Season 6, Episode 5 - Lauren Taylor Wolf - Adding Value With A Creative Approach to Environmental, Social, and Governance Change

Episode Description:

Activist investing is the new frontier for value investors, allowing them to be the agents of their own returns.

Today we’re continuing our examination of the activist style of investing by exploring the intersection of two important trends in the money management industry: activism and environmental, social, and governance investing.

Impactive Capital’s Lauren Taylor Wolfe joins us to share her perspective and Impactive’s unique approach to creatively incorporating environmental, social and governance (ESG) into activism.

Lauren is co-founder and Managing Partner of Impactive Capital, an activist investment management firm that currently has more than 1.5 billion in assets under management.  Prior to founding Impactive, she spent 10 years at Blue Harbour Group where she was a Managing Director and Investing Partner. Lauren earned her M.B.A. from The Wharton School at University of Pennsylvania and a B.S. magna cum laude from Cornell University.

In this episode, Lauren, Michael and I discuss her non-linear journey to investing, what she learned from working in different industries, how she became interested in activist investing, what Impactive is doing to improve diversity in the industry, and so much more!

Key Topics:

• Lauren’s first business endeavors (2:05)
• Lauren’s work experiences after graduation (3:13)
• Why Lauren was drawn to value investing early in her career (6:16)
• How TurboChef raised Lauren’s interest in activist investing (8:57)
• Why many executives struggle with capital allocation (11:49)
• Impactive’s focus on business quality and time horizon (14:13)
• The evolution of activist investing (16:25)
• Impactive’s approach to working with management (18:21)
• Idea screening and ESG considerations (20:33)
• How Impactive values businesses (21:24)
• Thinking about business resilience (25:13)
• Portfolio construction and sizing (26:40)
• Lauren’s thoughts on luck and skill (30:22)
• Creating a diverse workforce in investment management and our support industries (32:08)
• Impactive’s approach to idea sourcing and prioritization (34:30)
• HD Supply’s business background (37:39)
• HD Supply’s move from Home Depot to private equity and back (40:49)
• KBR’s transformation into a high quality business (46:16)
• The opportunities Impactive identified with KBR (49:30)
• Lauren’s perspective on meme stocks and SPACs  (52:41)
• Opportunities and risks on the horizon (54:47)
• Books that Lauren is reading (57:01)
• And much more!

Mentioned in this Episode:

• Impactive Capital
• William Thorndike’s Book | The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
• Robert G. Kirby’s Article | The Coffee Can Portfolio
• Annie Duke’s Book | How to Decide: Simple Tools for Making Better Choices
• Scott Page’s Book | The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy
• Scott Page’s Book | The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies
• Bill Gates’ Book | How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need
• Kazuo Ishiguro’s Book | Klara and the Sun
• Ted Koppel’s Book | Lights Out: A Cyberattack, A Nation Unprepared, Surviving the Aftermath

Thanks for Listening!

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Season 6, Episode 4 - Mason Morfit - Bringing An Outside Perspective Through Transformational Activism

Episode Description:

In a world of plentiful capital and compressed yields, activism and being the agent of one's returns is a way forward. Transformational activism in particular is centered around a deep commitment and trusting relationship between the investor and the company. This multi-dimensional approach forgoes short-term solutions like financial engineering and instead focuses on working with great leaders to put together the right people, resources, and strategies for long-term results.Few firms exemplify the value creation associated with shareholder engagement and activism better than ValueAct and today I’m joined by Mason Morfit, Chief Executive Officer and Chief Investment Officer of ValueAct Capital.

Mason Morfit is a Partner, the Chief Executive Officer and Chief Investment Officer of ValueAct Capital, a governance-oriented investment fund with over $14 billion in assets under management. ValueAct has a very highly concentrated portfolio and one of its partners has served on the Boards of Directors of 44 public companies over the life of this great activist fund. Mason himself has served as a director of Microsoft Corporation, Valeant, Bard, Immucor, and many other companies.

In this episode, Mason and I discuss why he became interested in the psychological aspect of economics, how the activist investor landscape has shifted, the difference between transactional and transformational activism, the value of a learn-teach relationship, and so much more!

Key Topics:

• The advantages of Mason’s experience growing up as an outsider (2:30)
• What drew Mason to studying economics and psychology (3:48)
• Working in the health care group at Credit Suisse First Boston in the late 90s (5:37)
• Mason’s introduction to activist investing (7:24)
• Activist investing in the time of the imperial CEO (9:42)
• How corporate scandals and Sarbanes-Oxley changed the landscape for ValueAct (10:44)
• 20 years of network and relationship building (12:54)
• The immense value of documentation and knowledge sharing (13:50)
• Defending against self-attribution bias (15:24)
• The inherent problems with a public company board (17:48)
• ValueAct’s role in mitigating against bureaucratic biases (18:24)
• Integrating the work of board committees (19:37)
• Psychological paradigms that emerge based on corporate history (22:18)
• Shifting paradigms that no longer work (24:14)
• Differentiating between transactional and transformational activism (28:15)
• Finding opportunities in interesting times (30:36)
• ValueAct’s mission (31:38)
• The key ingredients of ValueAct’s successes (34:37)
• Creating a learn-teach relationship (35:46)
• How the learn-teach relationship helps with organizational diagnosis (37:44)
• Creating an environment that empowers truth (39:38)
• The changing Japanese corporate governance landscape (41:25)
• Olympus as a case study of ValueAct’s expansion into Japan (43:31)
• ValueAct’s unique approach to investing in the Japanese market (47:45)
• Why activism today is more relevant than ever before (49:53)
• Shifting opportunities for an activist investor (51:51)
• Creating 21st century global champions (54:04)
• The disproportionate reward of disruptors at the expense of incumbents (55:27)
• Mason’s book recommendations (57:14)
• And much more!

Mentioned in this Episode:

• ValueAct Capital
• John Irving’s Book | The World According to Garp
• Kazuo Ishiguro’s Book | The Remains of the Day
• Sir Lawrence Freedman’s Book | Strategy: A History

Thanks for Listening!

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Season 6, Episode 3 - Thomas Russo, Ryan Albert '21, Rainbow Chik '21, Andres Helland '21 - 5x5x5 Russo Student Investment Fund: Class of 2021

Episode Description:

Not satisfied with the lack of value most student-run investment clubs offered to students, Tom Russo designed a better way. Through the 5x5x5 Russo Student Investment Fund, he set out to prove the teaching value of a long-term fund rather than the conventional short-term activity that the existing systems favored.

Each year, students submit their ideas for new investments with five ideas ultimately being selected and held in their entirety for five years. At the end of those five years, the inflation-adjusted original amount is invested back into the fund and any other gains are used to support scholarships for traditionally under-represented members of the class.

Today I’m joined by Tom Russo himself to discuss this year’s picks for the 5x5x5 fund with three of the students who pitched them. I continue to be impressed with the sophistication of the insights made by the students and the professional discussions that arise for each pitch. In this episode, Tom, Rainbow, Andreas, Ryan, and I discuss why they were initially attracted to the companies they pitched, the competitive advantages and under-appreciated opportunities that exist, key factors that appealed to each of them for their selected companies, and so much more!

Key Topics:

• The problem with most student-run investment clubs (1:18)
• How the 5x5x5 Russo Student Investment Fund started (2:22)
• Goals of the program (4:04)
• Performance of the Fund’s international holdings (7:01)
• How personal experience drew Rainbow’s interest in Atlassian (9:45)
• Atlassian’s self-reinforcing competitive advantage (10:45)
• What makes Atlassian an extraordinary investment (12:10)
• Managing the risk of industry consolidation (15:59)
• Rainbow’s initial research focus on Atlassian partners (18:05)
• Understanding the magnitude of investment and return on investment (19:32)
• The types of companies we like to invest in (22:54)
• What initially attracted Andreas to Vestas Wind Systems (24:36)
• Key facts about Vestas (25:39)
• The main elements that make Vestas an attractive investment (27:41)
• How Vestas’ margins are impacted by the effects of Wright’s Law (30:54)
• Why Andreas isn’t concerned about the intermittent nature of wind power (33:06)
• Mitigating the core risks associated with Vestas (35:03)
• Understanding the real return on capital committed (36:47)
• Why Ryan became interested in Gruma (39:49)
• Key facts about Gruma (40:34)
• The investment opportunity Ryan sees in Gruma (43:44)
• Ryan’s confidence in the founding family and management (47:01)
• The value of the Gruma brand and steady leadership (48:34)
• Underappreciated insights into Gruma (50:36)
• How Gruma handles distribution (53:40)
• Ryan’s assessment of Gruma’s Europe business (55:01)
• And much more!

Mentioned in this Episode:

• 5x5x5 Student Investment Fund
  • Rainbow Chik’s Write-Up of Atlassian
  • Andreas Helland’s Write-Up of Vestas Wind Systems
  • Ryan Albert’s Write-Up of Gruma, S.A.B. de C.V.

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 [email protected].

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Season 6, Episode 2 - Chris Davis - A Multifaceted Perspective on Financial Services

A year and a half into the pandemic, a lot has changed in the investment landscape.

Individual investors have been empowered, economies reacted in unpredictable ways, and we still have no clear idea of what is to come. At the same time, when we take a retrospective look, we can find parallels between the trends, behaviors, and reactions of today and events in the past. Today we’re joined by one of the great conversationalists in the community, Chris Davis, to share his perspective on investing in a time of COVID and his outlook for the future.

Chris Davis is the Chairman of Davis Advisors, where he oversees approximately $30 billion of client assets for both individuals and institutions worldwide. Chris joined Davis Advisors in 1989 as a financial analyst and has been a portfolio manager of the firm's flagship fund, the Davis New York Venture Fund since 1995. That fund has a very long history, having been founded more than a half-century ago. An investment of $10,000 at the fund’s inception would be worth $3.6 million as of June 30, 2021, versus 1.9 million for the S&P 500. Chris studied Moral Philosophy and Practical Theology at the University of St. Andrews in Scotland and is on the board of directors at the Coca Cola Company and Graham Holdings.

In this episode, Chris, Tano, and I discuss how the pandemic compares to past crises, Davis Advisors’ approach to triage as we entered the pandemic, why the banking industry offers more certainty to investors than other financials, the impact of low interest rates, the advantages US companies hold have over European companies, and so much more!

Key Topics:

• The two types of crises Chris has seen over his career (1:53)
• COVID in the context of past crises (3:48)
• Davis Advisors’ approach to analyzing the long-term impact of COVID (7:48)
• How Davis assessed key companies and industries as we entered the pandemic (9:38)
• Structural changes in the banking industry in the past decade (13:39)
• Why investments in banking come with a higher degree of certainty (15:18)
• The inherent uncertainty associated with insurers (17:21)
• Long-term dangers of the aggressive consumer bailout (19:36)
• How Chris saw history repeating itself in the past year (21:30)
• The biggest change in market structure (23:13)
• What active managers need to understand about dispersion (26:05)
• Factors that feed dispersion between Europe and the US (30:10)
• How Chris views his European investments (33:31)
• Two components of valuing a business (37:04)
• Amazon as a modern-day Standard Oil (39:14)
• Why successor CEOs should focus on preservation and protection (43:04)
• The impact of low interest rates (46:24)
• How banks have performed in the face of a significant headwind (49:03)
• The high adaptability shown by banks (50:36)
• Key differences between US and international banks (53:11)
• The numerous disruptors that the banking system has absorbed (56:16)
• How inertia and regulation protect banks from disruption (58:41)
• Chris’ thoughts on the growth of the payments industry (1:00:27)
• Viewing Bitcoin as a digital version of gold (1:04:29)
• Why Chris’ opinion on Bitcoin has shifted (1:07:35)
• Chris’ big takeaway from 2020/2021 (1:10:08)
• The impact of China becoming the largest consumer economy (1:11:15)
• Why state and federal government finances keep Chris up at night (1:13:16)
• Chris’ top book recommendations (1:15:10)
• And much more!

Mentioned in this Episode:

• Davis Advisors
• Davis New York Venture Fund
• Walter Isaacson’s Book | The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race
• Morgan Housel’s Book | The Psychology of Money
• John Tierney & Roy F. Baumeister’s Book | The Power of Bad: How the Negativity Effect Rules Us and How We Can Rule It
• Benjamin Labatut’s Book | When We Cease to Understand the World

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 [email protected].

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Season 6, Episode 1 - Chase Sheridan '06 and Will Pan - The Art of Fund Management

Since our first podcast in the spring of 2019, we’ve built a wonderful audience around the world, and now have a terrific collection of interviews with remarkable investors.I have loved the opportunity to host these interviews myself but from the very beginning, I felt that you would benefit from having another voice to challenge the guests and bring a different point of view to the podcast. That time has finally come.

As we start this new season, I couldn’t think of a better person to join me as co-host than Michael Mauboussin, Head of Consilient Research at Counterpoint Global. Michael is a colleague, a friend, and someone I admire enormously for his passion and ability to match academic research with the practical considerations of investing.

On our first episode together we’re delighted to welcome Chase Sheridan '06 and Will Pan of one of the great names in value investing, Ruane, Cunniff & Goldfarb. Chase Sheridan joined Ruane, Cunniff & Goldfarb in June 2006 upon his graduation from Columbia Business School. Prior to attending Columbia, Chase was a senior vice president at Citadel Investment Group, a hedge fund based in Chicago and a partner at Q.E.D. Capital, an arbitrage firm based in Chicago. After interning with the firm in 2009, Will Pan was set on a career path with Ruane, Cunniff & Goldfarb. He joined the firm in 2010 after graduating from Harvard College.

On this episode, Chase, Will, Michael, and I discuss Ruane, Cunniff & Goldfarb’s history and connection to Warren Buffett, why the Hyperion found was started, the team dynamic between Chase and Will as co-managers of the fund, their approach to idea sourcing and portfolio construction, and so much more!

Key Topics:

• The history of Ruane, Cunniff & Goldfarb (RCG) (3:40)
• Chase’s unusual path to RCG (6:37)
• How Chase became interested in value investing (8:36)
• Will’s journey to RCG (10:18)
• The core of the RCG investment approach (13:52)
• Hyperion’s maniacal focus on the intrinsic earnings power of a business (15:59)
• The relationship between RCG and Hyperion (17:26)
• The main difference between Hyperion and Sequoia (18:15)
• Why the RCG team considers themselves analysts first (19:45)
• The founding of Hyperion (21:30)
• Chase and Will’s co-manager dynamic (23:18)
• Benefits of team management of a fund (25:30)
• Analyzing your trade ledger and thesis memos (26:52)
• RCG’s writing and research culture (28:25)
• Hyperion’s ideal investment characteristics (30:31)
• Idea sourcing at Hyperion (32:36)
• How Hyperion tackles due diligence (35:04)
• Focusing on intrinsic earnings power (38:56)
• The art of portfolio construction (41:46)
• Running scenarios on potential investments (44:05)
• The problem with portfolio managers emulating their idols (45:11)
• Understanding roll-ups (47:15)
• Why the vertical software industry is well-suited to consolidation (49:27)
• Where Constellation Software focuses on making their return (51:59)
• Constellation Software’s framework for defensive acquisitions (54:15)
• What you need to know about Constellation Software (56:49)
• Mark Leonard’s unique approach to acquisitions (58:53)
• An overview of Eurofins (1:01:17)
• Why consolidation makes sense for the testing industry (1:03:13)
• Gilles Martin’s playbook for acquisitions (1:04:15)
• Why Hyperion became interested in Eurofins (1:07:42)
• The advantages of Eurofins having a founder CEO (1:08:56)
• The importance of leverage to Eurofins’ growth (1:10:24)
• Will’s recommended reading (1:12:43)
• What noise means for investors (1:14:14)
• Chase’s recommended reading (1:15:15)
• And much more!

Mentioned in this Episode:

• Ruane, Cunniff & Goldfarb
• Constellation Software
• Eurofins Scientific
• Daniel Kahneman, Olivier Sibony & Cass R. Sunstein’s Book | Noise: A Flaw in Human Judgment
• Steve Brusatte’s Book | The Rise and Fall of the Dinosaurs: A New History of a Lost World
• Walter Isaacson’s Book | The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race
• Jeff Hawkins’ Book | A Thousand Brains: A New Theory of Intelligence
• Edgar Wachenheim’s Book | Common Stocks and Common Sense: The Strategies, Analyses, Decisions, and Emotions of a Particularly Successful Value Investor
• Jordan Ellenberg’s Book | How Not to Be Wrong: The Power of Mathematical Thinking
• Chip Heath & Dan Heath’s Book | Switch: How to Change Things When Change Is Hard
• Jeff Bezos’ Book | Invent and Wander: The Collected Writings of Jeff Bezos
• Mark Leonard’s President Letters
• David Sklansky’s Book | Getting the Best of It
• Bryce Carlson’s Book | Blackjack for Blood: The Card-Counters' Bible and Complete Winning Guide
• Ralph Vince’s Book | The Mathematics of Money Management: Risk Analysis Techniques for Traders

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 [email protected].

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Season 5, Episode 7 - Anne-Sophie d'Andlau - Driving Change By Engaging With Impact

Listeners of this podcast will know that I believe one of the most dynamic areas of investing is that of activism. In the true spirit of value investing, there’s a crop of activist investors who are now embracing their role in engaging management in various ways, whether to improve operational performance, address governance issues, or simply to encourage better capital allocation and distribution policies.

Today we’re exploring this topic further with Anne-Sophie d’Andlau. Anne-Sophie co-founded CIAM with her partner, Catherine Berjal, in 2010. Since then they have led several groundbreaking activist campaigns in Europe, capturing the attention of the financial press everywhere.

Anne-Sophie is a Partner and Deputy CEO at CIAM and she is responsible for the fund’s strategy and development. CIAM, which stands for Charity Investment Asset Management, donates 25% of its annual performance fees to charities dedicated to improving children's health and education across the world. Before founding CIAM, Anne-Sophie worked at Systeia Capital Management from 2001 to 2008, first as Head of Research for the Event Driven and M&A strategies, then taking on a portfolio management role from 2003 to 2008.

On this episode, Anne-Sophie and I talk about how she started her career in finance, how CIAM evolved into active investment, why Europe is well-suited for a new wave of activist investors, CIAM’s approach to idea sourcing, analysis, and risk management, what Anne-Sophie hopes to see for the future of activism in Europe, and so much more!

Key Topics:

• The story of the first activist investor, Ben Graham (1:45)
• Introducing Anne-Sophie (4:24)
• How Anne-Sophie’s interest in finance led to a front-row seat to late 90s IPOs (5:43)
• Participating in the launch of the first hedge fund in France (7:05)
• Why CIAM evolved into activism (9:50)
• Factors driving the new wave of activism in Europe (11:28)
• Moving away from the negative connotation of activism (13:21)
• The lack of recognition of activism as an asset class in Europe (15:23)
• Anne-Sophie’s hope for change in the mindset of European institutional investors (17:09)
• CIAM’s approach to consulting with management and shareholders (19:08)
• Understanding why there’s so much room for activism in Europe (21:01)
• Similarities and differences between European markets (22:00)
• Why CIAM chose the countries they operate within (23:32)
• The benefits of a UK office (25:13)
• CIAM’s decision against actively investing in Italy (26:39)
• CIAM’s method of idea sourcing (27:41)
• Examining Euro Disney as a case study of what good activism can do (28:38)
• Initial problems identified by CIAM at Euro Disney (31:51)
• CIAM’s campaigns as minority shareholders at Euro Disney (33:31)
• CIAM’s approach to information collection (35:46)
• The non-activist side of CIAM (36:56)
• How CIAM balances internal skillsets with outside advice and experts (38:28)
• Why AGM season is a key moment for activist investors (40:46)
• Investor relationships with proxy advisors in Europe (41:43)
• CIAM’s risk management strategy (42:38)
• Looking to the future of activism in Europe (45:01)
• How activism creates positive change (47:11)
• And much more!

Mentioned in this Episode:

• CIAM

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 [email protected].

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Season 5, Episode 6 - Florian Schuhbauer and Klaus Roehrig - Applying Activist Tactics to European Markets

One of our goals with this podcast is to get to know new markets, new situations, and new investors who bring dynamism to all markets. A great example of this is the new generation of activist investors in Europe.

Students of mine have heard me say for some time that Europe has been ripe for activism. I believe that with structural changes in European capital markets, combined with the state of global markets, a new wave of activism is happening and will be quite transformative.

My guests today, Florian Schuhbauer and Klaus Roehrig of Active Ownership Corporation (AOC), are one of the most exciting names in the current European activist scene. They have been making headlines with groundbreaking campaigns and change they are bringing to European Capital Markets. AOC has built a remarkable record over the last five years, beating the Europe ex UK Small Cap benchmark by a factor of almost three since inception.

AOC is an independent, partner-managed investment company acquiring significant minority stakes in publicly listed, undervalued small- and mid-size companies in German-speaking countries and Scandinavia. AOC follows an active ownership approach and fosters value creation through operational, strategic, and structural improvements.

Florian Schuhbauer is a founding partner of AOC and has more than 20 years of relevant experience. Prior to establishing AOC, Florian was a Partner at Triton Partners where he built up the Public Equity practice. Klaus Roehrig is also a founding partner of AOC and has more than 20 years of relevant investing experience. Before founding AOC, he was at Elliott Associates, responsible for the funds’ investments in the German-speaking countries.

On this episode, Florian, Klaus, and I discuss their early careers and the unusual paths they took before founding AOC, the mentorship they received along the way, the key pillars of their investment strategy, AOC’s holistic, team approach to their companies, how they manage liquidity differently from other firms, and so much more!

Key Topics:

• Florian’s early career in banking (3:46)
• Learning experiences from Florian’s SaaS startup (4:24)
• How Florian found himself in a 9 to 5 position he didn’t want (5:45)
• Why Florian made the move to private equity (7:17)
• Applying a private equity value creation model to public equity (8:32)
• Klaus’ early interest in business and business builders (10:14)
• The accidental advertising agency (11:03)
• How Klaus became interested in investment banking (12:44)
• Why Klaus developed a focus on risk early in his career (14:25)
• Klaus’ move to the hedge fund industry (16:08)
• Mentorship from great investors at Elliott Management Corporation (18:26)
• Florian and Klaus’ decision to start AOC (20:42)
• The two pillars of AOC’s investment strategy (22:10)
• Using an activist approach as a tactic rather than their strategy (23:44)
• The huge agency issue caused by a lack of active owners (25:33)
• How an underdeveloped shareholder culture created opportunities for AOC (27:18)
• Working with management teams for investment ideas (30:23)
• Idea sourcing from AOC’s library of investment cases (32:01)
• The types of companies AOC considers for investing (33:12)
• Building a broad knowledge base as a generalist (34:54)
• Why AOC values a team approach with their companies (37:34)
• Union and employee representation on the board (39:34)
• AOC’s holistic approach to their investments (42:27)
• How AOC became interested in STADA (43:37)
• Why board seats were crucial for AOC’s strategy for STADA (48:13)
• The proxy fight that erupted from a broken contract with STADA (50:04)
• Internal issues between STRADA’s board members (51:24)
• Bringing the supervisory board and shareholders into alignment (53:31)
• Starting from scratch with STADA’s board (55:41)
• Breaking new ground as dissident shareholders in Germany (57:17)
• Taking STADA private within 18 months (1:00:39)
• AOC’s unique approach to liquidity (1:03:45)
• Managing liquidity on the asset side (1:07:50)
• Time arbitrage opportunities with locked-up capital (1:08:30)
• Florian’s perspective on the next five years for AOC (1:11:23)
• Klaus’ view on the next five years for AOC (1:14:58)
• Opportunities for activism in Europe (1:16:29)
• And much more!

Mentioned in this Episode:

• Active Ownership Corporation
• Value Investing with Legends | Jan Hummel – The Rare Advantage of Real-World Experience

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 [email protected].

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Season 5, Episode 5 - Elizabeth Lilly  - Embodying the Principles of Value Investing

The value investing in legends class is one of the highlights of the Heilbrunn year. It’s filled with special moments, including the annual visit from our guest today, Elizabeth Lilly.

Beth embodies the principles and practices of value investing like very few people do. She makes investing look easy and her lecture always captures the pure essence of value investing.

Elizabeth Lilly is Chief Investment Officer and Executive Vice President for The Pohlad Companies, LLC where she oversees the public and private investments for the Pohlad family. Beth began her career with Goldman Sachs in 1985 and shortly after moved to Greenwich, Connecticut to work as an analyst in Fund American Companies in 1988. In 1997, she co-founded Woodland Partners in Minneapolis which focused on investing in small capitalization equities.

In 2002, Woodland Partners was acquired by GAMCO Investors where she went on to serve as a Senior Vice President and Portfolio Manager of the $1.4 billion Teton Westwood Mighty Mites Fund and as a member of the value portfolio management team. In 2017, Beth founded Crocus Hill Partners to focus on investments in small and micro capitalization equities but a year later she left to join the investment arm of the Pohlad family in an opportunity that was impossible to pass on. Beth is a graduate of Hobart/William Smith College and a dear friend of the Heilbrunn Center.

On this episode, Elizabeth and I discuss how her passion for investing was ignited from in childhood, the many value investing legends she has had the opportunity to learn from during her career, how she founded her firm before ultimately landing her dream job at Pohland Companies, her approaches to idea sourcing and risk management, and so much more!

Key Topics:

• How Beth’s mother and grandparents shaped her passion for investing (3:29)
• Why Beth attributes her research job at Goldman to pure luck (5:21)
• Leaving Goldman Sachs (7:58)
• The legendary Bob Rose (9:40)
• The first turning point in Beth’s career (11:16)
• Beth’s phenomenal experience at Fund American (12:54)
• Talking investing with Warren Buffett (14:22)
• The fundamentals of investing (16:12)
• Why Beth has a notebook on her at all times (17:38)
• The key elements of a good value investing firm (19:03)
• Beth’s focus on small-cap stocks (20:29)
• Beth’s introduction to Mario Gabelli (21:06)
• How a value trap is created (22:44)
• Why the management team is the best protection from a value trap (23:21)
• Getting comfortable with the artistic side of investing (25:33)
• Preparing to ask insightful questions (27:23)
• Talking to management as a shareholder (29:37)
• The benefit of constructive activism (31:51)
• Crocs as a case study of a compounder (33:19)
• Beth’s approach to valuation (35:06)
• Sourcing ideas with curiosity (36:28)
• Building up a valuable database (38:04)
• The seamless transition after being acquired by GAMCO (39:10)
• How Beth’s career at GAMCO increased her interest in the microcap space (40:35)
• Beth’s experience managing the Teton Westwood Mighty Mites Fund (42:01)
• Founding Crocus Hill partners in 2017 (44:47)
• Beth’s connection to the Pohlad family (45:56)
• Taking the dream job at Pohlad (47:29)
• The similarities between investing in public and private markets (49:25)
• Why Beth is eager to pass on the training she received (52:22)
• How the pandemic has shifted Beth’s thinking on businesses (53:54)
• Applying value investing principles to non-traditional value companies (56:27)
• And much more!

Mentioned in this Episode:

• Pohlad Investment Management, LLC
• Benjamin Graham’s Book | The Intelligent Investor
• Howard Marks’ Memo | Something of Value

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 [email protected].

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Season 5, Episode 4 - Anna Nikolayevsky '98  - The Value of Independent Thought

Any sound investment strategy must include both a tactical and a structural component. The tactical side requires close attention to the firm’s financials and prospects, while the structural side puts that analysis in the specific context of the industry as well as the economy at large. Our guest, Anna Nikolayevsky '98, is here today to share her approach and how her investment strategy has evolved.

Anna Nikolayevsky is the founder and Chief Investment Officer of Axel Capital Management, a fundamentally driven long/short firm investing in equities across a variety of sectors and geographies. Before founding Axel Capital in 2002, Anna was an analyst at Zweig-DiMenna Associates and Goldman Sachs Asset Management. Anna holds a BS from NYU, an MBA from Columbia Business School, and has also received multiple accolades for her investment work, including being the recipient of the Investors Choice Awards for Emerging Fund of 2015. She is a wonderful friend of the Centre and I'm incredibly thankful for all she does here for us at the Business School.

On this episode, Anna and I discuss how her humble childhood ultimately impacted her career choice, starting in the world of trading as a freshman, her rich learning opportunities early in her career, what it was like to start her firm in the early 2000s, why she decided to depart from the traditional hedge fund model, her thoughts on the future of value investing, and so much more!

Key Topics:

• How Anna’s childhood influenced her career (3:08)
• Anna’s transformative experience at Stuyvesant High School (5:17)
• Anna’s start in the world of trading (6:43)
• Why Anna decided to apply to Columbia Business School (8:14)
• Insights from working for Mario Gabelli (9:09)
• Establishing a foundation of independent thought (11:07)
• Learning opportunities as an analyst at Goldman Sachs (12:32)
• Why Anna made the move to a hedge fund (15:16)
• The starting point for Axel Capital Management (16:29)
• Axel Capital’s post-bubble success (18:38)
• Rethinking the traditional hedge fund model (19:48)
• The issues Anna identified in the housing market leading up to the global economic crisis (21:33)
• Finding an alternative to the housing market (23:33)
• How to think about your search strategy (25:19)
• Timing and risk management of shorts (26:47)
• Anna’s approach to risk management (27:56)
• Thinking about fiscal policy and portfolio construction (29:12)
• Axel Capital’s portfolio positioning during the ups and downs of the market since 2018 (30:57)
• The wider effect of highly available capital (33:01)
• How the pandemic has impacted Axel Capital’s portfolio structure (34:30)
• Planning your approach to structural shocks (36:45)
• Why Anna is comfortable with a relatively concentrated portfolio (38:46)
• Axel Capital’s approach to industry analysis (40:09)
• Decentralization away from Wall Street (41:31)
• The democratization of trading (43:03)
• My thoughts on the long-term impact of the increase in retail investors (44:03)
• And much more!

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 [email protected].

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Season 5, Episode 3 - David Marcus  - Developing a 3D Perspective of Investing

Over the last few years, the opportunities for global value investing have improved significantly. Yields are incredibly low across the board, putting pressure on improving operational performance to generate returns. In such an environment, Europe is fertile ground for the value investor. With room for operational improvement in many sectors and a robust institutional environment, it’s an ideal market to deploy your activist dollar.

When I decided to bring this topic to the show, I couldn’t think of anyone better than David Marcus to have a thorough conversation. David Marcus is Co-Founder, Chief Executive Officer, and Chief Investment Officer of Evermore Global Advisors, LLC, which he co-founded in 2009, and is also portfolio manager of the Evermore Global Value Fund.

Beginning his career in 1988 at Mutual Series Fund, David was mentored by renowned value investor Michael Price and rose to manage the Mutual European Fund and co-manage the Mutual Shares and Mutual Discovery Funds, representing over $14 billion in assets. In 2000, he founded Marcstone Capital Management, LP, a long-short Europe-focused equity manager, largely funded by Swedish financier Jan Stenbeck. After Mr. Stenbeck passed away in 2002, David closed Marcstone, co-founded a family office for the Stenbeck family, and advised on the restructuring of several public and private companies the family controlled. David graduated from Northeastern University in 1988 with a B.S. in Business Administration and a concentration in Finance.

On this episode, David and I discuss his structured approach to learning that he’s been committed to since starting his career, his comprehensive approach to investment analysis, why he believes there are huge opportunities in the European markets, how many people are taking the wrong approach when assessing investments in Europe, and so much more!

Key Topics:

• How David always knew investing would be in his future (3:51)
• David’s internship experience during the 1987 stock market crash (5:18)
• Getting a shot at a trading desk within a month of working with Michael F. Price (7:37)
• How David’s learned what makes a good analyst (9:24)
• Pivoting into European investing (11:11)
• Learning from the Swedish financial crisis of the early 90s (13:14)
• Looking beyond the CEO to the main shareholder (15:41)
• Leveraging your existing knowledge in new areas (16:45)
• When David became the head of Europe across portfolios at Franklin Mutual (19:46)
• David’s decision to start Marcstone Capital Management (23:36)
• Transitioning from stock picker to operator (26:32)
• Taking a private equity approach to public companies (29:43)
• The birth of Evermore Global Advisors (30:20)
• The advantage of being a generalist and a specialist (33:27)
• Why you must build your network (34:42)
• Deepening your operational understanding by engaging management (36:11)
• Mischaracterization of the European market (39:25)
• Game-changing opportunities in the European Union (EU) (41:19)
• What key areas David looks at in investments (42:53)
• The fundamental lack of knowledge about European institutions (45:37)
• Long-term thinking and European evolution (49:36)
• Understanding the local rules (51:58)
• Why you need to figure out peoples’ motivations (52:27)
• The opportunity behind deconglomeration in Europe (55:20)
• Good managers as an important competitive advantage (57:17)
• Taking advantage of room for operational improvement (59:10)
• Assessing the right time for the right people (1:01:04)
• The confluence of value and growth in Europe (1:02:22)
• Misconceptions about value and growth (1:05:33)
• Finding growth opportunities at value prices (1:06:39)
• Screening with numbers instead of words (1:07:55)
• The benefits of quarterly offsites (1:09:24)
• Getting clear on the reason behind investor activism (1:11:41)
• David’s approach to risk management (1:14:14)
• Why David’s view on leverage has changed (1:16:29)
• Checking and testing your thesis continuously (1:17:55)
• And much more!

Mentioned in this Episode:

• Evermore Global Advisors
• Value Investing with Legends Podcast | Leveraging Fundamentals to Remain Relevant with David Samra
• David Marcus’ Whitepaper | Europe: Lonely and Lumpy, Yet Extremely Compelling
• European Union Website

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 [email protected].

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Season 5, Episode 2 - Samantha Greenberg  - Recognizing True Asymmetry

Many of the guests that I've had on this program are people I've known for years. We approached those conversations as an opportunity to explain together to the audience their methods, philosophies, and approach. Today’s conversation with Samantha Greenberg is a bit different. Samantha is someone I’ve looked forward to meeting for some time now as she would come up constantly in conversations with other investors and I’m happy to get to know her alongside you.

Samantha Greenberg is Portfolio Manager of Technology, Media & Telecom investing at Ashler Capital, a Citadel company. Before joining Ashler Capital, Samantha was Chief Investment Officer of Margate Capital Management which she founded in 2016, a partner and TMT/consumer sector head at Paulson & Co. Inc., and a vice president in the Special Situations Group of Goldman Sachs. Samantha received her MBA from Stanford University's Graduate School of Business and graduated from the Wharton School at the University of Pennsylvania with a BS in Economics.

On this episode, Samantha and I discuss how she developed an interest in the investment industry, why asset management is a particularly good field for women, how her experiences at Goldman and Paulson shaped her investment philosophy, her catalyst-driven approach, why resources are critical to scaling, the benefits of extensive data modeling, and so much more!

Key Topics:

• Samantha’s early discovery and passion for the markets (3:26)
• How Samantha’s interest in investing continued throughout her school years (4:28)
• The experience that drove Samantha’s passion for entrepreneurship (5:52)
• How Samantha’s experience as an internet and media analyst shaped her passion for tech (7:58)
• Formative experiences from successive market crises in Samantha’s early career (9:24)
• Learning true process diligence (11:52)
• Critical lessons about catalysts from John Paulson (14:19)
• Samantha’s experiences at Goldman Sachs and Paulson & Co. in the late 2000s (15:59)
• Why asset management is a great industry for women, despite the current demographics (19:26)
• Comcast as a powerful example of asymmetry from Samantha’s time at Paulson (22:55)
• The importance of steady-state valuations (26:28)
• The decision to start Margate Capital (27:58)
• Margate Capital’s investment philosophy (29:47)
• Samantha’s perspective on idea generation (32:07)
• How access to resources acts as a major barrier to entry for hedge funds (33:27)
• Understanding the rationale behind mispricing (35:58)
• Why a catalytic event is crucial for Samantha (37:24)
• Making decisions about portfolio sizing (38:19)
• Hedging market exposure (40:25)
• Shock testing your portfolio (43:20)
• A case study on value-unlocking catalysts with the Madison Square Garden Company (45:12)
• The leisure industry is one to watch for the future (50:46)
• Why Samantha left Margate Capital for Ashler Capital (52:24)
• How regulatory risk impacts the future of investments in the technology industry (55:47)
• The current tech trends Samantha is keeping an eye on (58:48)
• And much more!

Mentioned in this Episode:

• Ashler Capital
• Value Investing with Legends | Season 4, Episode 2 - Richard Lawrence - Investing in Superior Businesses
• Samantha Greenberg’s Robinhood Presentation on Madison Square Garden[AS1] 

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 [email protected].

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Season 5, Episode 1 - Mohnish Pabrai  - The Value of Continuous Learning

There are several great investors out there who are effectively offering free lessons through their positions, letters, and interviews. What’s surprising is that while many people listen to them, hardly anyone puts those lessons into practice.

Today’s guest, Mohnish Pabrai, is not one to miss such opportunities and he attributes much of his success to his hunger to learn, improve, and adjust. Mohnish is an author and the Founder and CEO of Pabrai Investment Fund, which he started in 1999 at the peak of the tech bubble. In 1983 he moved to the United States from India, to study computer engineering at South Carolina's Clemson University. After working in research and development, Mohnish launched his own successful IT consulting firm, TransTech, in 1991.

One of the most original investors out there, Mohnish arrived relatively late in his professional career to the world of investing but he has made such an impact ever since. Through Pabrai Investments, Mohnish has built one of those records that is the stuff of legends.

On this episode, Mohnish and I discuss how his early years alongside his entrepreneurial father have shaped him as an investor, why he decided to make the switch to a career in investing, how he was introduced to the world of value investing through the works of Peter Lynch, his growth as an investor since starting Pabrai Investments as a hobby investor, how you can use cloning to your advantage, and so much more!

Key Topics:

• The meaning behind the title of Mohnish’s book “The Dhandho Investor” (3:02)
• What Mohnish learned from his father’s entrepreneurial ventures (4:20)
• Mohnish’s invaluable hands-on business experience as a teenager (8:05)
• How an engineering background offers an advantage as an investor (10:40)
• Mohnish’s decision to remain in the US after university (11:51)
• The importance of looking at the big picture (13:03)
• Moving from computer engineering to international marketing (14:36)
• How Mohnish’s father changed the path of his career (15:41)
• Why Mohnish decided to start his own company (18:17)
• The early days of TransTech (20:14)
• An introduction to Peter Lynch and Warren Buffet (22:22)
• Testing out the Buffet approach to investing (23:48)
• Transitioning into asset management (27:35)
• The 1999 start of Pabrai Funds as a hobby (30:04)
• Starting out as a traditional value investor (32:46)
• Our aversion to cloning (34:17)
• The significant competitive advantage you can gain by cloning (36:24)
• Understanding the patterns of different investors (39:10)
• Mohnish’s approach to idea selection (40:51)
• Reaching clarity before making investment decisions (44:10)
• Examining Fiat Chrysler as a case study for Mohnish’s investment process (47:31)
• How Mohnish utilizes guardrails (50:59)
• A value investor’s approach to risk management (52:46)
• Finding 50 cent dollar bills (54:29)
• Focusing on compounders (56:55)
• What we can learn from NICE Holdings (59:37)
• What you need to know about “spawning” (1:01:43)
• Why investors need to think like entrepreneurs (1:05:06)
• Why this is an interesting time for value investing (1:07:23)
• How Mohnish thinks about the future of value investing (1:09:41)
• And much more!

Mentioned in this Episode:

• Mohnish Pabrai’s Books:
  • Mosaic: Perspectives on Investing
  • The Dhandho Investor: The Low-Risk Value Method to High Returns
• Peter Lynch’s Book | One Up On Wall Street: How To Use What You Already Know To Make Money In The Market
• Young Presidents' Organization (YPO)
• Tom Peters’ Book | In Search of Excellence: Lessons from America's Best-Run Companies

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 [email protected].

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

Season 4, Episode 6 - Jan Hummel  - The Rare Advantage of Real-World Experience

Modern value investing emphasizes investing in resilient franchises and letting the compounding do the work for you. Today’s guest, Jan Hummel, is a fantastic expositor of this subject and a friend of the Center who has been part of many of our events over the years.

In 2007, Jan launched the Paradigm Capital Value Fund with Bruce Greenwald, the founder of the Heilbrunn Center and Columbia Business School alumnus, Mario Gabelli '67. Paradigm’s investment philosophy is built around a focus on mispriced securities in the small- and mid-cap space within Europe, deep fundamental research, a concentrated portfolio, and hedging of the portfolio through non-equity investments and derivatives.

I've often mentioned that I think the opportunities in Europe for value investors are enormous and with Paradigm’s focus on making investments within the European Union, Jan is the perfect person to explore this topic with us.

On this episode, Jan and I discuss the advantages of real-world experience, combined with deep fundamental research and tenacity. We talk about how Jan’s early years in Sweden have shaped his whole life, what it was like to make the move from financial economics to business school, making the transition from 15 years of turnaround recovery to running a fund, the key traits of a great analyst and an entrepreneur, and so much more!

Key Topics:

• How Jan’s childhood in Sweden has colored his life (2:37)
• Jan’s unconventional experience buying shares at 16 (4:06)
• Studying financial economics at the Stockholm School of Economics and Stanford (6:26)
• The first steps of Jan’s finance career as a Junior Analyst (7:33)
• How Jan went from studying under Bruce Greenwald at Harvard to working together (9:16)
• How business school broadened Jan’s experience (9:56)
• Jan’s unorthodox path in asset management (12:07)
• Why Jan became interested in turnaround restructuring (13:08)
• How Jan’s 15 years of business experience has helped him as an investor (14:29)
• The Swedish banking crisis of the early 90s (16:24)
• Competitive dynamics of the 80s and 90s (18:03)
• The powerful combination of deep knowledge and a favorable market environment (19:19)
• Events that led to the launch of Paradigm Capital (20:44)
• The experience of founding a fund right before the 2008 economic crisis (23:09)
• Creating an information edge through research (24:37)
• Advantages of a having concentrated portfolio (26:22)
• Paradigm’s layered approach to sizing positions in their portfolio (29:05)
• Why Paradigm is country-agnostic when it comes to portfolio construction (30:57)
• How Paradigm hedges currencies as part of their risk management (31:50)
• Navigating the tricky waters of figuring out when to exit a position (35:48)
• What I like about Paradigm’s flexible approach to engaging with management (38:55)
• Why data is always foundation for identifying potential investments (39:59)
• What Jan is looking for in companies’ return on capital employed (41:05)
• Why Jan believes we’ll see an increase in passive investing in Europe in the future (45:32)
• Opportunities for value investors in Europe (47:04)
• Building strategy around the improvement of operational practices (48:51)
• What makes a great analyst (51:32)
• The tenacity of an entrepreneur (53:01)
• And much more!

Mentioned in this Episode:

• Value Investing with Legends Podcast | Season 4 Episode 4: The Multi-Faceted Future of Value Investing with Henry Ellenbogen and Anouk Dey

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 [email protected].

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

Season 4, Episode 5 - Howard Marks  - Successful Investing Through Buying Things Well

The most successful investors combine a profound analytical understanding of financial markets and the economy at large with the ability to act on those ideas. My guest today has these two attributes in spades.

Today’s conversation is with Howard Marks, the Co-Founder and Co-Chairman of Oaktree Capital Management, which is one of the largest credit investors in the world and certainly the largest investor in distressed securities. Howard started his career at Citicorp as an equity research analyst and then Director of Research, Vice President, and Senior Portfolio Manager overseeing convertible and high yield debt. After leaving Citicorp, he moved to The TCW Group, where once again, he was responsible for investments in distressed debt, high yield bonds, and convertible securities. In 1995 he and another group of partners from TCW founded Oaktree, where he remains today.

Howard is known for his penetrating mind and his memos are a must-read for any serious student of the market and I can’t think of anyone better than him to discuss the many complexities of markets and the economy of today.

On this episode, Howard and I discuss how he ended up in the high yields space, why running research at Citicorp was a low point in his career, the concept of “efficientization”, why Graham and Dodd called bond investing a negative art, why complexity and early adoption are your friends, the dominant challenge for investors today, Howard’s prolific writing, and so much more!

Key Topics:

• Howard’s early life from working adding machines in an accounting office to studying finance at university (3:30)
• How Howard ended up working at Citicorp for his first job out of school (5:39)
• Why running research at Citicorp was an extremely unsatisfactory role for Howard (7:25)
• Howard’s involuntary transition from analyst into the high yield space (9:01)
• The big difference between the market being efficient and being right (11:37)
• The concept of “efficientization” (13:14)
• Two main causes of mistakes in the market? (14:04)
• Howard’s holy grail in investing (15:12)
• Why Howard doesn’t use macro forecasting in his decision making (17:24)
• The dawn of the high yield bond era (18:55)
• Different approaches to the analysis of equities versus high yield bonds (20:07)
• Why Graham and Dodd called bond investing a negative art (21:03)
• Howard’s early days at The TCW Group (23:18)
• Complexity and early adoption as an investor’s friends (24:53)
• Why you must work at a firm that is in alignment with your investment philosophy (28:05)
• Howard’s love for writing (31:49)
• Using memos to shape the company culture (33:30)
• Why you should analyze your winners (34:47)
• The “I know” school versus the “I don’t know” school (36:01)
• The dominant challenge for investors today (38:46)
• What Howard thinks is behind consistently low yields (42:13)
• What surprises me about the politics of populism and financial markets (46:43)
• The rise of populism as a response to the shifting beliefs of the working class (48:16)
• And much more!

Mentioned in this Episode:

• Oaktree Capital Management
• Memos from Howard Marks
• Howard Marks’ Book | The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
• Benjamin Graham & David Dodd’s Book | Security Analysis
• Howard Marks’ Memos:
  • Us and Them
  • Coming into Focus
  • Mysterious
  • Economic Reality
  • Political Reality
  • Political Reality Meets Economic Reality

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 [email protected].

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

Season 4, Episode 4 - Henry Ellenbogen and Anouk Dey  - The Multi-Faceted Future of Value Investing

Today’s conversation is with Henry Ellenbogen and Anouk Dey from Durable Capital Partners. Henry founded Durable in 2019 and serves as Managing Partner and Chief Investment Officer. Before that, he was a Vice President of T. Rowe Price, T. Rowe Price Group Chief Investment Officer for U.S. Equity Growth, the lead Portfolio Manager for the U.S. Small-Cap Growth Equity Strategy, and the Portfolio Manager for the New Horizons Fund. Anouk is a Partner of Durable who joined the firm at its inception in 2019. Before joining Durable, she was also a Vice President of T. Rowe Price Group, where she was an investment analyst in the U.S. Equity Division, focusing on small-cap growth stocks. Anouk also co-teaches the Compounders Independent Study at Columbia Business School.

My students have heard me say many times that the future of investing must be one that combines exposure to private and public markets and that is flexible in its valuation approach and ideas, and that embraces disruption. That type of investing requires partners that are willing to commit capital for the long haul while being able to withstand the volatility of the market. That’s where Durable Capital Partners stands out.

On this episode, Henry, Anouk, and I discuss how Henry developed his investment philosophy, how a liberal arts background gives you an advantage in the investment industry, Henry and Anouk’s lessons from their time at T. Rowe Price, Durable’s commitment to long-term relationships with the companies they invest in, their unique approach to knowledge acquisition, and so much more!

Key Topics:

• How Henry started his career in investing after exploring different fields (3:41)
• The beginnings of Henry’s investment philosophy (6:04)
• Major lessons from Henry’s study of the history of technology (8:53)
• The benefits of a liberal arts background (9:41)
• Why crisis is the true test of an investor (11:00)
• The stroke of luck that took Anouk from ski racing to studying international relations (12:38)
• How Anouk got the opportunity to spend her first year as an investor studying compounders (14:44)
• Henry’s early role as an analyst at T. Rowe Price (18:18)
• The move from traditional media analyst to managing the T. Rowe Price New Horizons Fund (19:59)
• What you can learn from studying media companies in the early 2000s (21:00)
• Why Henry started looking at private companies as investment opportunities (23:37)
• Creating a systematic approach to investing in private companies (25:38)
• The foundation for building a network of companies with unique access (26:51)
• Advantages for public security analysts over venture capitalists in the private market (29:06)
• What Durable wants to be known for (30:07)
• How Durable’s perspective on relationships and long-term commitment are in alignment with entrepreneurs (31:18)
• Durable’s approach to knowledge acquisition (34:01)
• Looking at Shopify as a company that has gone from Act 1 and 2 to a potential Act 3 (37:05)
• Durable’s approach to analyzing and supporting company leaders (41:24)
• Managing the risk of human capital (45:25)
• The importance of honoring your commitments and managing capital successfully during a crisis (47:46)
• Eliminating the false dichotomies in the investment industry (51:59)
• How you can reduce your learning trajectory around compounders (55:19)
• The advantage of working in collaborative teams at Durable (57:26)
• Idea sourcing as world-class fundamental investors (1:00:01)
• Understanding the good to great thesis (1:01:22)
• The value of deeply human investing (1:04:15)
• Building on the human skillset (1:06:13)
• How passive investing is affecting market volatility (1:08:30)
• And much more!

Mentioned in this Episode:

• Durable Capital Partners

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 [email protected].

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

Season 4, Episode 3 - Rishi Renjen  - Evolving Your Investment Process

Today’s conversation is with Rishi Renjen, the Founder and Chief Investment Officer of ROAM Global Management. Before founding ROAM Global, he was a Managing Director and Sector Head at Maverick Capital, a Partner at TPG-Axon Capital, and a Senior Analyst at Glenview Capital. Rishi earned a Bachelor of Science in Economics, with a concentration in Finance, from The Wharton School at the University of Pennsylvania and he is an Adjunct Assistant Professor in the Value Investing Program at Columbia Business School.

Following his interest in finance from a young age, Rishi built up a wealth of experience over the years across in the financial services industry before launching his fund, ROAM Global in 2018. It is a pleasure to welcome Rishi to the show today and, like everyone involved with the Center, he combines his deep understanding of markets, the practice of investing, and fundamental analysis with the ability to convey these ideas clearly to the students.

On this episode, Rishi and I discuss where his deep interest in finance came from, what he learned from his years in investment banking, how his experience in the private equity world offers him an advantage, the core principles Rishi wanted to incorporate into his firm, a dynamic approach to value investing, and so much more!

Key Topics:

• Rishi’s early affinity towards business (2:59)
• The advantage of a deep understanding of economics (4:10)
• Why it was important to Rishi to do internships and work in the investment banking world (4:40)
• What Rishi learned from his early years in investment banking (5:53)
• How Rishi’s foundation in banking and private equity helps him in difficult economic periods (6:31)
• The similarities between working in private equity and public markets (8:52)
• Why Rishi believes investing is a balance between conviction and price (10:43)
• The evolution of public and private markets in recent years (12:57)
• Why starting his career during a financial crisis was a great opportunity for Rishi (14:56)
• Rishi’s focus during his career in private equity (17:04)
• Why the business services sector is so dynamic and transformative (17:56)
• A dynamic approach to value investing (18:29)
• How Rishi developed his global perspective on investing (20:04)
• Lessons learned from the rapid growth of TPG Axon (22:52)
• The core principles Rishi wanted to incorporate into his firm (25:29)
• Defining the ROAM investment framework (27:28)
• How ROAM has navigated the economic shifts due to COVID (30:01)
• How top of the market activity is creating a biased view of the market (32:44)
• Risk management in times of distress (33:37)
• Why it’s easy to lose all your money quickly in the current economic climate (37:35)
• Why Rishi is a dedicated short seller (40:55)
• The importance of building a company culture of collective success (44:22)
• The value of a postmortem analysis for successes as well as failures (47:01)
• Rishi’s perspective on the future of financial markets (48:57)
• Why I believe there’s going to be a lot of opportunity for nimble investors (50:48)
• Agility as a competitive advantage (52:27)
• And much more!

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 [email protected].

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

Season 4, Episode 2 - Richard Lawrence  - Investing in Superior Businesses

With the COVID-19 crisis dominating our spring semester, the focus of the podcast shifted slightly, and we had several conversations with distinguished investors talking about the impact of the crisis on financial markets.

For this season, in addition to the essential lessons about investing and good asset management practices, we are going to explore broader investment experiences and different approaches. Today, I'm particularly delighted to share this conversation with the great value investor, Richard Lawrence who has made a career as a true pioneer, particularly in Asia, where he built a legendary track record.

Richard is the Chairman and Executive Director of the Overlook Investment Group, a firm that invests in publicly listed equities across Asia, and that he founded in 1991. The Overlook Partnership, which Richard founded in 1992, currently has over $6 billion in assets under management, and since inception has achieved an astonishing capital-weighted annual compounded return of almost 14%.

On this episode, Richard and I discuss the advantages of learning asset management in a family office environment, why he decided to move to Hong Kong, the evolving Asian investment landscape, the Overlook investment philosophy, the four components of a great stock pick, what to consider when building a team, why passive investing brings opportunities for active managers, and so much more!

Key Topics:

• Richard’s early exposure to investing as a career (3:38)
• The advantage of learning asset management in a family office environment (5:05)
• How the connection between economic and social growth influenced Richard’s studies at Brown University (7:03)
• Richard’s early career journey from telex translation to analyst (8:45)
• How Richard developed the beginnings of his “superior business” investment philosophy (9:53)
• Why Richard decided to move to Hong Kong (11:22)
• The Asian investment landscape in the late 80s (12:43)
• Creating the foundation for Overlook Investments (17:05)
• The four components of a great stock pick (18:34)
• How to assess a company’s pricing power (21:45)
• Richard’s defense against the lack of corporate governance regulations when he started in the Asian markets (25:06)
• Using the “tower” to track potential investments (27:51)
• The Overlook approach to portfolio construction (29:52)
• The five evils ( 32:19)
• Why you should keep an eye on current account imbalances (33:26)
• Why Richard decided to cap the growth of assets under management at Overlook (37:25)
• Richard’s perspective on cutting fees (38:56)
• The critical aspects of building a team (40:51)
• How diversity plays a critical at Overlook (42:32)
• Why Richard refuses to do post-mortems (44:04)
• Figuring out the institutional framework in China (45:59)
• The impact of deteriorating US-China relations on the investment landscape (51:27)
• How passive investing increases opportunities for active managers (55:00)
• And much more!

Mentioned in this Episode:

• Overlook Investments

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 [email protected].

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Season 4, Episode 1 - Thomas Russo, James Shen '20 and Freda Zhuo '20  - Learning from FiveYears of 5x5x5 Russo Student Investment Fund

Welcome back to a new season of the show! Our first conversation is going to be a little different as we’ll be talking about this year’s picks for the 5x5x5 Russo Student Investment Fund. Joining me today is Tom Russo, who designed and funded this first-ever student investment fund at Columbia Business School in 2014, and students James Shen '20 and Freda Zhuo '20, whose portfolio picks have performed particularly well.

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. Five students are selected with five ideas that will be held in their entirety for five years. 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. As we enter year six of the fund, we’re taking a deeper look at the performance of the fund.

On this episode, Tom, James, Freda and I discuss how the 5x5x5 fund is more valuable than others, why James and Freda selected the particular companies for investment, what they have learned since investing in those companies, overall observations of the past 5 years of the fund, and so much more!

Key Topics:

• Why the 5x5x5 fund is more valuable than other student-run funds (1:35)
• The higher purpose of the fund (2:42)
• How Nuance Communications attracted James’ attention (3:41)
• What James learned from his initial research into Nuance (4:43)
• The changes James has seen in the months since the initial investment was made (5:57)
• Why investors should be on the lookout for companies making the transition to cloud-based software (6:42)
• Getting comfortable with a long investment horizon (8:16)
• Nuance’s competitive advantages over new players entering the market (9:24)
• Why Freda became interested in investing in Aon PLC (11:09)
• What Freda has learned about Aon since investing (12:12)
• How Freda maintained confidence in Aon despite the hit caused by COVID-19 (13:05)
• Significant developments in the insurance industry due to COVID-19 (14:32)
• Aon’s risk management advantage (17:58)
• Why Aon’s customer-centric model gives them an extra edge in client retention (20:28)
• How Aon mitigates disintermediation risk (23:00)
• Using new technology as an advantage for Nuance communications (25:49)
• How Aon covers risks internally (28:15)
• The redistributive nature of the shock caused by the pandemic (31:57)
• Observations from the past five years of the 5x5x5 fund (33:09)
• What to consider when constructing a resilient portfolio (36:22)
• Tom’s review of the fund and participants (40:47)
• And much more!

Mentioned in this Episode:

• 5x5x5 Student Investment Fund
  • James Shen’s Write-Up of Nuance Communications
  • Freda Zhuo's Write-Up of Aon Plc

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 [email protected].

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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:

• Kim Shannon’s Book | The Value Proposition: Sionna's Common Sense Path to Investment Success
• Sionna Investment Managers
• Variant Perspectives
• Sionna Article | Waiting For

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 [email protected].

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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:

• Polen Capital
• Value Investing with Legends Season 3, Episode 4 | C.T. Fitzpatrick  - Value Investing in Times of Deep Distress

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 [email protected].

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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:

• Vulcan Value Partners

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 [email protected].

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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:

• Michael Mauboussin’s Website
• Michael Mauboussin’s Books
• Michael Mauboussin and Alfred Rappaport’s Book | Expectations Investing: Reading Stock Prices for Better Returns
• Tyler Cowen’s Bloomberg Article | Bill Gates Is Really Worried About the Coronavirus. Here’s Why.
• Mancur Olson’s Book | The Logic of Collective Action: Public Goods and the Theory of Groups
• Thomas Philippon’s Book | The Great Reversal: How America Gave Up on Free Markets

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 [email protected].

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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:

• Cobas Asset Management
• Francisco García Paramés’ Book | Investing for the Long Term
• Bestinver S.A.
• Peter Lynch’s Book | One Up On Wall Street: How To Use What You Already Know To Make Money In The Market
• Joel Greenblatt’s Book | The Little Book That Still Beats the Market
• Cobas Letters from the Asset Manager
• Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing

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 valueinves[email protected].

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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:

• Artisan Partners
• G. Bennett Stewart’s Book | The Quest for Value: A Guide for Senior Managers
• Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing
• Value Investing with Legends Podcast:
  • Season 2 Episode 6 | Bruce Greenwald - Staying on the Right Side of the Trade
  • Season 1, Episode 2 | Tom Russo - The All Important Power of Consumer Brands

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 [email protected].

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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:

• New York Times Article | PRIVATE SECTOR; A Guru to Wall Street's Gurus
• Bruce C. N. Greenwald’s Books
  • Value Investing: From Graham to Buffett and Beyond
  • Competition Demystified: A Radically Simplified Approach to Business Strategy
• The Columbia Student Investment Management Association (CSIMA) Conference

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:

• First Eagle Investment Management
• First Eagle Investment Management Foundation Scholarship
• Tanya Kostrinsky, the inaugural recipient of the First Eagle Investment Management Foundation scholarship
• Bruce C. N. Greenwald’s Book | Value Investing: From Graham to Buffett and Beyond
• The Columbia Student Investment Management Association (CSIMA) Conference
• Goldman Sachs
• Jean-Marie Eveillard, Senior Advisor to the First Eagle Investment Management Global Value team
• Value Investing with Legends | Taking a Top-Down Approach to Value Investing with Jean-Marie Eveillard
• Value Investing with Legends | Looking For More For Less with Leon Cooperman
• Bill White, former Chairman of the Economic and Development Review Committee at the OECD

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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:

• Gotham Asset Management
• Joel Greenblatt’s Books:
  • The Little Book That Still Beats the Market
  • The Big Secret for the Small Investor - A New Route to Long-Term Investment Success
  • You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
• Joel Greenblatt’s Journal of Portfolio Management Article | How the small investor can beat the market
• Malcolm Gladwell’s Book | Outliers: The Story of Success
• Mike Milken, Financier
• Benjamin Graham and David L. Dodd’s Book | Security Analysis
• Benjamin Graham’s Book | The Intelligent Investor
• Warren Buffet’s Shareholder Letters
• John Train’s Books
• David Dreman’s Books
• Joel Greenblatt’s Morningstar Paper | Adding Your Two Cents May Cost a Lot Over the Long Term
• Cliff Asness, Managing and Founding Principal of AQR Capital Managements

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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:

• The Giving Pledge
• Open Letter To The President Of The United States Of America from Leon Cooperman
• The Horatio Alger Association of Distinguished Americans
• Goldman Sachs
• Benjamin Graham and David Dodd’s Book | Security Analysis
• Cooperman College Scholars 
• The Cooperman Family Fund for a Jewish Future
• Lehman College

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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!

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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!

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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!

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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!

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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!

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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!

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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:

• Michael Mauboussin’s Website
• Michael Mauboussin’s Books
• BlueMountain Capital Management
• Alfred Rappaport’s Book | Creating Shareholder Value: A Guide for Managers and Investors
• Journal Articles:
  • Franklin Allen | Do Financial Institutions Matter?
  • Solomon E. Asch | Opinions and Social Pressure
  • Sanford J. Grossman and Joseph E. Stiglitz | On the Impossibility of Informationally Efficient Markets
• Scott Page, Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science, and Economics, The University of Michigan
• Daniel Kahneman, Professor of Psychology and Public Affairs Emeritus at the Woodrow Wilson School, the Eugene Higgins Professor of Psychology Emeritus at Princeton University
• Michael Gazzaniga, Director of the SAGE Center for the Study of Mind at the University of California, Santa Barbara

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

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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:

• Jack McDonald, The Stanford Investors Professor of Finance, Emeritus
• Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
• Warren Buffett, CEO of Berkshire Hathaway

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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:

• GAMCO Investors, Inc
• Barron’s Roundtables