In episode 151 we welcome Divya Narendra, CEO & Co-Founder of SumZero. Divya begins by talking about the beginnings of SumZero and finding its initial traction by Divya calling friends from other funds and politely asking them to submit research. From there, he asked those friends to provide any contacts they could, and the platform grew from there, including a cap-intro side of the business to expose analysts, PMs, and fund managers to potential investors.
Divya then discusses addressing the shortcomings of sell side research with SumZero, in particular, the lack of vested interest and high conviction from the sell-side, and lack of coverage in unknown securities. All contributors are vetted, and their ideas go through Divya.
Meb asks about how people use the site for generating ideas, which brings up some various processes like screens from people with a fundamental approach, to quants who are looking at items like who is getting the most views and best ratings. Divya even gets into some of the best ideas contests he has run, and even submitted a contest winner’s idea to Warren Buffett.
The conversation then shifts to what Divya sees in the future for SumZero, from scaling cap-intro efforts, to a data feed that can serve quantitatively driven analysts, but ultimately looks to expand the scope of the SumZero community.
Catch all this and more in episode 151, including Divya’s thoughts about the future of fundamental stock picking, robo advisors and the private wealth model, and more.
In episode 150 we welcome Bill Smead. Bill begins with how he came to be a value investor, describing himself as someone who came from a family of educated gamblers, and as a boy, going to greyhound races, learning to put probabilities in his favor, and even developing a criteria system for selecting greyhounds.
Next, Bill talks about his beginnings in the investment business, starting out in an era of high interest rates, and reading about Buffett, Lynch, and some of investing’s great minds. He describes his 8 criteria for selecting investments: 1) Does it meet an economic need 2) Does it have a long history of profitability 3) Does it have a wide moat 4) Does it generate high and consistent cash flow 5) Can the company be purchased at a discount 6) Business must be shareholder friendly 7) The company must have a strong balance sheet 8) The company must have strong insider ownership.
Meb then asks Bill to elaborate on the investment landscape, and what he’s seeing in a specific pocket of the market. Bill discusses the parabolic move in e-commerce companies, and issues he sees in the strategies and valuations of companies like Amazon.
As the conversation winds down, Bill lays out the thesis that the Millennials are in position to drive the economy in the future.
All this and more in episode 150, including Bill’s most memorable investment.
In episode 149 we welcome back our guest from Episode 122, Phil Haslett. Meb and Phil begin the episode with a chat of the IPO environment so far in 2019, and the recent Lyft IPO. Phil then gets into the cyclicality of IPOs in general, and that IPOs tend to be most successful when the market is not so volatile.
Meb asks Phil about the IPO process. Phil starts with banking and how the banking relationship works, and what some companies have done to avoid the high costs of going through the IPO process. Google was the first to give an alternative approach to the IPO process a shot, and Spotify found huge success through a direct listing.
Next, Phil gets into the changing characteristics of what firms look like in today’s IPO cycle, vs. the past. He discusses that the value of which companies go public is far higher than it used to be, and they are going public much later. This stems from companies raising large amounts of capital as private companies. Eventually, though, they’ll need to go public for a couple of reasons. 1) venture capital investors that invested early, may run out of patience waiting for an exit, 2) the need to address liquidity for other shareholders 3) recognition, and 4) be able to issue stock and raise capital for potential future M&A.
The conversation then shifts back to Lyft, and their S-1 filing.
Phil mentions some interesting points he and his team found in the S-1. He discusses Lyft’s $300 million R&D spend, signaling the likelihood it is making major investments, possibly in autonomous driving. They also found that the company has presented itself as a transportation as a service (TaaS) company.
Meb brings up the topic of dilution, and why it is so important in understanding venture capital investing, and Phil walks through the fundamentals of capital raising, and shareholder dilution, and what it really means to early investors.
Next, employee wealth, and how to think about managing it is addressed. Phil shares some advice of being diversified to offset the concentration that comes with both owning shares and earning a paycheck from the same company.
As the conversation begins to wind down, Phil covers his take on the future of the private investment space.
Hear all this and more in episode 149, including the future of EquityZen, and Phil’s predictions for the 2019 IPO market.
In episode 148 we welcome Paul Lountzis. Paul starts with his background in consulting that led him to develop a skillset in competitive analysis that meant going out into the field to conduct research far beyond the numbers, leading to “differential insights.” He wanted to get into value investing and reached out to a number of firms including Warren Buffett’s assistant, Gladys Kaiser. He ended up interviewing with Chuck Royce’s partner, Tom Ebright, and after Chuck saw his work, he was put on research projects for Chuck. He then went to work for Ruane, Cunniff & Goldfarm before founding Lountzis Asset Management.
Paul then discusses his framework of finding outstanding businesses that are unique, different, and special. He talks about that changes that are taking place and how the qualitative characteristics are becoming significantly more meaningful in company analysis. He highlights the importance of field research primarily to prevent permanent loss of capital, and to drive greater conviction to potentially make bigger bets on companies.
Meb then asks Paul to get into the investment process at Lountzis. Paul emphasizes a long-term holding period, screening on financial metrics like return on investment capital, free cash flow, revenue growth, and covering 600-700 names across the team. Beyond that, the team digs into further insights, from management elements like capital allocation, shareholder friendliness, and the quality of their operating ability, to valuation and the general level of inflation and taxation. He then dives into some examples of how he and his team identify businesses that are unique, different, and special in practice.
Meb then gets into questions on risk. Paul discusses how he and his team look at position sizing and risk based on the clarity in which they understand the business.
The conversation then shifts into a discussion about the current and future state of Berkshire Hathaway. Paul talks about how unique and special Warren Buffett is, how valuable the underlying businesses are that Berkshire owns, and a couple of items that concern him about life after Warren Buffett and Charlie Munger.
All this and more in episode 148, including a special story about a hand he played in helping students meet Warren Buffett.
Episode 147 is a Meb Short. In this episode, you’ll hear Meb discuss a critical topic to consider for investors…The portfolio that helps you get rich isn’t necessarily the portfolio that’s going to help you remain rich. In this piece, Meb explains that risk-free assets often considered “safe,” aren’t exactly that, if viewed in the proper context. He proposes that with some thought, a strategy can be engineered to offer expected drawdowns similar to T-Bills historically, while at the same time, going above and beyond by historically offering exposure to some positive performance after inflation.
All this and more in episode 147.
In episode 146 we welcome Neil Littman. Neil starts with his background and how he came up with the idea of Bioverge, a platform that offers an opportunity to invest in healthcare startups, with the mission of democratizing access to early stage healthcare companies. Neil follows that with a discussion of his time at CIRM, and some of the incredible stories and the science he experienced firsthand during his involvement. It was his time at CIRM where he learned that the institutional model of financing and investing could be applied to the retail sector as well. That paired with his desire to provide exposure to the alternative asset class created the perfect storm and the result was Bioverge.
Meb then asks Neil to get into the structure of the Bioverge platform. Neil explains that the decentralized network they built provides warm referrals to Bioverge and ultimately links capital to potential investment opportunities. In addition to that, Bioverge provides value added service beyond capital that is important for founders and portfolio companies that may seek support and expertise along the way. Beyond sourcing deal flow, another critical component for Bioverge is diligence on the investment opportunities by leveraging its network of subject matter experts with deep domain expertise. In evaluating opportunities, Neil explains the “nuts and bolts” of the model they use, looking at the risk and reward side of the equation.
The conversation then turns to some examples of companies and deals Neil has been involved with since starting Bioverge. Neil provides a walk-through of Notable Labs, which provides personalized drug combination testing for cancer patients, Crowd Med, a service that relies on crowd sourcing to help solve difficult medical cases, Ligandal, a company delivering a gene therapy platform, Occam’s Razor, a company that is attempting to understand and cure neurodegenerative diseases, Blue Mesa health, developing a new breed of digital therapeutics to nudge patients to change behavior, and Echo laboratories, developers of a hybrid microscope with a new twist on the traditional eye piece.
The conversation winds down with Neil providing some insight into what he sees in the future for the industry, and the long-term vision for Bioverge.
All this and more in episode 146.
Episode 145 is a Meb Short. In this episode, you’ll hear Meb follow-up on his 2014 article, Cloning the Largest Hedge Fund in the World: Bridgewater’s All Weather. Meb covers how Bridgewater’s All Weather portfolio compared to the global asset allocation portfolio, and an extension, the global asset allocation portfolio with leverage. He winds down by giving an update on how the strategies have performed since writing the piece in 2014. All this and more in episode 145.
In Episode 144 we welcome Marty Bergin. Marty begins by going through his background, the history of Dunn Capital and the relationship he had with Bill Dunn, the founder of Dunn Capital. That relationship opened the door for Marty to ultimately work or Bill, and to later become the owner of the firm as part of a transition plan.
Next, Meb asks Marty to describe trend following as it relates to Dunn. Marty describes that trend following is pretty basic, but there’s magic in how you develop a portfolio with the strategy. At Dunn, Marty and his team rely on an adaptive trend-following system. From a portfolio management perspective, they look for markets with enough volume to trade in 55 markets across commodities, currencies, interest rates, bonds, equities, and volatility with an equal allocation of risk buckets for each market they trade.
Meb follows that with a question about how it all fits together on a high level. Marty explains the program is not restricted in any way, and multiple methods are used for determining noise. He adds that when looking at possibilities, they are looking at a few days all the way out to a couple of years, and update weekly, yet he doesn’t believe there would be a major drift in performance if it were updated on a 12 or 18 month basis. The program gets into positions slowly, and is designed to get out quickly to protect downside.
The conversation then transitions into how the system has evolved over time. Marty walks through the core tweaks Dunn has undergone to adapt and improve the trading system, from looking at trading from a market-by-market basis, to applying the same techniques to every market, to taking a fresh approach to risk.
Meb then asks about what Dunn’s strategy looks like during various environments. Marty goes on to talk about how a trend follower is looking for directional volatility that is consistently applied, and the difficulty of environments like 2018 when trend followers can become overweight and get caught in corrections that can lead to aggressive reversals.
He follows that with some insight into thinking about the current environment through the lens of Dunn Capital, and talks about risk metrics setting up to look conducive for trend following.
Meb and Marty wind down with a chat about how Dunn is very focused on education. They also touch on Dunn’s unique fee structure, and the place for a strategy like Dunn’s in investment portfolios.
All this and more in episode 144.
In episode 143 we welcome Dr. David Eifrig. David begins by going through his background and pathway to finance. He first discovered his interest in investing through the occasional Barron’s issue, and understood he didn’t want to follow in his father’s footsteps in medicine, moving on to Kellogg for business school before moving on to Wall Street. He describes that while working in finance, he decided to pursue science and medical school and ultimately helped build a business that was sold to Roche. While in residency, he began writing and that launched him into newsletter writing.
Meb then asks David to describe his publications, Retirement Millionaire, Retirement Trader, Income Intelligence, and the newly launched Advanced Options.
Meb asks David about how he thinks about value and price declines. David responds with some background on how he prefers to teach investing, and provides a simple framework for thinking about price and value.
After a quick discussion of the closed-end fund space, the conversation shifts to what looks interesting right now. David discusses Altria, and their exposure to the vaping market and the marijuana industry as well as preferred shares. The pair then expands with a discussion about the current interest rate and inflationary environment after an interesting example from David. David also gets into the use of stop losses, having a plan, and the mindset of having an idea of when to sell. He mentions that he thinks about structuring portfolio positions such that losses on one single position won’t significantly impact the overall portfolio.
The conversation then shifts gears into some lifestyle suggestions, David’s experience as a winemaker, and David’s best and worst trades.
All this and more in episode 143.
In episode 142 we welcome Ryan Ansin. Ryan begins by discussing how his introduction into the cannabis industry started with thoughtful conversations at home, focused on the social justice perspective. He started investing in the industry over 4 years ago, then had an opportunity to purchase a factory in Fitchburg, Massachusetts. What started off as a passive real estate investment he thought would be a fit for vertical farming, and a suggestion from vertical farming experts to consider cultivating cannabis, led him to start his operation, Revolutionary.
Meb asks Ryan to speak in more depth about the business and the cannabis ecosystem. Ryan discusses the laws that shaped the cannabis industry in Massachusetts that caused a lot of fallout until recently. His operation is vertically integrated, and they go after products they can excel in, while licensing and distributing other products they don’t feel they can execute as well. Next, he discusses his vision for the company, and his goal to expand within Massachusetts, do it responsibly and sustainably, before growing elsewhere.
Ryan then gets into investing in cannabis companies, and although he receives hundreds of decks per month, he focuses on areas that fit well and within his areas of competence. The basis for his thinking behind the investments he makes is how it initially can help Revolutionary. He brings up the important point that we have not seen a full venture cycle in cannabis yet, what the exits will be, how, and when, so it is important to think about investments that can optimize operations.
Meb shifts into valuations in the space. Ryan mentions that he feels that valuations are high, and that valuation is a huge consideration for him. He notes that while many companies appear to be valued under assumptions of being able to sell what they’re funded to produce, and expand internationally in some cases, he believes competition may create unforeseen barriers in certain markets that may not be accounted for in valuations.
The conversation then transitions into the huge institutional interest that Ryan sees in the industry, as he has seen family offices gradually shift in their comfort level with the space.
As the pair wind down, Meb asks Ryan to discuss his involvement in the Family Office Association. Ryan provides useful insight about best practices in managing multigenerational wealth.
All this and more, in episode 142.
Episode 141 has a radio show format. We cover tweets of the month from Meb as well as listener Q&A.
For Tweets of the Month, a few topics we cover include:
We then get into listener Q&A, a few questions we touch on include:
There’s this and plenty more in episode 141.
In episode 140 we welcome Ralph Acampora. Ralph begins with his background and talks about the accident that left him in a body cast for months. His father’s best friend left a copy of something market related that he was reading when he visited the hospital. That piqued his curiosity, and he later found a job as a junior analyst on Wall Street. It was that job that introduced him to technical analysis.
Meb then gets into technical analysis and what is, and what it means to Ralph. Ralph discusses how he keeps it simple, looking at trends every day with a few indicators. He then goes on to explain Dow Theory before explaining that when he took a look at the market through the lens of Dow Theory, when the Dow Industrials, and Dow Transports hit low points late last year, he saw a downturn signal. He mentions the post-Christmas rally was a nice move in a short period of time, but he refers to it as a “vacuum” rally. The bad news is that he saw the rally encounter overhead resistance and is looking overbought. For this move to sustain, he’d like to see, over the next month or two, the market hold above December lows.
Looking around the world, he sees the DAX in a topping period, and emerging market stocks look like they’re trying to bottom. As far as commodities go, he thinks crude is bottoming as well.
Ralph then gets into how little acceptance there was of technical analysis early in his career, and how he fought for technical analysis.
Meb then asks Ralph to touch on behavioral finance. He discusses how technical analysts have been incorporating behavioral finance for years.
As the conversation winds down, Meb asks Ralph if anything has changed about his approach to analyzing markets, and Ralph quickly says “No,” and talks about how over time, technical analysis is looking at buyers and sellers, which he feels haven’t changed, so he hasn’t changed his analysis.
This and more in episode 140, including a fantastic story behind Ralph’s most memorable trade, and where one of his hand-drawn charts is now displayed.
In episode 139, we welcome Taz Turner, CEO, and Nate Nienhuis, COO, of CordovaCann in the 4th installment of our cannabis series.
The episode begins with the backstory behind CordovaCann, and the mission to produce superior plants and consistent and predictable products. Meb asks the pair to get into their backgrounds. Nate starts by describing his deep industry background from consulting with operators, to working on the regulatory side in Washington D.C. Taz then talks about his career in finance, and what led him into investing in the cannabis industry first in Canada, then in the U.S. He goes on to discuss his conversations with Nate and others in the industry leading to the launch of Cordova.
Meb then asks about the Cordova roadmap with the company ultimately growing into a cannabis operation. Taz had the idea of targeting the more established markets in the western United States and overlaying their technology platform to add value to the operators. Nate then gets into the details of the importance of consistent formulation, and how their platform is delivering technology that isn’t being utilized by the rest of the industry.
The conversation then shifts to the regulatory environment, and Taz notes the ball seems to be moving forward. Nate adds that he thinks the regulations will continue to get more specific.
Next, Meb asks about acquiring assets. Taz talks about the parallels he sees to the late 1990s internet craze. He discusses the goal of taking already strong operators and overlaying the technology that Cordova has, while Nate talks about the importance of culture. Taz follows up with some specific examples of how the acquisitions have worked on a state-by-state basis.
Meb asks what the future looks like. Nate talks about the growth of the industry and how various operators and even large-scale manufacturing operations may get into the space, as well as significant advancement in science, and continued refinement of the cannabis product line.
All this and more in episode 139 including the long-term vision for Cordova, and Taz and Nate’s most memorable investments.
In episode 138, we welcome Yariv Haim. Yariv begins with his backstory. He had been working for a family running marketing and business development. He was asked to get involved with the investment management needs of the family, and through a path of his own, had gained enough knowledge to crystallize an approach he now follows at Sparrows Capital.
Yariv discusses how he focused on evidence from impartial academic institutions and research, and refers to the strategies derived from them as evidence-based investing strategies. After doing his research, he saw an informational gap in the industry, and it still exists today.
Yariv then gets into 6 core principles 1) return is primarily a function of risk, 2) certain risks attract persistent premium, 3) Diversification works, 4) stock picking and market timing seldom add value, 5) remain invested across the full cycle, 6) costs matter (although it isn’t the only prism to evaluate investment opportunities).
Next, Meb asks about factors and smart beta. Yariv discusses his opinion that Wall Street is a marketing machine, and the term “smart beta,” while it sounds sexy, ends up becoming an umbrella for all things. When asked about factors and when it’s time to stop using them, Yariv responds by discussing resources available, and the importance of doing the homework, and not to invest until you fully understand what you are investing in. As far as favorite factors go, Yariv talked about not having one, and expanded by saying he sees factor timing as a problem. He recommends a blend of factors to clients, starting with the most diversified portfolio, and building tilts.
The conversation then shifts to a discussion of behavioral investing. Yariv talks about how investors are all human beings, human beings are filled with biases and emotions, and feelings of optimism and pessimism can affect the way we make decisions. He finishes his comment by saying he feels that for people who wish to invest on their own, that it is always helpful to have someone by your side who is potentially slightly less emotional about the way your portfolio behaves in the short term.
As the conversation winds down, Meb and Yariv get into socially responsible investing and environmental and social governance themes. Yariv believes it is a trend that nobody can ignore today. He discusses some research conclusions the efficiency of markets and how higher returns investors have earned on vice companies is compensated for the additional risk they bear for owning them. He makes the point that there is more to investing than purely outcome in the form of returns, and that if an investor’s ethical compass steers them in the SRI/ESG direction, it is sensible to invest that way.
The pair then conclude with how Yariv puts all of these ideas together to form investment portfolios.
This and more in episode 138.
In episode 137 we welcome the sibling duo, Emily and Morgan Paxhia. Emily and Morgan begin by discussing their backstory, and how coming from a family with an entrepreneurial background influenced their path to start Poseidon Asset Management to specialize in cannabis investing. Emily and Morgan each describe their previous roles and the skills they acquired in their respective industries (Consulting for Emily, and Investment Management for Morgan) that helped them build foundations that transitioned well into asset management.
Next, the pair discusses starting their fund, and the journey that included seeking service providers, raising capital, and the many challenges and hurdles they faced along the way. Morgan mentioned that even with all the hurdles, they knew they were on to something and continued to drive forward.
Meb then asks about cannabis industry trends and what the space has in store looking forward. Emily covers some regulatory and political issues and then talks about the challenge they will face as a firm as they try to allocate capital before the industry really opens up down the road. Morgan follows with some catalysts that include legal cannabis in California, a number of countries approving medical cannabis, and expanded media coverage.
The conversation shifts to the regulatory environment. Morgan talks about the progress that has been made, although state programs are varied, which makes it difficult to see where the standout model lies. There’s also bi-partisan support, New York is looking serious at legalizing, and the environment is moving forward.
Meb follows with questions about the investment process and portfolio building, as well as a question on what areas people aren’t thinking about that have disruptive potential. Emily and Morgan talk about looking at the industry by subsector such as ag-tech and technology and being invested everywhere on the spectrum from plant cultivation to end consumer product consumption and that the portfolio construction process leans on a very diversified approach but is very flexible and dynamic. In searching for ideas, they rely on a “boots on the ground” approach to understand the industry and operator dynamics, as well as identify quality teams. Meb then asks about any areas people aren’t thinking about that have disruptive potential. Emily and Morgan respond with 100% industrial hemp as a product that has disruptive potential with almost endless applications.
Hear all this and more in episode 137, including the names of some portfolio companies and their most memorable investments.
In episode 136, we welcome Steve Romick. The conversation begins with Steve explaining that he hated losing more than he enjoyed winning, and while there wasn’t one event that led him to value investing, he considers his aversion to loss a contributor to being drawn to the value-oriented investment approach.
Meb then transitions the conversation by asking Steve to characterize the investment strategy of FPA’s Crescent Fund. Steve talks about the value investing framework as investing with a margin of safety and how it has morphed over the years from being about the balance sheet to now, through technological innovation, the corporate lifecycle has been as short of it has ever been with the most of the density of innovation happening in the past 50 years.
Next, the discussion turns to investment framework. Steve describes this team of 11, and how the job of his team is to understand the business and industry first on both a quantitative and qualitative basis. He describes the go-anywhere mandate as a potential recipe for disaster as there are more places to lose money. Steve then discusses looking at equities and debt for the portfolio. In the equity space, they’re looking at two categories, the high quality growing businesses considered “compounders,” and more traditional value investments, where there’s potential for 3 times upside to downside. Meb then asks Steve about Naspers, and Steve follow’s up with commentary about one of the biggest losers the portfolio’s ever had, but reiterates that his biggest concern is permanent loss of capital, and as the holding is still in the portfolio, he’d be surprised if they didn’t make money on it long-term.
Meb asks Steve about credit. Steve talks about high yield and distressed debt as an asset class being periodically attractive and one doesn’t need to be there all the time. He explains that the gross yield of roughly 6.5% looks interesting on the surface, but once you consider the history of defaults and recovery, the yield drops significantly to 4.4%, right above the investment grade yield, and it isn’t so attractive. Steve talks about how the fund allows the freedom to seek asset classes that offer value, and that for the first time, they now own a municipal bond. Steve then discusses the small allocation they have to farmland.
Meb follows with a question about holding cash. Steve expands by talking about going through the research process, and when there aren’t enough opportunities that meet their parameters, cash results as a byproduct.
The discussion then gets into Steve’s background at FPA, and what it was like going through the late 1990s. Steve talks about trailing the market going into the late 90s as valuations appeared unsupportable, but fast forward a few years and he and the team were validated. They allocated to high yield, small cap, and value, and made money in 2000, 2001 and 2002 when the market was down.
Meb then asks how Steve views the rest of the world. Steve responds that while it is more expensive generally here in the U.S., it is important to remember that international exposure can be had by owning U.S. stocks with revenue exposure overseas, and that like-for-like companies are trading at similar valuations outside of the U.S.
Next, Meb and Steve discuss the importance of managers investing alongside their clients. Steve feels it is important that investor’s energy should be aligned with the client’s interests and holdings.
All this and more, including Steve’s thought on the catalysts that could end the current bull market in episode 136.