Value Investing with Legends

Latest Episodes:

Munib Islam - Creating Long-Term Value Dec 03, 2021

Show notes

Time arbitrage is one of the biggest behavioral advantages an investor can have.

Joining us today to talk about what it means to be an engaged, long-term shareholder is Munib Islam. Munib is someone who has experienced investing from many different angles, from a traditional long-short hedge fund to sitting on corporate boards and seeing the process of approving corporate performance from the inside.

Munib Islam is the Founder and Managing Partner of LTS One Management, an investment partnership created earlier this year with funding from Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto Sicupira. Before starting LTS One, Munib was a longtime partner and briefly Co-Chief Investment Officer of Third Point, a New York-based hedge fund with over $15 billion of assets under management. Before joining Third Point, Munib worked as an associate at Oak Hill Capital and Lazard. He received a BA in Economics magna cum laude from Dartmouth College and an MBA from the Graduate School of Business at Stanford University.

In this episode, Munib, Tano, and Micheal discuss Munib's introduction to a career investing, similarities and differences between working in private equity and public markets, why Munib was excited to bring capital to European markets, the value of cognitive diversity, Munib's investment philosophy, the challenges of activism, and so much more!

Key Topics:

How Munib was initially drawn into the world of investing (3:06)
Munib's early career in the investing world (4:32)
Where Munib developed his investing foundation (6:27)
Learning about the experiential aspects of an investing career (7:27)
The overlap at the analyst level for private equity and public markets (8:58)
Key differences between working in private equity and public markets (10:27)
Munib's journey from analyst to co-portfolio manager at Third Point (12:48)
Why Munib was well-positioned to find opportunities in the European markets (14:39)
Challenges of attracting investment in Europe in the wake of the financial crisis (15:47)
The main goals behind the founding of LTS One (18:31)
Firms with risk-management DNA versus stock-picking DNA (21:00)
Developing a robust risk management approach (22:24)
Munib's evolving approach to hiring (23:58)
Focusing on capital allocation improvement with a soft twist of operational improvement (26:42)
What investors can learn from academia (28:07)
Munib's investing philosophy (31:33)
Finding ideas where you can change a company's trajectory (33:30)
The actionability aspect of activism (36:05)
The value of time arbitrage (39:19)
Crucial elements for successful long-term orientation (43:36)
The benefit of highly concentrated activist strategy (46:22)
Why Munib looks for good businesses with questionable leadership (48:26)
What operational excellence looks like (50:27)
Common pitfalls in capital allocation (51:37)
Munib's approach to portfolio optimization (53:43)
How Third Point identified Baxter as a good investment opportunity (55:56)
Third Point's strategy for Baxter (58:11)
Munib's biggest lessons from his first board experience at Baxter (1:00:58)
Highlights from Third Point's investments in Sony (1:02:50)
LTS One's investment in Cellnex Telecom (1:05:50)
Why it's an exciting time to invest in International Flavors & Fragrances (1:10:43)
Munib's worries about the current market environment (1:11:09)
Munib's current focus (1:12:36)
Why Munib believes in reading widely across disciplines (1:13:25)
And much more!

Mentioned in this Episode:

Thanks for Listening!

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

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Lauren Taylor Wolfe - Adding Value With A Creative Approach to Environmental, Social, and Governance Change Nov 12, 2021

Show notes

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:

Thanks for Listening!

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

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Bringing An Outside Perspective Through Transformational Activism with Mason Morfit Oct 29, 2021

Show notes

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:

Thanks for Listening!

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

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

5x5x5 Russo Student Investment Fund: Class of 2021 Oct 15, 2021

Show notes

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

Thanks for Listening!

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

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

Chris Davis - A Multifaceted Perspective on Financial Services Oct 01, 2021

Show notes

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:

Thanks for Listening!

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

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

The Art of Fund Management with Chase Sheridan & Will Pan Sep 17, 2021

Show notes

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 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:

Thanks for Listening!

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

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

Anne-Sophie d'Andlau - Driving Change By Engaging With Impact Apr 09, 2021

Show notes

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 valueinvesting@gsb.columbia.edu.

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

Florian Schuhbauer and Klaus Roehrig - Applying Activist Tactics to European Markets Mar 26, 2021

Show notes

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:

Thanks for Listening!

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

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

Elizabeth Lilly - Embodying the Principles of Value Investing Mar 12, 2021

Show notes

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:

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Anna Nikolayevsky - The Value of Independent Thought Feb 26, 2021

Show notes

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, 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 valueinvesting@gsb.columbia.edu.

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

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