Welcome to The Value Perspective podcast on Decision Making. We're a group of value investors working together on the global value team here at Schroders. As investors we have to tackle decision making in uncertain environments every day. In this podcast series we speak to people from other walks of life who also share the challenge of making decisions in complex
and uncertain environments. We cover topics such as how to think in probabilities, tools for overcoming psychological biases and how we can learn and improve decision making in complex environments. We hope you enjoy it. This is marketing material for our financial professionals and professional clients only. The material is not intended to provide and should not be relied on for accounting, legal
or tax advice or investment recommendations. Reliance should not be placed on any views or information in the material when taking individual investment and or strategic decisions. Fast performance is not a guide to future performance it may not be repeated. Diversification cannot ensure profits or protect against loss of principle. The value of investments and the income from them may go down as well as up and investors may not get back the amounts
originally invested. Exchange rate changes may cause the value of investments to fall, as well as rise. Investing in emerging markets and securities with limited liquidity can expose investors to greater risk. Private assets investments are only available to qualified investors who are sophisticated enough to understand the risk associated with these investments. This material may contain forward-looking information such as forecast or projections.
Please note that any such information is not a guarantee of any future performance and there's no assurance that any forecast or protection will be realized. The views and opinions contained herein, but those of the individual to whom they are attributed, it may not necessarily represent
views expressed or reflected in any other shodders communications, strategies or funds. Any reference to regions, countries, sectors, stocks or securities is for illustration purposes only and not a recommendation to buy or sell any financial instruments or a dot a specific investment strategy. Hi everyone and welcome back to TVP. This week we have a fantastic guest joining us, Andrew Walker. Andrew is a portfolio manager at Rainsley Capital and the voice behind the
popular podcast yet another value investing podcast. He authors a sub-stack under the same name. He is also a huge fantasy reader and he's given us some of the richest book recommendations we've had in about five years, so stay tuned to the end just to hear those. In this episode Juan and Andrew will dive into Andrew's take on whether the value investing philosophy is still alive
and what it's like running a boutique firm built on that approach. The toughest challenges in investing from a behavioral standpoint, the one lasting behavioral edge any investor could cultivate, how Andrew filters investment ideas, especially as someone who's not your typical cigar but investor, and finally how he views communication with his investor base through his podcast, sub-stacked and beyond. How much comms is enough? Enjoy. Andrew Walker, welcome to the value perspective
podcast. He's a pleasure to come in here. How are you? Doing good. Thanks for having me. Where do we find you today? I am in my office on the upper east side of New York City. Amazing. I have to say before we start the conversation that I think congratulations are in place because you had your first born baby a few months ago. That is great. Yesterday was her nine month birthday. Amazing. Well, many congratulations. How is that working out?
It's a lot, man. My whoop. I don't know if you guys are familiar. There's this thing whoop, like their advertising is all the elite athletes were them. So I almost canceled my subscription, but after Patrick Mahomes won the Super Bowl, I went to cancel and Patrick Mahomes was on the front page. He was like Super Bowl MVP Patrick Mahomes. Where is it? Anyway, it's a sleep tracker and wearable that track your health. And in the past nine months, like three nights, three times a week,
whoop will be like, man, you didn't sleep at all last night. Like your body isn't primed. You can't even walk to the corner right now. Like you need to go take a nap. So it's a battlefield. That's great. Why don't you walk our audience through your journey, your story. You are a podcast for yourself. You write a sub-stag. You are a PM. You run research. Tell us everything about that. Yeah. A lot. Look, I think most of your, I work at Rangely Capital.
We are a value and event fund. I think most of your listeners or most people would probably know me. I say on the side, but it all kind of works hand in hand. I write the very thinly followed yet another value blog.com. People can go check that out. And I run, as you said, a competitive podcast yet another value podcast. You know, the podcast is having sharp investors. I know we've had several overlaps. Having sharp investors come on. And kind of for roughly an hour talk,
just dive in depth, only talk about one idea is generally what the podcasts are. So that is, you have to be a real finance value nerd to listen. But you know, it's sharp investors talking about their best or one of their best ideas for an hour. I think the format is unparalleled in terms of diligence and getting up to speed on an idea. And then on the blog side, get another value blog.com.
You know, the basics are I really like writing and I write what I'm seeing on there. I write a lot of, you know, investing can be a very stressful job when you do it for a living and when kind of your your income and everything depends on numbers on the screen going up or down. It can be a very stressful job because a lot of that is outside of your control. So I'll write about the stress of it or I'll write about interesting things I am seeing in the markets, funny things I'm seeing in the
market. All that. So that's kind of the background. I'm happy to dive into any piece you kind of want to pick at. So you are also the you also had well, no, actually, whether you tell us a little bit about rugby capital, the history and its great object. Yeah. So, uh, range Lee was founded by Christimuth in 2008. He had a regulatory and event driven background and he invests a long kind of those those parameters. So, you know, a lot of regulatory, hey, like if you listen, we do a monthly
state of the markets where Chris comes on and we just talk about what's what he's looking at. And if you listen to it, it'll be a lot of, hey, this is what's happening on the regulatory side. A lot of anti-trust, a lot of following kind of what's happening with compliance and everything. So that that's really what he looks at. And then in about 2015, I had a background in consulting and I was at
a private equity firm for on the credit side for a while. And in about 2015, you know, I was kind of looking around and I really liked where I was, but I was 27 and single and I was kind of like, look, I want to do I might want to do something more entrepreneurial. Chris said, hey, you know, we, I, we are scrappy, we are small, we, we love entrepreneurial, we love to do things differently. So, I came over to range lead to add some kind of a more fundamental value analysis, which obviously goes
with my background in consulting and at the private equity credit side and special situation. So, we Chris says kind of the regulatory and that side and I can do special situations and fundamental analysis. As a value investor yourself, this is something that I've been obsessed asking a lot of people on the blog lately. Do you believe that is value investing for a subjectly dad as our investment style? And then as a follow-up question, do you believe that value investing as a
business is that? So, I guess I don't think value investing is dead. I feel like that's a soft quality question, mostly. You're kind of preaching to the choir here. I'm sure your listeners are value investors and I'm sure you and I are value investor. I don't think value investing will ever die because the fundamentals of a smart, sophisticated business person wanting to buy
something for less than its worth is never going to go away, right? And even drop business person, a person like people every day you shell out a dollar for an apple or a sandwich at the store because it's worth more to you than the dollar you're giving. That kind of is value investing. Now, at the scale as we do it, it's more, hey, I am buying company XYZ because they trade in the
market for 12 and I think they're worth 15. That's one so. But you know the other is, again, a business person, a company trades in the market for 15 and they think it's worth 20 and by the way, it might be worth 20 to them because there's seven dollars of synergies or something, right? So they go on by like, I don't think that style of thinking through and trying to buy businesses for less than their worth. I don't think that ever goes away. Now, on the public market side as, you know, people
running funds investing into equity strategies, it has been difficult, right? Like the indices have been formidable bosses over the past 10, 15 years in large part driven because I think value investors for a long time had a tailwind where smaller cap stuff tend to too well or if you really dug around in small cap stuff, there was really interesting stuff not sit there as now. But you know the large cap stuff, like largest company in the world in the 60s and 70s was GM and you kind of
think about that now. You're like, oh, that's that's kind of funny, right? Like if GM was the top of the index, God, how easy would the index be to beat instead of something like Nvidia, which goes up 100% every three months or something. So I think it's harder. You know, I think the other thing is when every investor comes up, they are told read intelligent investor. It's the best book on investing ever. And I don't think it's the best anymore. I think it's been subsented. I think
you have to have a great and undegree of difficulty, right? Like the wizard of Oz in the 30s, I don't think it would be the best movie of all time anymore. Like the plots vary some plastic, obviously the ethics. But at the time, it was revolutionary, right? Graham using fundamental investing when he did the intelligent investor, that was absolutely revolutionary at the time. The issue is I think, you know, value investing needs to evolve. And when Graham writes the intelligent investor, the
intelligent investor is, hey, open a balance sheet and go look at the shareholder equity line. And if it says $100 per share of shareholder equity and the stock is trading for 20, that's a buy, right? Today, I think those strategies, not that they couldn't work. But if you and I are doing it, I think we would have a question of, hey, that's a pretty simplistic analysis. Why isn't there some quant AI model that can do this better, faster, more accurately, more aggressively than me?
The answer is there is. So I think when people say value investing in a dead, what they mean is easy value investing is dead. I think today, finding value where you truly have an edge, where you truly have differentiated insight, where you can truly generate alpha. I just think it takes a lot of work and it's a lot harder. But, you know, I do think it is still there. It is still doable. So yeah, that was a long wouldn't answer. I'm happy to talk to you about any piece you kind of
want to dive into. Before we go into the side of managing a value investing business, I find that really interesting with your saying. And I think that I agree with you to the fact that the intelligente investor is not as revolutionary today as it was when I was first written all those decades ago. So I guess the follow up question is what would be in today's world the one piece of literature that everyone that is interested in by investing should still read?
Oh, so I think this is pretty easy actually. You can be a stock market genius by Joe Greenblatt. I recommend it all the time as the best book on a modern investing. And you know, I sometimes say event investing, but I think it's the best book on investing as well. Like look, you need to go, if you want to be a value investor or any type of investor, you obviously need to go learn accounting and you need to run the accounting basics. You need to learn the finance basics.
And this book isn't really going to teach you that. But what it is going to teach you is how to think through, hey, how do I get an edge? How do I find something where I might be able to buy it and outperform? How do I find something that would be mispriced? And I think that's something that investors today need to be particularly keen on. You know, like, I'll have a lot of investors I talk to and they'll say, hey, I'm really interested in Google as a long. I'll be like, hey,
that's great, right? I understand. But tell me, what is your edge in looking at Google? Like, what are you seeing that the market's missing that's going to let you generate alpha? And maybe choosing Google's a silly example, because if you had just bought Google 10 years ago and just kind of sat on your hand, you'd be doing great. But, you know, I do think you need to be able to point to something when you buy it and purchase your halfway. Tons of people like to buy birch pathway. And
that's great. You want to buy Buffett a fantastic. But tell me what you are seeing at birch your halfway that the market's missing. If you can't really point to that, it's really difficult to think you're going to generate alpha. And particularly like real alpha, right? Like, real alpha, you might get a little bit. So that's it. I can give some examples of things, modern things that I think are interesting for generating alpha, but I'll pause there.
And I totally agree with you. That is a fantastic book. And we are big followers of your Google as well. It's kind of the way that he has been missing for the last 30 to 40 years. Now, if I turn the question more on the running and investment boutique shop for winning a wireless strategy, do you think that those that's dying as well?
That's another really good question. Look, it's harder again, right? Like, the investment, there were very few, there are no other industries that I know of where you can just show up and say, I'm participating and check a box and deliver average returns. But you can do that in the investing world, right? You can just show up and say, I'm going to dollar cost average my way into a broad variety of very low costs fee funds. And I'll invest in the indexes and I'll get the average return.
And by the way, the average return has done better than most active managers over the past 10 years. And the average return in large part driven by some of the trends you talked about earlier has been pretty damn good over the past 10 years. Look, I think it's hard to say small cap value shops. There's a robust future. But I do think there is. Like, people, smart people were very motivated going around and looking for, trying to generate an edge, looking at things, trying to look at things,
find something where they're viewing it very differently than the market. I think there will always be a place for that. You know, increasingly the stock market is indexes and quant slash model driven. And as you go, you know, a more quant slash model driven index pod heavy world, I think there's going
to be a lot of opportunity. I think I hope I I'm seen in practice. I think there's a lot of opportunity for smart focused value funds who look and say, Oh, this particular thing doesn't check any of the boxes, right? It's not in any of the indexes. It doesn't screen well for quantitative models. It's
something that the pod shops for XYZ reason can't own. Well, that creates the opportunity for me to step in and have a view on what the value is and maybe create and maybe capture a lot of output for myself. I mean, I guess one of the aspects of that question is the fact that a lot of flows are going to passive passive by definition will buy the largest market caps and those tend to be the most
expensive. And so the debate gets going on on the back of the fact that seems like price discovery is not happening anymore on those stocks that are not being part of the benchmark or the yet for the passive. Do you do you feel that that's true or in your world where you're looking specific special situations that are even driven that's actually another case? Look at both event driven and value investments and look on the value investing. The nice thing about the
event driven side is you hopefully have a catalyst, right? You're buying this and you're hoping, hey, XYZ happens and when it does, I'm going to realize my value get out. That's nice. And I think as we've seen a lot of a lot of traditional event shops kind of close up or restructure go to more market neutral models. I think there has opened up a window where I think these things are a little more
they trade a little more inefficiently than they used to. On the event side, like look, I do hear you you see these smaller cap stocks, these stocks outside of the indices are in the smaller indices and they just languish and they languish and you're like, oh, it's so frustrating. But you know, if you looking at management incentives is a thing that is a real thing to consider. And if you buy a business and you buy it cheaply and they have a really incentivized management, like good things
tend to happen, right? If the stock trades really cheaply, they'll buy back a lot of stock and the longer the stock trades cheaper, they'll continue to buy back stock and that intrinsic value will grow and grow and grow and you'll have a growing piece of that intrinsic value. And I'd love to see like,
you know, there's the old joke what happens when the last share gets bought back. I've never seen a company get close, you know, AutoZone over the past 25 years has managed to buy back more than their shares outstanding since they kind of began their share repurchase, but they still got plenty of shares left to buy, right? So I'd love to see that happen. But I guess what I'm saying is
looking at management incentives and thinking about how value grows is a thing. And I think a lot of people, but I'm oh, my stock's not in the index and it trades for eight times price earnings and the index keeps going up and up and up and the this stock never goes up. You go, okay, well, what do they do? They're like, well, you know, they, they're in this no growth business, right? It doesn't grow at all. So it just trades at eight times earnings. You're like, okay, so that's about 12% free
calf yield. You should hopefully do about 12% per year investing in that if they return all the cash shareholders, what do they do with all the cash? And they'll say, oh, well, you know, half of the goes to management bonuses and half of it goes to really dumb acquisitions that destroy value. And you're like, hey, the reason the stock isn't going up isn't because the indexes go up and this never gets recognized. The reason the stock doesn't grow up is because the business's value never grows
and management lights all of the money on fire, basically, right? So, uh, whereas I could point you to a variety of companies that are really cheap and they buy back their shares and then a lot of them, the catalyst comes slowly then all at once where you know, the stock languages, languages, languages, and then one day they say, hey, we bought back 15% of the stock over the past three years and now we're selling the company for a 75% premium, right? And management owned a lot of stock. They
were incentivized to realize it at some point. So that's kind of how I think about it. You know, I guess just one more point where I'm around, but in like one place I would look is I did a podcast episode earlier this year and I think it's mentioned and you can be a market genius. A lot of people have historically had success is look at demutual, demutualized banks, right? What happens there is you have a bank, it demutualizes, you know, they tend to be very small, but when they do that,
management tends to get a lot of equity and they tend to be very incentivized. And yeah, the market doesn't care. They don't generate great earnings, but most of them after three to five years, they sell and when they sell, they sell for huge premiums. And like that's a place where I would point you and I say, yeah, the market doesn't really care. They don't get picked up in indexes.
It's not like fun trading their stock. You don't see a straight line up into the right. But if you're really paying attention and a lot of times you can see management kind of like increasing their incentives as they get closer to sale. If you're really paying attention, you can say, oh, you know, the stock trades for 10, I think it's worth 15 standalone and 22 buyer mentions really incentivized and most of them do end up selling and they work really well. So long wouldn't answer,
but yeah. Was that your podcast with Jim Boreal? That is right. That is right. Look, this is how you know Juan was in line. He's listening to his paying attention. So I am a big fan of thrift as well. And we have Jim on the pod and we had him in preparation for our interview. We actually listen to
your, your, your episode as well. So thank you very much for that. That was fantastic. This is a podcast that has aimed to explore decision making frameworks for the last five years and you are the head of research and you also are responsible for stock generation ideas and risk management. I am curious, you know, what process have you put in place to help you cope with a short term nature of the markets and to endure long term periods when it performs? Okay. So
look, short term nature of the markets is really hard. You know, I know a lot of people the right answer should be BZN, right? We should, you and I should turn off our portfolio and we should do the Walter Schloss and we should go and we should sit in a windowless room and my room at I'm in an indoor office so there are no windows even though there are glasses. So maybe I'm hitting that, but you should sit in a windowless room so the weather doesn't affect you and you should
read for, you know, 10, 12, 14 pick your number of hours a day. You should just read, you should trade and if a stock trades for 10 and you think it's worth 30, you should buy and if it goes down to eight, you shouldn't let that affect you at all and you should buy more as long as you know the business is deteriorating. So in theory, that's true and I try to do that, but you know, it's
it's really hard. Again, I mentioned at the start, if you're doing this professionally, then you're you're your job, your career, your income, your a lot of yourself worth it unfortunately comes from how the market is doing and how your stocks are doing and when the market goes up, it's easier to feel like you're a genius and when the market goes down, it's easier to feel like you're an idiot.
It's really hard. You know, it is one of the reasons I started the blog and I write the blog and I think you'll notice when markets are really volatile, the blog probably gets more posts because
writing really helps me think. I find writing really cathartic. I find it when I'm struggling with something, I find it really cathartic to put thoughts down on paper and I always like to hear a lot of times if I put something down and it feels kind of personal or kind of makes me feel vulnerable, I'll put something down and you know, get eight emails from PMs and like, man, I feel this way and I thought I was the only one, but it's a really stressful part of the job. Like, I'll
give you one example. Two weeks ago, I posted a note that said, look, this stock market, you know, we were talking about how investing in dead, we're recording this on August 1st in July, small cap stocks had, it was just an unbelievable forage. You know, like the S&P 500, which is general larger cap, was flat, flatish to downish maybe a little bit and the Russell 2000, which is generally small caps, was up like 10, 12%. I mean, they were just ripping and I did a post that said, look,
it's nice. Yes, stocks are ripping with everyone else. Like some of them are ripping more, some of them are ripping less, whatever. It's really nice, but I actually find my wife jokes with me, but the only time I'm more stressed out than when everything is going straight down is when everything's going straight up because I'm like, look, I love all these stocks. I've done so much research on them. I've spent so much time on them. I love them. I feel like I'm right and they're
just ripping in front of me and then I'm like, oh, why would you know, I had a 3% position? Why was it a 5% position? Why was it 10? I find it really stressful. So I posted something talking about the stress of that and I got so many emails that are like, dude, I feel the exact same way. Like it's more miserable when my stocks are going up and you know, my net worth is going up. All my clients, net worth is going up. I find myself more stressed out than a lot of the times.
Then you know, there is, if the market's going straight, straight down that can have its own stresses, but it feels, you know, the market goes up and you feel like a genius, but you also feel like an idiot for not, you know, thinking you were a genius and being a little more aggressive. So yeah. So you would say that, you know, the top cope with the best thing that you can do is shut down all of the market noise. Just remove yourself from the market. I think shutting down the market
noise really helps. You know, if I find myself getting a little too gun shy of wanting to check the portfolio prices or check the stock market prices, like one thing you can do is I'll just leave my computer and just go on a walk around the block and I subscribe to the Panera SIP Club membership, which you're European. So I don't know if they got it, but it lets you get unlimited
drinks basically. So if I'm feeling myself like really like I need to check the market and feeling that I'm being more of a day trader than an investor, I'll just walk over to Panera and use my SIP Club and get a free iced tea or something. So that's one thing. You know, another thing is if I'm feeling like I really need to be trading or getting like a disconnecting you want to but be just right. Just go back and either write a post how I'm feeling about it or go look at a stock that's
ripping, right? It's ripping, dropping, whatever it is that's really emotionally affecting you. And one thing I'll do is I'll just go and I'll sit down and I'll rewrite my investment thesis. Right? So I'll be like, hey, you know, this stock was at 100 and it's gone to 150 and I feel like an idiot for not having more of it. Let's rewrite why wasn't it a bigger position at 100? Or
they're worse. It went from 100 to 50 and I'm feeling like an idiot for owning it. Let's go rewrite why was I long into 100 and a lot of times that can be really helpful too because you know, if something goes from 100 to 50, sometimes it's just the market went down a ton. But a lot of times there's new information and if you write that out you might say, oh,
like here is a risk that I was I was under appreciating that's come to pass. This might be a much worse value at 50 than it was at 100 because this risk has become more risky or more prevalent. Or you know, sometimes stock goes 100 to 150, you sit and you write your thesis and you say, oh, like I thought, you know, revenue was going to grow 5%, revenue's going 15%. Margins are better than I ever thought. This might be a better value at 150. So those are the types
of things. Just like on-plugs sit back. Anytime you're getting into a more anti-state and you know, I do think investors for the most part not always but they tend to people who are pretty high performing who are pretty used to being able to do things, have things in your control and investing unfortunately much of it is out of your control, aside from the buyer's self-assition. Anytime you can get away from that, like I just need to be
responding to the market. I just need to be checking the market. I'm really driven by and getting into a more thoughtful place. I think that's a good thing. So this is me to my next question, which I think it's related to, at least on the first part of my whatever the things you've been saying. What is the hardest thing in your opinion to do when it comes to investing from a
B-hable point of view? And then the follow-up question with that, if I flip the coin to the other side, what is in your opinion the one long lasting B-hable advantage anyone can have? I was kind of hitting on it in the earlier answer, but I think the hardest thing to do is, especially when you have a stock that's a loser, is to recognize if it's a loser and you are wrong and it's time to exit so you don't have that dreaded value trap where you know it goes from 10 to 8 to 6 to 4
and you're either holding or even worse doubling down the whole time. You know I'll give a personal example. So I have always really liked the cable companies, right? The US domestic cable companies in particular and I remember in mid-20023 they were at a conference and one of the companies came on and said, hey, you know it's been a tough quarter, moves are down a little bit, housework
formations though, we're going to report negative broadband ads this quarter. And one of the things I had underwritten when I loved these is I was like, look, you know these guys I don't see how they can lose broadband subscribers. Like yes, I'm sure like you know America you know 50% of it goes up
and flame, yes obviously they're going to lose broadband subscribers. But in a steady state world, I don't see how they could lose broadband subscribers because home formation you know once it's 2% per year home formation, some people still have DSL, those always come on, the demand for data keeps and you go up like yeah at some point they'll kind of hit a flat but I don't know how they could really lose broadband subscribers because they've got this great because they've got that great
formula. And when they said they're going to lose broadband subscribers, you know I should have been looking and thinking oh my god like this is a change to the thesis. One leg of this stool that I thought I had where broads band subscribers would be flat to slightly growing forever that has changed right? The competition has eroded in such a way where I thought it would be kind of flat to neutral slow growing and the competition has ramped up in such a way that they're losing subs.
I really need to reunderwrite, rethink about this and you know I probably should have been out at that time and if you look if you had the stock the stocks were down quite a bit on that day but if you had sold indiscriminately on that day and I think many cable investors were very surprised to hear that you had sold indiscriminately on that day you've missed a huge huge drawdown since then and there's a lot of places like that right? Like you can see it not to stick with cable but the
TV bundle right? The first time Disney came out and said hey we're going to lose some subs at ESPN right? People never heard that happening before. Now this was 2016 because ESPN and I'm sorry this is a mess that I know a lot of your listeners are international but ESPN was like the lynch pin
of the TV bundle. The first time they ever said that if you were long Disney you needed to reassess a lot of your views on the near networks, the pricing power there, the growth there and if you had heard that and exited I mean I think Disney stock is like kind of flat for the past 10-ish years like
you would have freed up a lot of capital to go invest in a lot more profitable places. You can apply this to a lot of places you know that when you accompany that you think has pricing power or announce pricing cuts for the first time or all these but I think the most to come back to your
question the most difficult thing is when you have a loser to reassess and say hey what about this thesis has changed is this actually worse now than it was before or when you have a winner you know really smart people I know when I'll talk to them will both be buying it at 10 and then the stock
will go to 15 I'll be like oh man might be time to sell big winner and the big dude what are you talking about things are much better than we thought right like everything we talked about we're in the best of all world scenario it's time to be buying this company's cheaper at 15 than it was
at 10 you need to buy now that can be difficult because you know if you start with a 5% position and it goes a 50% at 7.5% you don't have a lot of portfolio room to add to that but you know the best investors I know they they do not care what they're they don't let their cost basis effect
them I guess what I'm saying if the stocks down and they think the the value is gone they're out if the stocks up but they think there's more value they might be adding so again everything I said there I was basing off my cost basis of 10 going to 5 or 10 going to 15 the best investors I know
they don't care they look at it and say it's 15 I think it's worth 50 now you know and I think we've got multiple data points that say we're going there or it's five I think it's worth four I think it's worth six not enough margin of safety I'm out you know the money is probably on this
podcast and he was actually making that point he said that Warren Buffett never affects the cost pressure basis affecting he can easily keep buying on the way up as he does the way down whereas he was saying that he struggles with that a lot it's very difficult for him to move his average cost
up despite the fact that he might know that actually things were going better but then going back to the original question of the flip side of the question what will you say it's the the strongest ever lasting competitive advantage you can have from a behavioral interview when
you are playing on the investing you know I I think there is something to being able to keep your cool when there's panic right how many people just last let's just forget COVID forget global financial crisis which are great great great data points but if you were an investor and you in small caps and you were under invested for whatever reason on June 15th 2024 you've missed a 15 percent rip up in small caps since then right I'm using rough numbers and rough dates and everything
but market ribs can happen quickly for any reason and if you have lost if you are not invested in them for any reason and the reason is generally hey the market is down 20 percent I'm frustrated the Russell has under performed S&P 500 by 50 percent over the past 30 years on brush rid if you don't
stick that course for whatever reason or the market's down a lot I'm really scared you know global financial crisis I think the entire world is going to end I think the entire financial systems go down if you're out and you miss those ribs like game over so I think the the most fundamental
the ability to just kind of stick the course you are not the traditional cigar bought compounder type of investor you are striving to find unique I just incredible the ideas either on the legal situation side or things that markets are really paying attention to I'd like to explore
how do you think about the specific ideas how do you research them and how do you think about sizing well I don't know like I will buy compounders I mentioned cable a while ago but you know I think what is maybe different is two things I like to buy compounders when there's some hair on them
you know if you go back to what we were to promote earlier I'd like things that I think I have some edge where I can look at and say hey here's what the markets view I think differently I think the market is wrong you know I think about you know the classic example of this the American Express
Saladoyle scandal in the 60s right that it was a business that was a compounder business was a great business I'm sure but but eventually sold and then bought back but if you had just bought the American Express business during the Saladoyle scandal and then health rubber like your
returns would be incredible but that is a one-time hairy event that was kind of binary and you could do research and you could say hey do I think it's this is going to take American Express down or not I like to buy businesses compounders that have that type of hair on them right they're
they're going along they're chugging boom meteor comes out of left field and you can you could research it and maybe the meteor killed the business maybe it didn't but if you're right and it didn't kill the business you know this stock kind of goes back to where it was and you you can make
really good returns in a short period and and so on you as an analyst to be right or wrong on it you know but a lot of times the market will kind of shoot first and ask questions later and you can get good value you know one example I've done zero work here zero work I have no position
but CrowdStrike you and I are talking August they had that big hat about two weeks ago now the stock's down 25 percent look that is a that's a really interesting situation right if you are a fundamental investor on the tech space that might be one worth looking at because you could say hey
this is going to kill CrowdStrike or you could say hey you know this could be CrowdStrike Johnson and Johnson I'd be perfect moment where they go to their customers and say hey look we we're gonna fix this we're gonna be better than ever and all their customers it could reveal
to all their customers oh my god like CrowdStrike is the most important thing every it's so important to our business like there's no way to rip it out and CrowdStrike could realize oh we've got unlimited pricing power all this sort of stuff you know so that's the type of things I like where
there's like a compound or out of left field or I also like on the event side I like either situations I can pattern match to so you know like a classic would be bidding war company a is getting off is offering to buy company B for $10 per share and out of nowhere company C says hey
this is a really strategic asset forget that $10 we'd love to give you $11 like I can pattern match a bidding war to bidding wars I've seen in the past or things that you can't pattern match anything to so you know the company a is offering to buy company B for $10 per share and then
individual a comes and says hey I'll give you $4 per share plus 30% of my private business that I value at $50 per share or something you know like I've never seen that before there's once I know you don't really want to talk specific examples but every now and then oh you have line
of hearts on so I'll mention one that's in the past there was this company liquidity and liquidity had a they've got a let's just simplified and called they've got new drug that will go up against a giant blockbuster drug that united therapeutic zones and they there's a patent dispute right
and I sent it over to Lionel Hots who is a patent lawyer and said hey is this interesting he was like I've never seen a patent case like this this is the strangest patent case I've ever seen and he had some commentary from the judge where I read it as a layman I said no whatever
and I said to him he was like oh my god I've I've never seen judges admonish people like this before so you know you had this really unique patent case where I was talking to the patent lawyers who like oh I've never seen something like this and you had a judge dressing down a dressing down the
I guess it's united therapeutics I guess they were the plaintiffs in that case dressing them down in ways that we're making lawyers here stand up and you know that's an end of one have people seeing patent disputes yes people but people never seen a patent dispute like this so it was something
where you know you you could do a lot of work and I don't know if the market could properly handicap it that's super interesting another topic that we have explored widely in this podcast is that of communications and you have the podcast you have the sub-stack the blog all play an important role
in the way you are letting today's investors potential ones in the future understand what type of investors you guys are and how you think about markets is this enough how do you think about the communication side with with your natural investment base I think it'd be tough to argue I
under communicate you know clients potential clients they get all those communications I'm always here if they want to chat you know the zoom the zoom line is always open they want to come to the upper east side or meet me and hand coffees I try to fly out to visit them sometimes I think
it's tough to argue I under communicate you know I I guess let me go to the blog the blog is something I really enjoy doing I'm sure it's pretty unique among your guests I know it's unique among investors but you know just because it's unique and because other people aren't doing it
I don't you know I think our thing is we're small maybe we're differentiated but we want to maybe we do things different but we want to do things the way that we think makes sense and the way that we think are the best so the blog yes it's different but hey I really enjoyed doing it and B I think
it really helps it's helped me I helped with communication it helps with me thinking through ideas I think it's made me a significantly better investor it's helped with me networking and meeting other investors and sharing ideas which has helped improve my idea flow quite a bit and then the last
thing I'd say on the communication front you know the nice thing about a blog is if you're a small value investor you're already small fun it's very easy for management seems to dismiss you right you you call them up you're like hey I have been studying this industry for I've done a lot of work
I I think it would make sense for you to consider x y and z and you can fill in whatever x y and z is that you want well a lot of management seems we'll talk to you and they'll say hey cool how much of our stocked you know you say I own pick your number uh three hundred thousand dollars worth
which three hundred thousand dollars worth is a lot for an individual investor it is nothing for a publicly traded company the manager seems gonna listen and say okay well we'll take your concerns consideration and then they're gonna laugh and hang up I'll give you start I was talking to
a executive and they had a they had a shareholder who owned roughly what I'm talking about the dollar figure I'm talking about who owned that and they submitted a proxy proposal in the US they have open process now if you follow process you can do a process person and the proxy proposal was
hey this company does not deserve to be public they need you need to sell themselves I'm proposing to shareholders a vote that says the company must sell themselves and the vote failed because you don't want to tie yourself to you must sell yourself in a year management came pretty strongly
like there's a reason that you don't want to put a company into a force liquidation right but it's not just management they're like this effing guy like points this proxy on he owns three hundred thousand dollars worth of stock who does he think he is as often as like hey do you know
how much stock you're but your board owns in total so I don't know I was like your board in total owns less stock than this one shareholder does your board in total and he was like what and I was like get it you know who else owns less stock than the shareholders you own less stock than the
shareholder does now you have some stock options that if you've asked and you assume different things on braces you might own a little bit more than him but you're making fun of this guy this guy is an independent he has chosen to write a check into this company stock to uh uh and he
thinks the best thing for this company would be to sell themselves so who are you you're saying oh this guy who are you say that who's especially your board like maybe your board knows the business but this guy's got a lot more on the line than your board does your board I mean in my opinion they
just want to keep caching checks and keep the prestige of being a publicly traded company director so why are you making fun of this guy and he's like okay I see what you're saying uh I'll think about that so and a long story with the blog I can call companies and I have you know
with the funds we can do a little bit more than the $300,000 we're talking about but for a lot of companies we're a rounding error you know if I want it's called Berkshire Hathaway and be like I have a hundred percent of my fund and Berkshire Hathaway you'd be like great you own two shares
three shares you know uh that's not an investing vice and we're indicative of it I'm obviously rounding joking there but I can call a company and be like hey we've got a material position I've done a lot of work here you know look I used to be a consultant I consulted in this industry I
used to be in the private equity side we owned businesses in this industry I've read every 10k you've ever published I've read every 10k you're a competitor's owner of the vote I I've done expert calls talk to expert I've done all this work and I I'm here to tell you that if you just do
this instead of that your stock is so undervalued and it's going to create so much fiber and the guys will talk to me like okay cool thanks how much you own be like we own less than five percent your company all right and they'll hang up the phone and I can tell you they never think about what
they heard again however if I call them and they ignore me and then I put a blog post up and I say here's all the research we've done if this company would just do this this you I don't want to say to stock with moon because that is not that's not my style nor what I say that but you know they
would unlock a lot of value or they'd have the potential and I'll tell you if I put that blog post up the next day the company's phone lines will be melting down with investors and the investors being like hey what about this idea why aren't you doing this and we have had a lot
of success with and look I'm not talking about going activists I'm not talking about firing people I'm just talking about like strategies or considering things and I have had so much success with companies where I say hey this doesn't make sense to me I think they need to consider this
and they ignore it when I present it to them but then you put a blog post and all of a sudden their phone lines are in fire and the company is really considering it so that to come back to what you say the communication yeah it's an orthodox but I think it provides a a lever that if I was just
a small person you know by myself it's a lever for value creation that I wouldn't have and I think it's a very valuable lever that can actually create value and actually justify reason for being here we are coming to an end for session but before I ask you a very last question just something that
makes me a little bit curious about your journey you mentioned before that you were a user as a consultant and you wanted to property and then you wanted to a deep value investing special situations in the markets people that going to property or that have gone into
property or the last 25 years don't tend to be property seems like that has been the place to be for at least the last generation what made you transition from property into property markets oh yeah so I really loved it there I had a great time people looking I won't name
many firms people can look at my LinkedIn and figure out where I'm talking about great time I everyone I met there was lovely I had a fantastic time I absolutely could have seen myself seeing them I was 27 at the time and if you're at any private equity company a lot a lot of
companies you know lawyers lawyers have this same thing too as your advance you kind of get into this investing trap right where when you get promoted you start messing a little bit of economics into the the fund the firm whatever it is and it gets really difficult to leave right the longer
you stay the more you invest and when you leave you're you'd be giving up a lot of compensation and now there are ways around that right like most you look at publicly traded CEOs they have a hundred million dollars worth of stock you're like oh they can never leave this company and then
the another company is like we need to turn around artists we'll we'll give you the hundred million dollar check plus another 50 million come on over like there are ways around that right but it is especially at the smaller scale it is difficult so look I was 27 and I I was talking to my bosses
there and they were like we I don't want to put words in them out but I think they really like working with me and there was a place for me to keep advancing and I was really thinking about that but I was also thinking hey I'm 27 and I you know I really like doing things on my own I want to go
to I'm single I don't have a lot of needs I don't live richly like maybe now is the time to go take a shot do my own thing do something as I mentioned with the blog something a little different something a little off the beaten path something that I kind of
can create and scope on my own and if I like it and it works great I'm 27 and I'll be 28 or 29 and I can keep it going if I try it and I don't well that sucks like it's a one or two year setback it's a lot of time it's a lot of foregone compensation but you know hopefully I can land on my feet
and find something else and I was 27 or 28 time and now I'm 36 and I it's been going well and I like what I'm doing and I've really enjoyed it and you know there are days where you look back and launching a small thing a one man thing you're like oh this is really stressful I wish I had gone
a different route I may be a little less stressed maybe a little easier but on the whole I'm pretty happy with the decision and I really enjoy what I'm doing and I'm gonna keep doing it and you know I kind of a everybody says oh I'm watching the video I'm a drummer like I understand a lot
of the things a lot of the ways I invest a lot of things that are different but they work for me and I enjoy them and if I if they work and I believe they're going to work and I believe they're going to create value then I'm gonna try and keep doing them that's fantastic Andrew we ask all of our
guests for a book recommendation what have you been breathing or what would be the one book that you recommend people to read and I know that you have already mentioned a couple doing this session but what else come to mind okay I'm so glad you asked this question I'm sure you meant a finance
book and I will happily provide a finance book if that's where you want to go but look if your listeners are not reading Brandon Sanderson they need to hop on the Brandon Sanderson train so for those you don't know Brandon Sanderson to my mind he is the best fantasy author out there right now
so I don't rely on the storm light storm light there you go there you go so I was a little there and then the next book is just coming out in December or November yes there you go so just a little bit about my I love him I read his first book like when it came out so I've been
a near day one fan but and this man he writes and said he writes nonstop four books a year six books a year so just to give get you interested in him during the pandemic you know he has contracted with his publisher for two to four books per year right so he whatever he writes he owes them
during the pandemic he does a lot of things he teaches at BYU everything all those get canceled right so he's got a lot extra time and what does he choose to do not go to the beach not hang out not watch TV shows he writes four extra books so in March 2021 I believe it is he goes on Kickstarter
and he says surprise says look I wrote four books because these are extra books I don't know them to any publisher I own them and I could go sell them to a publisher but I'm going to try to self publish these and I'm gonna do a Kickstarter and if I can raise I think it was $500,000 I'm
gonna self publish these he raised 40 million dollars and he ended up self publishing these but I say this to say a 40 million dollars like people love his work he is the best fantasy out out there if you haven't tried you need to hop in you need to start with the Missborn series the
Missborn series is the one the one you want to start with but you need to hop in so I say that for one because it's so interesting and two you know back to this is a non-traditional path right and a lot of the things he does if you read and follow him the Kickstarter the self publishing that's
non-traditional I like it because you know as I mentioned earlier when I said value best and like a lot of stuff I do I understand it's non-traditional or maybe but it works for me and he is non-traditional he's a thousand times better than me but a lot of stuff he does he's very thoughtful and he's
really shaping the industry and he's shaping it for a lot of people like I'll give you one more example with the Kickstarter he said for years I've been pushing my publishers look I think I have some super fans you guys publish a paperback and a hardcover I think that's a mistake you should
publish a super premium leather bound version of my books with images beautiful images higher and artist pay the artist thousands of dollars to make an image and sell this for 50 100 200 dollars per book and my fans will buy them and I think it'll be a great conversation piece and the publishers would just laugh them off they'd be like that's not how things are done so what does he do with this he's starter one of the things is hey you can get a supreme book and now guess what there's so much
demand for it he's going back to all of his old books and he's doing leather bounds and selling them so that's just one way he's been really thoughtful on with Amazon and audible how they pay their authors and everything so I just think he is a really thoughtful guy and he's the type of guy
there's a reason he's at the top of his craft in terms of fantasy and it's because look he's not just thinking about the worlds and the world but and he does that he does great at it but he's thinking about every aspect of the craft and improving it for him and writers and uh yeah so I would
just recommend that get into mishporn I understand fantasy books aren't for everyone but I can't say I've really recommended mishporns anyone who hasn't really enjoyed it so that would be my book recommendation I have to say that in five years of this podcast this is potentially one of the best book recommendations that anyone has given on the podcast with the best backstory about the author and we're gonna have to we're gonna have to clip it out and send it to Brandon Sanderson be like this
is how much of this man loves your books and maybe a little shoot us some I just want to say how much I love man there was a so Brandon's interested but he's awesome I could talk about forever one last third there was an article when he was getting really big after this that came out and it was some like you know New York Times writer who high society who went and visited him and was like this guy sucks and they were like he's boring he's a family man he wakes up and he basically writes all
day and some of his writing can be especially in his early books can be a little stilted it's like okay cool like his first books the writing is better now than it was then fine the man loves his family fine the man like only wants to write worlds like great I love the guy and as you can tell
I read that and it's one of the few times where I've been like I would go fight this man right now on the street for what he said about my man Brandon Sanderson I have only read the storm light summit yeah book book five of the surmites coming out this winter good I've only read the
the that's specific series and I it's absolutely fantastic I it's super entertaining it's really great it's very unique it's very original one of the things was one of the things with Stormlight and one of the things that so unique about Sanderson is storm light and misfortune and most of his
other series are set in the same overall universe so if you've read Stormlight and you go read Missborn some of the characters from Stormlight will pop up in Missborn so you're reading the Stormlight story but smuggled into the Stormlight story and smuggled into the Missborn story
is this overall story of the entire universe so I just you know it's the MCU except done really really well that's fantastic and if people want to reach out to you or they want to follow your work I mean we've talked about the podcast on top stock but just in case how should they go about
reaching out to you look this is really simple go to yet another value blog calm follow that and if you follow that I promise you you will be able to reach out to me you can just reply to the post that you get those will go into my inbox it will be very you can comment on them you you will be
able to find me if you do that short of that I also am on Twitter at Andrew Rangel that's Rangel like a driving range L.E.Y you can follow me there I you know to our point earlier on unplugging I try to not check I don't really check Instagram I don't check Facebook I try not to
check Twitter but you know it just keeps pulling me back in so you will I will be hit on or miss in terms of being able to contact me on there probably hit but maybe I'll stick to my guns and be missed so following the blogs the best way but all those work that's absolutely fantastic and the worker this has been fascinating thank you very much for coming on the world record for the podcast