals in assessing investment opportunities, and so much more!

Season 1, Episode 3 - Michael Mauboussin - Overcoming Biases for Effective Decision Making

Today’s conversation is with one of the finest intellectual investors and academic at heart, Michael Mauboussin. Michael is the Director of Research at BlueMountain Capital Management in New York and was formerly the Head of Global Financial Strategies at Credit Suisse and Chief Investment Strategist at Legg Mason Capital Management.

While rising to the top in his corporate career, Michael authored three books, including my favorite, More Than You Know: Finding Financial Wisdom in Unconventional Places, which was named one of the best business books by Businessweek and which features prominently in today’s show. Michael has been an adjunct professor of finance at Columbia Business School since 1993 and is on the faculty of the Heilbrunn Center for Graham and Dodd Investing. He is also Chairman of the Board of Trustees of the Santa Fe Institute, a leading center for multi-disciplinary research in complex systems theory.

On this episode, Michael and I talk about the early epiphany he had that set him on the path to Chief U.S. Investment Strategist, the importance of teaching value investing alongside psychology, the main contributors to investment bias, the importance of cognitive diversity, the top three techniques you can use to mitigate against bias in your investment processes, and so much more! 

Key Topics:

  • The epiphany Michael had from reading Creating Shareholder Value early in his Wall Street career (3:32)
  • Why we should teach value investing in a way that includes both finance and psychology (5:38)
  • How Michael’s focus on strategy and valuation issues helped him move from food analyst to Chief U.S. Investment Strategist at Credit Suisse (7:02)
  • Why analyzing the investment process has been an underlying theme throughout Michael’s career (7:30)
  • The three aspects to consider when examining how biases get incorporated into market valuations (9:54)
  • The effect of market structure on the incorporation of biases (11:45)
  • The conditions which have to be in place for the wisdom of crowds to operate efficiently (12:13)
  • Why market prices don’t directly reflect information (14:05)
  • The impact of financial institutions on the workings of the economy at large (16:04)
  • Why cognitive diversity leads to better decision-making for complex issues (17:33)
  • Applying the Diversity Prediction Theorem (18:47)
  • What the Asch experiment teaches us about biased decision-making (22:07)
  • The surprising neurological findings behind the results of the Asch experiment (24:56)
  • Value investing means being a contrarian and a calculator (26:52)
  • The difference between experience and expertise (28:36)
  • How technology has led to “the expert squeeze” (31:17)
  • Our thoughts on the future of machine-learning versus human judgment for investment decision-making (34:15)
  • The important difference between outcome and process (36:25)
  • Why you should audit your processes as an investor, even when you’re doing well (38:10)
  • Using a base rate to incorporate an outside view into your investment decisions (40:52)
  • How a pre-mortem helps you to identify bias and weaknesses by triggering the interpreter in your brain (43:57)
  • Applying red teaming to investment process analysis and decision-making (46:28)
  • Translating the margin of safety into decision processes (47:30)
  • The types of scenarios which are well-suited to routinizing (51:24)
  • Michael’s thoughts on passive investing (53:12)
  • And much more!

Mentioned in this Episode:

Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

Season 1, Episode 2 - Tom Russo - The All Important Power of Consumer Brands

Today’s conversation is with the master of consumer brand investing, Tom Russo. Tom is the Managing Member of Gardner Russo & Gardner LLC, Partner at Semper Vic partnerships, and he oversees more than $9 billion through separately managed accounts and Semper Vic partnerships. Tom is also a board member of the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School.

Growing up in Janesville, Wisconsin, home of the Parker Pen Company, Tom saw first-hand the impressive prospects of family-controlled consumer brand with global appeal. Since then, he has become well-known as the go-to person for all things consumer brands. Whether you’re wondering about the development of a beer business in Africa or the strategy for developing a brand in a new market, Tom’s three decades of experience has given him extraordinary insight.

On this episode, Tom and I dive into how he developed his investment philosophy, what he learned about investing during his early years before starting his career, the huge impact Warren Buffet had on his career and specializations, the main investment principles Tom follows, what you need to consider about a company before investing, why under-spending is a key risk factor Tom looks out for, and so much more! 

Key Topics:

  • How Tom’s early experiences while growing up in Janesville, Wisconsin influenced his thinking and perspectives (2:47)
  • Why Tom believes in challenging ideas and continuous evaluation (4:21)
  • The importance of considering multiple angles and opinions to mitigate risk (6:27)
  • What Tom learned about himself as an investor in his first jobs after Dartmouth (7:52)
  • Tom’s introduction to Warren Buffett and the concept of value investing while studying at Stanford (10:41)
  • How Tom’s investment philosophy developed (12:21)
  • Why you need to consider a company’s management structure and incentives in determining whether to invest (14:17)
  • The two main investment principles Tom learned from Warren Buffett (15:58)
  • Why Tom decided to focus on investing in family-controlled, international, consumer brands (17:06)
  • The fascinating history behind evolving consumer habits (18:16)
  • The connection between consumer brands and population and prosperity (19:15)
  • How the long-term perspective of family-controlled companies can reduce agency costs (21:28)
  • What Tom considers in assessing the ability of a company to succeed in a new international market (26:08)
  • What we can learn from Home and Garden TV about the value of investing in full-force to facilitate long-term profits (31:36)
  • Why Tom has high confidence in the power of specialization (35:40)
  • How Tom approaches the issue of maintaining alignment with management (38:04)
  • Why you need to be aware of the blind spots you may develop based on specialized expertise (39:56)
  • How Tom analyzes a company’s valuation to determine the best time to invest and when to exit (42:42)
  • How much does regulatory risk factor into Tom’s investment decisions? (49:32)
  • Why Tom is concerned about the risks associated with Brexit (50:30)
  • Tom’s approach to investing in companies in emerging markets (56:01)
  • Tom’s thoughts on the future of value investing (59:06)
  • And much more!

Mentioned in this Episode:

Season 1, Episode 1 - Mario Gabelli '67 - Welcome to Value Investing with Legends

Today’s conversation is with the legendary Mario Gabelli, the Chairman and Chief Executive Officer of GAMCO Investors, Inc., the firm he founded in 1977. A 1965 summa cum laude graduate of Fordham University's College of Business Administration, he also holds an M.B.A. from Columbia Business School, and honorary doctorates from Fordham University and Roger Williams University.

Since starting his firm Mario has been called “a prophet in the wilderness” by Forbes and strongly believes that the small, neglected stocks are where the money is going to be made in the future. With a focus on strong research and flexibility, it’s this foundation that has allowed the fund to successfully generate returns for clients even when facing a headwind in the market.

From his management technique to his investment rationale, Mario shares his perspective and strategies for maintaining positive results in an ever-evolving marketplace. On this episode, we talk about how Mario started out as a researcher, the benefits of a niche research focus, why it’s so crucial to build accumulated knowledge in your industries of focus, how Mario identifies investment and growth opportunities, and so much more!

Key Topics:

  • Mario shares how he first became interested in Graham and Dodd’s investing principles (2:45)
  • The early career opportunities that steered Mario’s research focus (3:19)
  • How Mario ended up starting his own firm at the bottom of a major economic downturn (4:27)
  • The market response to Mario’s niche research focus at his firm (5:38)
  • How the private market value and catalyst concepts came about (8:00)
  • The important lesson Mario learned on a research trip to Toronto in 1977 (10:55)
  • Why Mario uses a global approach to master the dynamics of change in an industry (12:53)
  • Mario’s management techniques for working with super-specialized analysts (14:49)
  • When did the Gabelli Asset Fund and the Gabelli Growth fund get started? (18:30)
  • How Mario identifies and connects political and industry events with investment and growth opportunities (20:22)
  • The approach Mario uses for managing clients and the firm’s positioning under difficult market conditions (24:39)
  • Mario’s perspective on the effect of economic cycles in various industries (29:39)
  • The factors behind the decision to invest talent and funds into specific industries while staying away from others (33:10)
  • The changes that Mario expects to see in the business and economic models based on the current market activity and projections (36:07)
  • Mario’s thoughts on the evolution of public markets (40:15)
  • Why multiple sustainability is Mario’s biggest concern currently (42:59)
  • Mario’s advice to people interested in starting companies (45:35)
  • And much more!

Mentioned in this Episode: