Value Investing with Legends

Latest Episodes:

David Marcus - Developing a 3D Perspective of Investing Feb 12, 2021

Show notes

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:

Thanks for Listening!

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Samantha Greenberg - Recognizing True Asymmetry Jan 29, 2021

Show notes

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:

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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Mohnish Pabrai - The Value of Continuous Learning Jan 15, 2021

Show notes

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:

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!

Jan Hummel - The Rare Advantage of Real-World Experience Dec 04, 2020

Show notes

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. 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 valueinvesting@gsb.columbia.edu.

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

Howard Marks - Successful Investing Through Buying Things Well Nov 20, 2020

Show notes

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:

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 Multi-Faceted Future of Value Investing with Henry Ellenbogen and Anouk Dey Oct 16, 2020

Show notes

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 valueinvesting@gsb.columbia.edu.

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

Rishi Renjen - Evolving Your Investment Process Oct 02, 2020

Show notes

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 valueinvesting@gsb.columbia.edu.

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

Richard Lawrence - Investing in Superior Businesses Sep 18, 2020

Show notes

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 valueinvesting@gsb.columbia.edu.

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

Learning from Five Years of the 5x5x5 Russo Student Investment Fund Sep 04, 2020

Show notes

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 and Freda Zhuo, 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 valueinvesting@gsb.columbia.edu.

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

Kim Shannon - Value Investing - Bringing it All Together May 22, 2020

Show notes

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!

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