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Hi everyone and welcome to The Value Perspective Podcast for a special episode, where Juan and Andrew Williams take you behind the scenes of the 2025 New York Value Investor Conference or ‘NYVIC’, recorded live from the conference floor – just as we have done in the past for the London Value Investor and London Quality Growth Investor events. We are fortunate to have lined up an incredible slate of guests – ranging from those who presented on stage to attendees at the conference itself. In today’s episode, we are joined by both stalwarts and rising stars from the value investing world: David Salem of Hedgeye Risk Management, returning guest Django Davidson of Hosking Partners, David Samra of Artisan Partners, Dave Iben of Kopernik Global Investors, Jonathan Boyar of Boyar Value Group, Anand Vasagiri of Artisan Partners, CT Fitzpatrick of Vulcan Value Partners, returning guest Jim Osman of The Edge Group, returning guest Andrew McDermott of Mission Value Partners, Samantha McLemore of Patient Capital Management, Bob Robotti of The Robotti Company then, finally, Rich Pzena of Pzena Investment Management rounds off an episode packed with insights from some of the most respected names in the value investing space. And, again, a huge thank you to Robert Hunter for inviting us all the way to New York and making this possible. Enjoy!
JTR: David Salem of Hedgeye Risk Management, welcome to The Value Perspective Podcast. How are you?
DS: Very good, thank you, Juan. Nice to see you.
JTR: We are at the New York Value Investor Conference and it is the first coffee-break. How is it going so far, in your opinion?
DS: As expected – there is not much new in value investing! That is not a disparagement of the presentations we have heard so far – it is what it is. Look, in the last 10 years or so, I have been a very serious student of flows and markets. There is this thing from valuation – I think you know I started my career working with Jeremy Grantham at GMO, and our model was kind of value, momentum and neglect. And when you think about that, in 2025, what has come to the fore is momentum. So the question is, How do you navigate these choppy waters where, for a very long time – as we heard from Dave Iben and Django Davidson and our other speakers this morning – it has been a very difficult environment.
Just to finish my answer to your question, I don’t think the speakers we heard, at least orally, have expressed sufficient appreciation for the degree to which, frankly, legislation and regulation in the US has created that massive self-fulfilling and self-reinforcing wave of momentum, particularly as it relates to passive. So I am not as sanguine as the speakers we have heard thus far that we are at a turning point. That said, if you focus on things like year-to-date returns, which I never, ever do – I focus on cycle-to-date, not year-to-date – you can see there is some glimmer of hope things have turned. The ‘Mag Seven’ have become the ‘Bag Seven’, and some of the other stocks are getting revalued upward. So I’ll stop right there and let you ask another question.
JTR: We heard some interesting presentations this morning and I think, if there was a common theme, it is the idea of capital allocation outside the US becoming quite attractive – with pitches on the platinum group metals, a lot of emerging market stocks and even some large conglomerates in Europe. Do you have any thoughts on that particular trend?
DS: Well, let me comment more generally – because it is also why I am here. As you know, this afternoon I am moderating a session with my good friend, Andrew McDermott, on Japan. So what can we boil all this down to? What is its utter essence? Not just investing generally, but today – the talks we have already heard, the talk Andrew will be giving later, with me giving him some questions along the way. And it comes down to time horizon and risk tolerance. Risk tolerance can be a tolerance for drawdown – absolute-return risk – or, more in this context, a tolerance for relative-return risk. So, How much pain of underperformance will my clients tolerate, if I keep suggesting to them there is real value here? After all, if they can extend their time horizon beyond the institutional norm, everything will be just fine in the end, right? That is the essence of why we are here. And you see enormous opportunity in value – particularly outside US markets.
By the way, I would argue, even though the number of stocks in the US has shrunk from sort of 8,500 at its peak, earlier in my career, to roughly half that now, there is still great opportunity – even in the US stockmarket. Still, as with the foreign stocks our speakers have already talked about and we’ll hear about as the day unfolds, you need an enormous amount of patience – which means, if you are managing other people’s money, you need to be a very skilled communicator to say, Look, this really makes sense for us to hold longer-term. Because I would be the last one to bet that the stocks we heard about earlier today are actually going to turn around tomorrow, or have already started a massive upward rerating – I just think that would be naive in light of all the forces against that. That doesn’t mean I’m not an adherent or an admirer of the techniques we are hearing about today. As you know, a similar group comes back tomorrow. I can’t be here but that will be quality-growth investing and I expect those presentations will be very, very different.
JTR: You touched on flows and passive and, during the last presentation with Dave Iben, he was asked about how dominant passive had become. A key question is, if passive is making markets less efficient, how come active management is still having a tough time beating the markets and generating alpha?
DS: One-word answer: flows. Now, I’ll elaborate a little – and due credit to my friend who we partner with, Mike Green, who does great work with Tier1 Alpha and Simplify and on his own Substack. I think he is kind of the leading researcher – but there are other academics who have proved just how incredibly powerful these flows are. And, indeed, how closely tied they are, dependent upon employment trends in the US – because of the massive bid and the momentum behind the largest-cap stocks in the indexes, right? I am sure you know about the QDIA [Qualified Default Investment Alternative] – the regulation and the legislation that says, if you are an FAA or an RIA managing other people’s money, you get a complete pass. It is a safe harbour – if you take your clients’ money and put it in a target-date fund in the S&P500, you cannot be sued, right?
You know, we heard a little bit from Dave Iben about career risk. He actually put up a quote from my former partner, Jeremy Grantham, about how career risk is all-important. Now – with the utmost respect for Dave, whose work I have followed for years – I think, if you just took the presentation we heard from him and replayed it over and over again, particularly his answer to the question about flows, you would say, Wait a minute, this guy doesn’t really get it. Like, he hasn’t really steeped himself in the data, the analysis, the regulation, the legislation, to understand exactly why these forces are as powerful as they are today, to gauge with reasonable accuracy the probability they will persist, which would make his life even more difficult moving forward. Because, of course, as you are eight, 10, 12, 15-plus years into underperformance, it becomes more acutely difficult to catch up on that.
JTR: Really interesting, David. Thank you very much for your time.
DS: Thank you, Juan. It’s good to see you.
“These deep-value, weird and wonderful global shares are coming back to life” – Django Davidson
AW: Django Davidson of Hosking Partners, we are here in New York at the Value Investor Conference. Your presentation was called ‘Rolling in the Deep’ – so what is that all about?
DD: So ‘Rolling in the Deep’ is the title of an Adele break-up anthem – and it is also a kind of analogy for what value investors have been going through for the past decade. And one of the reasons for the title was just to underline this idea that we have broken up with the period of value underperformance; and these deep-value, weird and wonderful global shares that have been largely ignored and received zero attention for the past 15 years, as the large-cap US tech companies sucked up all of the intellectual and financial capital of the world – they are kind of coming back to life. So we have broken up with that period – and then we moved from one great female artist, Adele, to another – to Dolly Parton and her terrific ‘Light of a Clear Blue Morning’. It is this really optimistic song – again, about a breakup, but about how when you reset and restart, there is just tremendous optimism or positive thinking about this ‘clear blue morning’. Which – hopefully – is now upon us and, you know, the value storm has passed and we are now in the spring.
AW: Well, absolutely. I share that hope and certainly the last few months are a sign of what could happen in the future. You focused on platinum group metals (PGMs) specifically in your presentation– what is it about that space that you are finding particularly interesting at the moment?
DD: As you know, we have this framework called the ‘capital cycle’. The disciplining factor of the capital cycle is this focus on industry capital spend and what we have seen for the last decade in PGMs is a structural underspend in new capex. So mines have been ‘high-graded’ – capital has not been spent to sustain these deep mines. If you look for the decade we have just had versus the prior decade, the industry spent about 30% less per ounce on capex – and what that has baked in, Andrew, is this supply curve that just falls off very sharply. So as capital-cycle investors – focused on capital, focused on supply, measuring supply – we see a really exciting set-up whereby it is just going to be impossible for supply to grow. The question then is how much it declines and that is interesting to us because we are kind of sceptical of demand stories – and the demand story for PGMs is obviously very negative. These are used for internal combustion engines, EVs that replace internal combustion engines and so on. But we are kind of sceptical of demand stories.
AW: Fantastic. It is an impossible question, thinking about inflection points, but are there any chinks in that negative narrative and starting to see things become a bit more positive?
DD: Yes, I think so. And listen – I don’t want to be too bombastic and pretend I have a roadmap for the future of the global vehicle fleet. But I would just say a few things – you know, we have gone pretty quickly from a view that 100% of all cars sold in the future were going to be EV, to now thinking, Well, that might happen, but we don’t know when that will happen – and, in the meantime, internal combustion engine cars have a terrific runway ahead of them and plug-in hybrids, which use more PGMs than internal combustion engine cars look to be the consumer’s choice in many markets where EVs are being pushed at them. Take China, for example, where there is huge regulatory friction to buying anything other than EVs – plug-in hybrids are kind of the consumer’s choice there. So this idea that we move from, you know, internal combustion engine cars very quickly to fully EVs is being questioned. And why that is important is that would extend the life cycle of demand for PGMs and these mines, which have basically been underinvested in, such that they maybe have six, seven or eight years of life, suddenly could have a lot more life left in them.
AW: Fantastic Django. Thank you very much.
DD: Thank you – and thank you for your role, Andrew, as part of this extraordinary community of value investors. We have had a tough old decade but I like to think that, as a group of people, we have supported each other and got through the tough times. I like to think we all have a similar outlook on life and it is just great to be in the company of all these good people.
AW: Well, that is very kind – and let’s hope the future turns out as we expect it to.
DD: It’s a clear blue morning!
“We spend all of our time trying to find businesses that fit a very specific profile” – David Samra
AW: David Samra of Artisan Partners, you have just got off the stage at the New York Value Investor Conference – how was that for you?
DS: Good, thanks.
AW: Fantastic. Your presentation was really fascinating. Could you tell us a little bit about the opportunities in international markets today – particularly in the large-cap space?
DS: We generally don’t think about opportunities in a very broad sense. Rather than thinking about us as ‘international exposure’, you should think about us as an investment platform – and we look at securities for what they legally are, which are small pieces of ownership in a business that has long-term, enduring intrinsic value. We spend all of our time trying to find businesses that fit a very specific profile and, as value investors, we try to identify situations where the price of that security is divorced from our estimate of the fundamental value of that business. So when we think about quote, unquote ‘markets’ per se, to us, that is nothing more than the aggregation of the market value of a bunch of businesses, some of which will be overvalued, some of which will be fairly valued – and then hopefully there are enough undervalued securities to allow us to be able to build a portfolio of compounding investments.
AW: Without mentioning any stock names, are there any countries or sectors that are particularly interesting you at the moment?
DS: We generally find that, after years and years of market appreciation, it is very hard to find countries or sectors that are out of favour. It is clear Chinese equities are probably one of the most undervalued securities in the world, and you have to internalise your own tolerance for risk of investing in a market where there are serious geopolitical issues involved – and that decision will be made on an individual-by-individual basis.
AW: There is an investment truism that betting on what has worked in the last decade tends not to turn out well in the future – and we all know how well the US market has done in the last decade, particularly versus international. What is your feeling, given the moves we have seen year-to-date?
DS: Well, rather than be guided by truisms, we are guided by fundamental analysis. Unfortunately, we don’t cover the US stockmarket as non-US investors so I don’t have a very well-informed opinion on that, but what I would say, for those Magnificent Seven businesses that make up the securities that have driven performance, they are fantastic businesses, and it would be hard to argue they should trade at valuations more mundane businesses trade at.
AW: Very interesting. David, thank you very much for your time and for your presentation today.
DS: OK. All right.
“Let’s find good companies across the globe at big discounts – that is mitigating risk” – Dave Iben
JTR: Dave Iben of Kopernik Global Investors, welcome to The Value Perspective Podcast. How are you?
DI: I’m doing great. Pleasure to be here, thank you.
JTR: I have to say, I really enjoyed your session this morning, where you were making the case for a lot of international stocks. Why is that?
DI: Well, thank you – I appreciate that. We talked a lot about perceptions and cycles – things go from growth to value to growth to value and they also go from international to US to international. Right now, the love for growth versus value and the love for US versus the rest of the world is extended. You know, maybe it is a little less deserved, but it is extended. So it is a big, big world, with a lot of good companies out there – and they are being discarded because people are, I’ll say, mindlessly throwing money into the indexes and leaving great companies at value prices in other countries, especially emerging markets.
JTR: You are preaching to the converted as I am, myself, a value investor in emerging markets. One thing that caught my attention though was you mentioning Europe and specifically the UK. Why there?
DI: Well, it has been interesting to see how Europe has underperformed. Not counting this year – it’s off to a great start this year – but it has been so many years that it has been left behind by the US and we have got to the point where I think people are overly negative on it. Europe, obviously, has lots of great companies with lots of smart, hard-working people running them and so, when everything gets thrown up, we look and see which ones are really good – and we’re finding them. The UK, in particular – you know, people are down on Europe and they are down on Brexit and they are down on a lot of the businesses in the UK. But the UK is a great country and so we are happy to start buying a handful of companies there – and, this summer, a lot of us are going to head over there and do a lot more research. It seems like a bargain.
JTR: You did mention that trip – spending time this summer with your team in London. Could you explain a bit more why as you also said you had done it for eight years in different countries?
DI: Yes. We have this policy where we are a global investor. In the US, sometimes people are not as knowledgeable on the world as we ought to be – we are in this little shell – and so we have said, Let’s get out and see the world. And we do take trips all year, every year to see what is out there. In the summer, though, we say, Let’s just go someplace and stay for a couple of months. We set up all kinds of meetings and get to know things closer – get to know the people and get to know a lot of different companies. So it was fortuitous to be in Montreal before oil prices plunged during Covid – we were there right before that. Argentina, a few years ago, before all the changes there was really great timing. Japan and Korea last summer was good timing because there is a lot of value in Korea particularly and, as we just discussed, it seems like a great time to go to the UK – the stocks are cheap, the pound is very cheap and so great timing. We look forward to it.
JTR: That sounds fantastic. One thing that is at the front of investors’ minds when it comes to emerging markets, and specifically today, is the whole issue of US tariffs. Do you have any thoughts on that – is it more noise or a genuine risk?
DI: I imagine it is part risk and part noise but I would make a couple of points. One, as I mentioned earlier, people view emerging markets as small, risky niches while we view them as ‘none of the above’. They are not small – it’s most of the world. They are not a niche – it’s most of the world. They are volatile – but we don’t view volatility as risk. If risk is permanent loss of capital, the cheaper something is, the less risky it is. So, on tariffs, the market seems to think, Good for the US, bad for everybody else – but it’s an unknown. Maybe it’s less bad for emerging markets than they think; maybe it’s less than perfect for the US. The US is expensive – that is where the risk is. And so, if tariffs mean change – wrong time to pay big premiums and right time to get big margin of safety. Emerging markets means lots of different countries – some will be winners, some won’t be winners. So let’s find the good companies across the globe at big discounts – that is mitigating risk. Putting all one’s money in a country with big multiples during times of change – that is not mitigating risk.
JTR: One final question from me – and maybe it is a bit cheeky. During your presentation you were asked about the rise of passives and you had a lot of charts on that but my question is, If passives are making markets less efficient, how is it that active is having a tough time outperforming?
DI: I think passives start off righting inefficient markets but, the more people that do passive, the less efficient it becomes – by definition. People who are buying passive are not being rational – they are not paying attention to the price and they are not doing due-diligence – and so they go from a free ride to basically leading the market. Why does that happen? It becomes self-perpetuating in the short term: people buy the passive manager, they fire the active manager, the active manager must sell cheap stocks, put money in the index, the index – being a momentum mechanism – buys expensive stocks and it all becomes self-fulfilling.
Expensive stocks become more expensive and cheap stocks become cheaper. So in the 1970s and the 1990s and lately, being an active manager is a painful thing. That cannot go on forever and it will not go on forever. You did not want to be a growth guy when growth broke in 1972 and you did not want to be a growth guy when it broke in 1999. Value did very well in both those decades – very, very well. If we are in that same spot, where you might be in a place where momentum unwinds, the passive guys lose a lot of money and the value guys – from these valuations – certainly ought to do well. So it will be painful until it changes. It may have started changing a couple of months ago or maybe not – time will tell – but eventually it has to.
JTR: That is great. Enjoy the rest of your day and thank you very much for your time.
DI: Thank you. Appreciate it.
“As a contrarian, maybe it is not so nice to hear all this optimism for value!” – Jonathan Boyar
JTR: Jonathan Boyar of Boyar Value Group, welcome to The Value Perspective Podcast. How are you?
JB: I’m doing well. Thanks for having me.
JTR: We are at the New York Value Investor Conference. How is it going so far?
JB: It has been a lot of fun. It is good seeing people I haven’t seen in years but, more importantly, I am hearing some fantastic ideas from a variety of speakers – including some international names, which is something we don’t normally look at, but it has been nice to hear. It is also nice to hear – or maybe, as a contrarian, not so nice to hear! – the amount of optimism for value investing over the next couple of years. So I am excited and nervous at the same time. But, overall, it has been a great day.
JTR: It may be a little bit early on – we are just halfway through the morning – but what presentation has caught your attention so far?
JB: I mean, all of them have been good. Django’s presentation was quite interesting – though it was in an area we don’t look at. Dave Iben’s presentation on the future of value investing I liked a lot. I’d say David Samra talking about Phillips was particularly interesting – one, because we own GE Healthcare and it’s a comp there, plus he talks about a potential spin-out that is worth roughly the entire market cap of the company. As a value investor who looks at spin-outs, I find that really intriguing.
JTR: One of the topics I have become obsessed with, and which has been touched on in today’s sessions, is flows into passive and what that means for active. I am very keen to hear your opinion on where we stand in the whole debate on passive beating active – is active losing the battle against passive?
JB: Clearly active managers are losing the battle – the question is, will they lose the war? And I don’t know. I think there is a place in everyone’s portfolio, or a lot of people’s portfolios, for passive but, to invest in passive – especially in the US when the indexes are at all-time highs – seems like a recipe for mediocre to terrible returns over the coming five to 10 years. With active management, though you do have to be careful. You have to pick the right stocks – and most stocks don’t do well if you look at all the academic studies – and we’ll see. But, yes, the flows into passive have only gone one way and I think they’ll continue to go that way until we see a significant retrenchment in the market.
JTR: You are the host of a podcast yourself. For the benefit of our listeners, what is the name of the podcast, where can it be found and how often does the podcast come out?
JB: Yes – thank you. It is The World According to Boyar, you can get it anywhere you get your podcasts and it is my favourite part about my job that I don’t get paid for! And we just do it infrequently – whenever we can find a great guest who we think can add value for our audience. And it’s just a lot of fun.
JTR: You recently had Bill Ackman come in to talk to you about his ideas and latest acquisitions. How did that come about?
JB: It’s an interesting story – he is trying to do a transaction with a company called Howard Hughes, which is a name we have written about and have owned for quite some time. He is doing it at a price – or proposing to do it at a price – we find unacceptable, so I wrote a letter to the special committee and copied him in. He was kind enough to call me and we discussed it on two occasions. I went up to his office and asked him if he wanted to go on the podcast where I could ask him, I thought, tough questions about it – to get to a wide institutional audience – and he was kind enough to accept. It was a lot of fun.
JTR: It was a really interesting, fantastic episode – so congratulations on that. And I believe you also ended up playing tennis with him. Who won?
JB: We played doubles and he actually won. I’m a singles player – singles is my favourite part of tennis – but he is a much better doubles player. In fact, it looks like he could be playing a match with Nick Kyrgios and I look forward to watching that whenever it is on.
JTR: Thank you very much for your time – and for coming on The Value Perspective Podcast.
JB: Thank you so much.
“Our holdings have no common theme other than the four key criteria we look for” – Anand Vasagiri
AW: Anand Vasagiri of Artisan Planners, welcome to The Value Perspective Podcast. It is a pleasure to have you here.=
AV: Thank you so much, Andrew. Thanks for the opportunity.
AW: We are here in New York at the Value Investor Conference and you have just come off the stage. Please could you tell us a little bit about what you were talking about today?
AV: My presentation was about the current state of the markets and the process we follow to find names in this current market environment – and I pitched one stock as part of the presentation.
AW: Your strategy is called International Explorer – which regions are you exploring in particular?
AV: We are looking everywhere outside the US. The strategy allows us to invest in companies that are based outside of the US – typically under $5bn market cap. So it’s a broad mandate – a broad universe – which gives us the freedom and the flexibility to go anywhere we see value.
AW: OK. That market cap is relatively low. In the last six months or so, have any sectors or areas of the market been standing out as being particularly interesting to you?
AV: Not really. I mean, if there is one thing that is common across the 37-odd names in our portfolio, it is just that each one is idiosyncratic. There is no common theme other than the fact they made the four key criteria we look for: they are all good businesses, we think; they are all run by good management teams, from our perspective; all of them have either net cash on the balance sheet or have very low debt or levels of leverage on the balance sheet; and they are all incredibly attractively priced with a big margin of safety.
AW: Fantastic. The first few months of this year perhaps put a dent in the narrative that growth is going to go on outperforming value forever – do you have any views on that?
AV: Again, not really. We don’t really focus on factors, such as growth versus value, or even things like smallcap versus large cap. We feel we operate in a very inefficient part of the universe, with about 50,000 names, so we should be able to compound at an attractive clip in any market environment. That is our goal. We don’t feel we need to have exposure to a geography or to an industry – our goal is to compound value and create wealth for people who have entrusted their capital to us.
AW: So to be as diversified as you can be within the area you look in, while making sure the portfolio is not beholden to any one macroeconomic outcome – is that fair?
AV: Yes. But, again, we are very cognisant of the risks of overdiversification because, if you look at the classic portfolio theory, you will get all of the benefits of diversification with 17 stocks. So if you have 100 stocks in your portfolio, I don’t know if you can have as much conviction on your 100th stock or your 99th stock as you have on your second or third holding. So we want to run a fairly concentrated portfolio with high conviction and not really worry about giving clients an exposure to a geography, an industry or a factor.
AW: Brilliant. Well, thank you very much for your time. It was a pleasure to have you on the pod and see your presentation.
AV: Thank you so much for your time.
“A stock can go up 15% for no fundamental reason other than it is now in an index” – CT Fitzpatrick
JTR: CT Fitzpatrick of Vulcan Value Partners, welcome to The Value Perspective Podcast. It is a pleasure to have you here. How are you.
CF: I’m doing great, thank you very much.
JTR: CT, Vulcan Value Partners is legendary in the world of value investors – how has that journey been, especially given value has had such a tough time over the last decade?
CF: Well, we are really fortunate to have a lot of wonderful clients we work for, and a lot of wonderful friends in the value investing industry we respect. And it’s great to be here at this conference – and seeing a lot of both of them.
JTR: One common theme in the questions posed today is the debate between passive and active. Is active management losing its battle against passive?
CF: We don’t believe so. As value investors, we are big believers in reversion to the mean and there’s been a lot of capital that has flowed into passive investing and active management has lost that market share. But there is a lot of value added by active management and, the more capital that goes into passive, the more it becomes almost a self-fulfilling prophecy – that the active managers that are left are going to be able to have easier opportunities, because you’re just simply buying and trading against an index that is somewhat mindless in terms of why it owns what it owns.
JTR: One of the things that has come up in this podcast before is whether passive is really making markets less efficient. If that is the case, why is active having a rough time beating those markets?
CF: Well, again, I think it is just momentum into the indexes. We see companies we own and have a value for included in an index and the stock goes up 15% for no fundamental reason other than the fact it is now in the index. Other stocks might get dropped from the index and their drop has zero to do with their fundamentals. As more and more assets are controlled by indexes – where their stock prices are increasingly not driven by fundamentals but just by their weight in the index – that provides mispricing opportunities. So it’s sort of like pulling back a rubber band – you pull it, you pull it, you pull it, then all of a sudden, you pop and it goes.
JTR: Another common theme of the conference today is a lot of investors pitching international stocks – in emerging markets, Japan, Europe – but you chose to go with a large US financial conglomerate. Are you thinking about international markets as well? Where is the opportunity set better?
CF: The example we used was the US-domiciled KKR, which is a global company – interestingly, they do business around the world, they derive revenues from around the world, they invest around the world. But we do look around the world – we have a global perspective – and in fact, in the last 18 months, we have been increasing our exposure to companies that are domiciled outside the US.
JTR: It is interesting about the alternative asset management space – how dominant they have become – not only KKR, but many of the others. What are your thoughts about the private debt push a lot of people are seeing?
CF: Some people have been doing it for a really long time and they are very good at it. And now their success is attracting a lot of newer players who might or might not have the same skill-sets. There will probably be a shakeout at some point in the future – and I think it could create some great opportunities for us if there is.
JTR: CT, thank you very much for being on the podcast and have a great day.
CF: Thank you, Juan, I really enjoyed it.
“What I really want to know is what stocks went wrong and why did they go wrong?” – Jim Osman
JTR: Jim Osman of The Edge Group, what a pleasure to run into you today at the New York Value Investor Conference. How are you?
JO: I’m great, Juan. It’s good to see you.
JTR: It is good to have you back on The Value Perspective Podcast – and on such short notice. We are now midway through today’s conference – what have you heard that has caught your attention?
JO: Well, I love to focus on some of the negatives – because that is where I learn more – and, you know, everybody’s got stocks that go up, right? And contrary to popular belief everyone can pick stocks – it’s just a matter of time. So what I really want to know is what ones went wrong and why did they go wrong? And unfortunately, I just missed the question last time because he didn’t pick me out. But that is what I want to know so I’m hoping for a little bit more of that this afternoon – just maybe to ask a few questions of some of these fund managers and say, When do you cut a position? Because that is where people lose money, right? It is not not-making money, it is not selling too early, it is none of that sort of stuff. It’s ‘I let the position run too long and I lost money’. That is where. So I want to hear more about that.
JTR: There has been a bit of a trend in what has been presented so far, with a lot of ideas coming in international markets and not that much for the US. Any thoughts on that?
JO: Look, we all think Europe is cheap while, on Asia, they talk about Japan and Korea and all that stuff – but, for the regular guy, he can look anywhere for value. So, yes, Europe is cheap but there is still a lot of value in the US domestically. And one thing I was a little bit disappointed in, Juan – and I asked a couple of questions on this as well – is that a lot of these guys hold these big stocks. GE was the last one mentioned and the presenter said he sold too early – well, if he had done his full analysis on the break-up of that business, maybe he wouldn’t have done that. And they also mentioned they were buying ABB and I pointed out, as a question, that Accelleron, which ABB spun off, gained 150% – and they completely ignored that point as well. I think, from a value perspective, you have got to question that a little bit wider so, in terms of your question – look, value is everywhere.
JTR: It is interesting we have not seen any specific stock idea from the special situation camp – and, to your point, there have been no spin-off ideas pitched.
JO: Well, I think that is why I’m here today – I think next time they want me to speak so I can give you a little bit more perspective on that! But I agree with you. And you can get very focused in the value-oriented view of stuff but there is ‘pure value’ – and, if I told you, Let me show you some value stocks in a space where no one covers that would outperform if you were to buy a basket of them over two years, you’d be like, Well, show me, Jim. But these guys are not looking in that space, clearly. There is a lot of learning to be done.
JTR: Finally, Jim, your book is out – can you remind us what it is called, where can we buy it and what it is about?
JO: Sure can! It is called Price Catalysts and you can buy it on Amazon. And, you know, read it, review it how you want, but I wrote it for a purpose – and this is so people can understand this area of the market which, clearly, even the big fund managers don’t look at.
JTR: Fantastic. Thank you very much for your time.
JO: Thank you, Juan, Cheers.
“There is a lot of talk but very little real-money allocation towards Japan” – Andrew McDermott
AW: Andrew McDermott of Mission Value Partners, we are here at the New York Value Investor Conference. How are you?
AM: Andrew Williams, I’m very good!
AW: It is great to see you again. We have seen you in London. We had you on the podcast twice last summer. I feel like you are a great friend of the show so it is great to have you back on the podcast. You have just co-hosted a great session where you had a prosecution-defence approach to looking at Japan versus China. One of your lines I loved was that you were not pitching for a stock – you were pitching for a change in perspective. So how do you think that pitch landed?
AM: Well, I don’t know. I think we probably took more time than we should have so we haven’t had the direct feedback yet! But I think most of the people were awake through the entire presentation – and some strong feelings were expressed on their expressions, if nothing else! So we may have at least gotten some conversations headed in the right direction.
AW: Fantastic. When we spoke last year, there was a lot of press around changes in Japan and changes in shareholder-friendly actions and we were agreeing that was not actually all that new – it was just that suddenly the media had jumped on top of the topic. Now other things have been in the press more recently so what’s your take on the overall sentiment of the investment community towards Japan and towards those industrial businesses you mentioned, longer term?
AM: Well, I think there is a lot of talk – to quote you too, maybe too much talk! – but very little action, as expressed in the real-money allocations to Japan. In fact, in many cases those numbers are down. And if you look at the relative performance of Japan, until very recently, in US dollars to the US, and the relative performance of Japan to China – I mean, what I observe is that a lot of the money that went into the Japanese index trade was ‘hot’ money, it was tied to a ‘long index, short currency’ trade, and it was very focused on China plays. And, as the Chinese market has recovered, a lot of that money that was allocated to Japan on kind of a trading basis has gone out. But there has been a bit of a rotation to smaller-cap companies, as well as a real increase in M&A, within the markets. I would say, in some ways, the big-picture story of Japan has moved on but, within Japan, there is actually a lot more intensity and a lot more discussion about things like hostile M&A or private equity or activism or, especially, the importance of Japan to this emerging re-industrialisation in the US and defence and how that is tied in.
AW: One thing you touched on in your presentation was business leadership – the difference between lots of western companies being led by accounting or finance majors, versus genuine engineers leading Japanese industrial and engineering companies. It is a wonderful narrative but how significant is that, do you believe, for the ongoing earnings growth and ongoing prosperity of those companies?
AM: Oh, I think it is absolutely essential. Just to take an example out of the real world, Intel recently had to massively increase its capital base. Boeing is also in the process. I guess I am confusing the two but it is the same story – these are companies that, for a long time, were showing high returns on invested capital but now they are having to recapitalise. I think the opposite is in the process of happening in Japan because you have had companies making investments that have not been showing very high returns – shipbuilding is a great example of that. And then, all of a sudden, the strategic imperative has become for these Japanese companies – and Korean companies as well – to do things that American or British or German companies cannot do.
Part of that is the demand for resources and energy – and Japan’s energy policy has been, I think, much more thoughtful than any of the other industrial countries. So there has been a lot of excitement and enthusiasm about European industrials but no-one is paying attention – or people don’t seem to be paying attention – to the fact the energy complex in Germany has been incredibly uncompetitive for the last decade or so. Japan is the opposite. They are in a position now where they can really start to harvest the fruits of that investment labour – and the most obvious is the connection between AI in the software world and in the physical world.
AW: Fantastic. Andrew, thank you very much for your presentation and for coming back on the podcast – and I am sure we will do this again in the future.
AM: Thank you very much. Have a good day.
“Knowing the facts of wealth creation is a key aspect to being able to do it” – Samantha McLemore
JTR: Samantha McLemore of Patient Capital Management, welcome to The Value Perspective Podcast. It is a pleasure to have you here. How are you?
SM: I’m doing great. Thanks for having me
JTR: We really enjoyed your presentation. As you said, you ‘won the lottery’ by starting your career with one of the greatest investors of all time. For the benefit of our audience, how was that experience?
SM: I did – as I like to say, I won ‘the job lottery’! Bill Miller went to the same alma mater I did and, when I was graduating from undergrad and doing a job search, he happened to come back and speak at our college. I asked if I could apply for a job, joined him as a junior analyst and worked with him for over 20 years – and then took over the business we worked on together under Patient Capital. So I was just so lucky. A lot of people say this is an apprenticeship business so to be side-by-side with a master investor … I got to sit in so many amazing meetings like, you know, Bill and Jeff Bezos early on in his Amazon investment. You know you can’t be more lucky than that as a way to learn about investing and about companies and businesses.
JTR: In your journey, first with Bill Miller and now on your own, how much has the market changed?
SM: Well, the market has changed a lot. I mean, at the core, obviously there are enduring elements of the market and it has always gone to extremes of fear and greed – and I think stock prices, over the long term, follow fundamentals. But when I got in the business in 2002, you know, Bill was in the midst of his 15-year ‘streak’, value investing was a very popular approach – it was the best-performing approach – and there were questions about that. Now, you know, with algorithms and passive and ‘pod shops’, I think the market has got even more short-term and value has been out-of-favour with the decline in interest rates and the innovation and the technological revolution. So, again, there are long cycles in the market and those things change over time – you know, the market structure has changed a lot – but I still think the core piece of ‘the market will provide you opportunities’ endures
JTR: One thing you said I found interesting was how it is very difficult to hold onto a ‘50-bagger’ if you do not expect the ‘50-bagger’. In today’s market, how do you think about those sorts of opportunities?
SM: That is 100% the hardest thing. And I asked Bill, Is it harder to find 50-baggers or 100-baggers or to hold them? And he said, Absolutely, it’s harder to hold them because you make a certain amount of money and your thinking is framed by a certain context – whatever that is. Like, with Amazon, no-one expected AWS – you couldn’t have predicted that. That was a huge source of value creation. The advertising business, the same. You know, providing logistics or, now, healthcare – no-one thinks about those potential opportunities because you can’t value them. How do you possibly value them? And then they will have a big run but, you know, all of the biggest wealth-creators have very severe drawdowns – 50% to 80% – so you will have periods of significant loss that people are concerned about. And you can’t predict when those might come.
And then no-one can get out and get back in – so it is absolutely harder. So I think being aware of the facts of how this wealth creation happens is one important aspect of being able to do it. I mean, I still make the mistake all the time – for example, Bill and I owned Netflix a number of times and sold it a number of times. And when we met with [chairman] Reed Hastings, I was like, Bill, we have got to ask Reed, X, Y and Z, because maybe we should sell! And so he said, Reed, Samantha thinks maybe we should sell your stock – can you please tell her why we shouldn’t? And that’s a good approach too. We still did – and it was the wrong call. I almost bought it back when it had a correction, a couple of years ago, and I even missed that. But I think staying on top of, like, What is the bull case for this stock?, is one helpful thing we do.
JTR: It is clear you have had this amazing opportunity to spend time with some of the greatest entrepreneurs of the last generation. It is an unfair question but who comes to mind as the greatest?
SM: That is like asking who my favourite child is so I would never answer that one!
JTR: But, as a parent, we all know everyone has a favourite child even if we don’t admit it!
SM: But it is very context-dependent – you know, some days it is different to others! So it is very variable. I don’t know, there are so many great ones. I have so much respect for Jeff Bezos and we have owned Amazon for a long time and I have met with him. Warren Buffett has called him ‘an authentic business genius’ and he created a lot of the ways entrepreneurs now think about building businesses and creating value – he understands value creation. He has tried to engineer Amazon to be innovative at scale and has been very thoughtful and disciplined about that. He realised that, with most big corporations, it takes one ‘no’ to shut things down so he explicitly designed Amazon so, if one person on the ‘S-team’, the senior executive team, wants to go ahead with an investment, that’s all it takes – otherwise you are just shutting down opportunity after opportunity. Jensen Huang is also just an amazing entrepreneur – I just read The Nvidia Way by Tae Kim – or Reed Hastings. I mean, it’s so hard to choose! Like, they are so smart, so insightful and so successful.
JTR: Last question from me – one common theme of this morning’s sessions was the attractions of international investing but do you think those ‘multi-baggers’ are easier to find somewhere else?
SM: Well, we have different pieces of the portfolio. So we have what I call ‘long-term compounders’ – names like Amazon that we think have that potential – and then there are shorter-term value opportunities. I think the valuations in some international markets have been more depressed and have lagged until just recently. So I think, on the value side, there are names that look like they could double or triple relatively easily in the right circumstances and, you know, those are probably harder to find in the US. The US has very innovative companies and invests a lot in that innovation – that has probably been the main driver of its outperformance – and I think most of those opportunities still exist in the US, although many of them are expensive.
JTR: Thank you very much for your time.
SM: Thank you. It was very nice to talk to you.
“I am a big believer that the next decade is all going to be about stockpicking” – Bob Robotti
JTR: Bob Robotti of The Robotti Company, welcome to The Value Perspective Podcast. It is a pleasure to have you here. How are you?
BR: Very good. It’s great to be here. Great to talk with you.
JTR: We are nearing the end of the New York Value Investor Conference. How did you find the day?
BR: It was great. You know, there are always interesting people here with different views and different ideas. With some of them, of course, there is confirmation bias – Oh, I was thinking the same thing! And others are, like, Do you think that’s really the case? That’s interesting – I hadn’t thought about that. So the range of ideas and topics covered helps stretch your mind to think about things well.
JTR: What presentational idea caught your attention most today?
BR: I guess one of the things I am really hyped up on is I do think the underlying fundamentals of the economics are changing. People have gotten used to a complacency – like, It’s worked this way for a long time – and I do think that assets need to be reallocated, probably. A big part of what has really done well the past time is definitely private equity and private equity was one of the topics that came up today – there was a private equity investor on what they’re doing and how they’re morphing the business. And I just think that it’s compounding a problem of misallocation of capital and therefore it creates a huge opportunity for someone to identify that and to be in the right place – as the saying goes in hockey, where the puck is going to be, not where the puck has been.
JTR: Another common theme throughout the day was international stocks looking very attractive from a valuation point of view and a lot of people pitching ideas outside the US – what is your view on that?
BR: Well, that is what has happened, of course, right? You have had an extended period of time where one market – and one component of one market, and that’s the US – has so much outperformed, it attracted so much capital to it. And therefore everything else has been starved for capital, everything else has been left behind, everything else has been sold. And therefore valuations really do matter – and that is where the valuation opportunity is. Yet, in many of these places, there is also growth that is probably better – whether that is the US or China or some other market there – so they probably have really excellent growth opportunities. And the important thing is valuation – valuation really does matter. People have forgotten that but that will come back – and that is a relevant point for how to think about how to invest capital today.
JTR: Another topic of the day is the whole passive/active debate. Do you have any thoughts about that?
BR: Sure. I am a big believer that the next decade is all going to be about stockpicking. Not only is it the continued gravitation to the US and into the select few that has pulled all the capital in, part of that is because passive just continues to suck assets in because it has performed also. So therefore it is a self-fulfilling prophecy. Again, though, valuation ends up mattering and therefore the risks you are taking for the valuations you’re paying and the assumptions you’re making – it is a very interesting dynamic. And so that idea was brought home in spades today.
JTR: We have talked to a lot of investors in the US and a lot of them recognise the home-bias risk and that valuations are stretched – yet they are not allocating anywhere else. What is holding them back?
BR: Because if I had done it two years ago, I would have lost money! That is what it is – until they start to lose money and they realise the risks they are accepting and they realise that maybe there are other places. So you can’t do it before the reckoning happens – that has to start before people get to the re-evaluation parts – and then maybe it does make sense.
JTR: Bob Robotti, thank you very much for coming on the podcast.
BR: Great. My pleasure. Thank you.
“The key to running a successful investment business is to not surprise your clients” – Rich Pzena
AW: Rich Pzena of Pzena Investment Management, we have just heard you speaking with Joel Greenblatt for the ‘fireside chat’, here at the New York Value Investor conference. It was a hugely interesting conversation and one very interesting thing you said was that value has actually been doing very well – but just not quite as well as growth over the last decade. Where are you seeing the areas of greatest opportunity today?
RP: Well, there are some geographic areas – China is probably one of the more interesting because it has one of the more diverse stockmarkets, where you can get exposure to so many different kinds of industries with so many different profiles, including both global competitors and those companies that are mostly in the domestic market. And when everything gets killed because of the economic situation in China – we all know what the issues are – you can really get an opportunity to buy some good businesses at low prices. The same thing is true, I would say, in Brazil and I would say it is true in international smallcap. And then I focus my life on the domestic market – on the US market – and so there are a lot of sectors that are interesting there.
Healthcare has been a big area for us. We have been, over the last 18 months, building up a pretty big position in healthcare – not the pharmaceutical companies, as much as the insurers and the suppliers. CVS is our biggest healthcare holding, we own Baxter, we own Humana – and these have become of growing importance in our firm, mostly because there is generally an ‘anti-sentiment’ towards healthcare that permeates. You know, we had this healthcare executive who was murdered in New York, which is sort of indicating the personal emotion that exists out there and that has gone into the government and elsewhere – and so it has created a big set of opportunities.
AW: When non-US investors look at the US, they see a headline Cape ratio that has typically been 40x-plus – and yet it has been a very bifurcated market. You mentioned there are times when you could buy businesses on 5x their normalised earnings. I suspect nowhere in the US is there today but are any parts of the market close to that?
RP: Well, CVS fell down to roughly $50 a share at its low. It is now in the higher 60s so it is no longer 5x – but it was at $50. So there are individual stocks that have got there. You could not build a whole portfolio of those today like you could in the middle of Covid, when, you know, we bought GE for 5x normal earnings.
AW: One thing I wanted to pick up on was that you said, over the last 10 years, value has been performing as expected – but has the rerating been as expected versus the longer term?
RP: Well, you have to understand it is not just about rerating. When we go into a stock, we are not thinking about rerating – we are thinking about, This is the cashflow stream it is going to generate, this is the price we are going to pay and we are happy with that. And if it never rerates and we continue to make double-digit returns – because the company is earning money and it is either buying back stock or paying dividends or reinvesting it – I will hold it forever. I mean, it doesn’t usually happen but financials were an interesting one. After the financial crisis, the US financials were the first to sort of get their act together – from an earnings perspective, not from a PE perspective. And, if you look back from 2009, so just post-financial crisis, to today, these companies produced, you know, double-digit returns to shareholders without significant rerating – until the last 18 months, when they just exploded. And so we exited and started buying something else.
AW: Yes, particularly in Europe, you finally saw financials going from 0.5x book to 1x book, very quickly, but there had been a lot of rolling up on them before that.
RP: If you earn a 10% return on equity and you’re paying half of book for that, you are making a 20% return, every year, on your investment – even if they don’t rerate. So at some point, it’s got to happen – unless they do stupid things with the money.
AW: Just before I let you go, you made a comment on the broader landscape – potentially for value today and as a business, and the sort of interest you are seeing in the strategies today.
RP: Well, as a business, it is mostly that the supply of value managers has dwindled dramatically – as has the demand for value managers – and so we have had some success more because we have expanded outside of our domestic origins. So, you know, pre-2004, we were just a domestic manager, whereas today we have about 70% of our assets invested in non-US investment strategies – so, somehow, we hit the right nerve around the world. We also didn’t have the S&P500 to contend with in other markets – so we don’t look so ‘out there’ relative to the broader market. And we do what we say we’re going to do – I mean, to me, the key to running a successful investment business is to not provide surprises to people by not doing what they hired you to do. And so, when it doesn’t work, nobody is sitting here asking us, How come you don’t have Nvidia in your portfolio – we could have made so much money? We just don’t hear that. We hear, Thank you for sticking to your knitting. Even though they may be somehow wishing that – that’s not what they hired us for.
AW: Brilliant, Rich. Thank you for a fantastic presentation earlier today with Joel – and for your time today on the podcast.
RP: My pleasure. Really enjoyed it – and thanks for reaching out.
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