Podcast Transcript - Mike Mitchell

This week, we’re jumping back into fresh episodes and we have Michael Mitchell joining us today. Mike is a professional investor who is in the enviable position of having retired at the age of 39 after a career in hedge funds in the States which he started under the tutelage of famed value investor, Michael Price. Juan and Mike discuss his past work in special situations and how decisions are made in that environment which have different parameters than other types of investing, how he now conducts his own portfolios as a private investor including a unique approach to concentration and the importance of the psychology of an investor especially in regards to maintaining style and the use of averages


Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

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JTR: Michael Mitchell, welcome to The Value Perspective podcast. It is a pleasure to have you here.

MM: Well, I appreciate the invite. I am very happy to be here and I am glad our friend Toby [Tobias Carlisle] made the connection.

JTR: That is fantastic. I have to say that, when I got your email accepting our invite to be on the pod, I was sitting next to my wife, who used to be in finance – not any more, she is a consultant – so she kind of knows some of the people who come on the pod, though not many. I was very happy you had accepted the invitation and I turned to her and said, you know what, we have got Michael Mitchell onto the pod. She was like, who is that? And I said, let me explain to you: he interned with Michael Price, who is one of my all-time idols in this business. He does special situations, which I absolutely love. And you are not going to believe this – and her expression was happy. There was a smile – when he turned 39, a couple a couple of years ago, he retired. He is on his own. And then the expression on her face changed immediately. There was a little bit of green in her eye and I could tell that she was like, so where have you gone wrong then? So maybe that is a good point for you to introduce yourself and explain how you became an investor and you journey since?

MM: It is funny because your wife’s reaction is the exact right one – who the eff is Mike Mitchell? I am still wondering so I totally get that reaction and I appreciate her point. I so yeah. So, yes, I did retire at 39. My history, briefly – I was not born in Oklahoma but I spent the vast majority of my life there. I am third-gen Oklahoman and my grandfather was a sharecropper and very poor. My father was a college professor. And I grew up in Oklahoma, went to school at Oklahoma State undergrad and University of Oklahoma graduate school.

And my professional life sort of came together in August of 2002. in Norman, Oklahoma, I had gone to graduate school because I had graduated during a very mild recession and I could not find a job. I had a degree in marketing, which did not really mean anything in the state of Oklahoma, so I did not have any prospects and I figured I would just go to graduate school. I applied to three schools. OU was one of the three and luckily I got in and they offered me a pretty generous scholarship and then also a teacher’s assistant position – and it was in state tuition so it was very cheap and pretty easy to say ‘yes’.

And I kind of decided at that time I was interested in investing and OU’s Business School has a benefactor who you mentioned – a pretty famous investor in the 1980s and the 1990s called Michael Price. So I kind of decided when I got into OU that I was going to really push finance. I was not 100% convinced it was something that I would be capable of doing  but it was still something I was very interested in anyway. So I get on campus at Norman in August of 2002 and it just so happened that Michael Price, who lived in Far Hills, New Jersey and worked in Short Hills, New Jersey at the time was that week was dropping off one of his sons to start school as a freshman in Norman.

So it is this great experience because he is the only person who comes to Norman, Oklahoma on a private jet. They have this little-bitty airport and Michael is this larger-than-life character. Right. He is not a very tall guy but he is larger-than-life and he flies in on his Falcon to the little airstrip in Norman, Oklahoma and gets out with his son and they come to campus. And when he is on campus in Norman, he is like a kid in a candy store – he just thinks it is the coolest thing in the world.

Anyway, he comes to speak to the full-time MBA programme – I think there were 30 or 35 of us at a breakfast – but he is not really a talker. He gets and stands at a podium and, says, I am not going to give a speech but my name is Michael Price, I am an investor – does anybody have any questions. Somebody – I think it was a professor – raises his hand and asks, you are a value investor ... what does that mean? I am sitting in the back at a table and my eyes are like saucers. He is the first billionaire I have ever seen in real life and it is like, oh my gosh, this guy is amazing.

So he says, well, let me tell you how I do it. I have a team of analysts. I will see a stock that is down 50% – something I know the name of or been interested in or followed for a while – and I tell my analysts to go take a look at this thing and come back and tell me what they think. One example he gave was Martha Stewart Living Omnimedia and, while I forget the exact numbers, they will be relatively close. But Martha had got into some legal trouble at the time and Omnimedia, a public company she was chairman of, had taken a big hit because of that.

So the stock was down, he told the analysts to take a look and they came back and said, well, they have a TV business – she has cooking shows and she has rights to all those – and that generates, let’s say, $30m in operating profit; and they have a magazine business that does another $50m in operating profit; and then they have this Kmart clothing business they have the rights to that maybe does another $20m. And if you look at the comparables – the peer group for each one of those – and you assign a comparable multiple to each one, you add up all the pieces and subtract out the debt they have, you get to a market cap valuation. Divide that by the share count and you get to $10 a share. And he said, the stock is $14, the value is $10, I am a buyer at $5 and that is it. That is what I do all day long.

And when he said that, for me, it was like, oh my God, that is incredibly easy – this guy made a billion dollars doing that all day? That sounds so easy. I can do that. There is no reason why I could not do that. And it turns out it is not that easy but, in construct, it is pretty simple. And so, after that breakfast, I was like, oh, this is it. This is my life. This is what I want to do. The stars just aligned for me.

And so I introduced myself to him. After he left, I went to see the a co-ordinator for the business school students, who’s role was to try and get them jobs and internships and things. There was a scholarship programme to take students to New York University over the summer between their first and second year and I got that. And when I got the scholarship, I went to this co-ordinator and said, I want to work for Michael Price. I do not care – I will wash his car, I will buy groceries, I will work for free. I do not need money.

And the guy said, look – Michael does not take interns and you cannot call him. We do not do that.  This was 2002 so I found his email address on the internet and I emailed him and said I would really like to work for you. And I will never forget – I did not save the answering machine message but, within a couple of ours hours of me emailing him, he calls my home phone. I was in class and, when I get home, there is a message on my answering machine that says, hi, this is Michael Price. I got your email. Sure, I would love to talk – just give me a call. And so I picked up the phone and called him in about five minutes and he said, yeah, you can come and intern for me – that is fine. So I interned for him in the summer of 2003. Luckily ...

JTR: Where was he at the time?

MM: He lived in Far Hills on a big ranch and he worked in Short Hills. I do not know if you know northern New Jersey at all but there is a pretty famous mall called the Short Hills Mall on JFK Parkway. Right across the street from Short Hills Mall is a Hilton Hotel at 51 JFK Parkway and then also a small office building. I do not know how many storeys there are – maybe five; I cannot really remember – but Michael is on the second floor of that office building. He had a small family office called MFP Investors. Franklin Mutual had a big office there as well, right down the hall.

I asked Michael for a job after the internship and he told me no – very nicely but he told me no. But I was fortunate and I got a job actually at 51 JFK Parkway working for Jefferies in their research group, covering post-reorganisation equities, and it was exactly one floor above MFP Investors. So all Michael’s analysts and Michael would be on the second floor; I was on the third floor in a little office doing research and it was stuff that I was just fascinated by.

I was still able to talk to Michael and my first big call as a restructuring analyst at Jefferies Michael was involved in, so we talked a lot about that. It was neat – it was a very good experience. But he was in Short Hills, I believe he bought a house in the Upper West Side while I worked there ... have you ever seen the movie Panic Room? He bought the apartment that Panic Room was filmed in – so had the panic room while I worked there. I do not know if he still has that or not. But then he moved into the city so all of his analysts now at MFP, I think, are in the city. I think I heard he now lives in Rye but, at the time, he was in northern New Jersey. So I commuted into the city on the weekends to go to school at NYU and then I worked for him during the week. It was a lot of fun. I really loved it. Those were good times.

JTR: How long was that internship for?

MM: Just the summer. I got there in May and I worked until August. In August of 2003, I went back to school knowing that I wanted to come back to New York – I had a ‘move to New York, work for two years and move back to Oklahoma’ plan. So I came back a lot between August of 2003 and the spring of 2004, networking with Michael’s analysts, trying to buy Michael coffee, obviously, and then just trying to meet people and interview for jobs. So I was back and forth in the city all the time.

I left Norman permanently in April of 2004 and moved to New Jersey. I just looked for a job and about eight or 10 weeks later, I had that job at Jefferies, which is another good store – you know, serendipity. Michael helped me even though he did not give me a job. When I had the interview at Jefferies, it was pretty competitive – they were only hiring one person, I think there were 100 applicants or something and, of course, I was the only applicant from the University of Oklahoma, competing against Princeton, Harvard, Yale –everybody..

But the ‘ace in the hole’ was that, after the first interview, I went downstairs to MFP and said ‘hi’ to Michael and told him I interviewed upstairs. And he looks at me and he goes, get out of my office, so I walk out of his office and then then I see him pick up the phone. He dials, he talks for about two minutes and then he waves for me to come back in. So I come back and he is like, I just called the head of high yield trading at Jefferies – you have got a job. I was like, boom, there you go. So all my career path circles around Michael Price and his generosity.

JTR: And so you worked with Jefferies as a restructuring analyst, which you do not tend to see. That is quite a unique position within a broker, isn’t it?

MM: It was. This was a unique time. I mean, this was 2004 and there was a lot of restructuring happening. This is post Enron and WorldCom – there were bankruptcies everywhere from the 2004 recession – and so there was a lot to do. And we have not had a time like that – I mean, even with the financial crisis, it did not last so long that you could really build teams up around it. But it was kind of the ‘cycle of life’ at Jefferies – they had a pretty active high yield banking group so they would do notes for private companies and notes for public companies. And several of those – if we are being kind – would default and then convert into equity.

So they had this need on the high yield trading desk and the high yield research desk for people who would pick up the equities because, once the plans were confirmed, and we knew whatever fulcrum security was going to get flopped into equity, the high yield guys did not want to cover it anymore. But that equity is going to trade publicly and they still wanted a banking relationship, obviously, so they hired a guy a guy called Farukh Farooqi from Merrill Lynch to be the head of their post-reorg/post-restructuring equity analysts and he hired a junior and I was that guy.

The timing could not have been more perfect. There was so much going on. We had a lot of calls – some of them were actually good, believe it or not – and Farukh became very popular with his clients on the buy side and one of his buy side clients hired him away. So I was only at Jefferies for a year. I did not make a tonne of money working at Jefferies but the experience was just awesome. If it were up to me, I would have worked there for five years-plus, but Farukh left and I got fortunate – he took me with him – and that was my start of buyside investing. It was 2005.

JTR: So you move from the sell side to the buy side because you went along with him?

MM: That is right. I was sort of stuck – I was 23 or 24 and I got lucky to get this job. I had no experience going in, no banking experience, nothing – I mean, I just cold-called basically and got this job. And so one year’s experience I did not think was enough so, when Farukh left, I was kind of like, is this it? You know, have I had my shot and now he has left? So I nicely – if you get him on the pod, he may disagree with this – but I think I was pretty nice. I was kind of pushing him like, hey, you are probably going to need a junior and he was like, yeah, but they will probably hire me a junior and I am like, yeah, but we work well together.

And after pushing and prodding and pushing and prodding, he was finally like, yes, they have got a seat for you. You can come. My understanding was that Jefferies liked me there – at least the people in high yield like me there. I did not really want to go into high yield research – I was happy to stay in equities – so I was not too interested to go there. Plus, they did not really have a seat for me so I would have been bouncing around. There was a guy who covered oil services stocks – Stephen Gengaro, who is the nicest guy in the world. He was like, well, I would love to have you. And I was like, Stephen, I would love to work with you, because I like you, but I have no interest in oil services.

I want to stay but I want to do special situations – but I got lucky and Farukh took me with him. And then a year later, I was out again. After he left that hedge fund, Kellogg Capital, I was out again – but I got lucky again. I mean, my whole life is just like, well, I got lucky. And I got lucky. And I got lucky. Right?

JTR: To be fair, you did start your career with one of the best investors who has ever existed!

MM: Yes – though that, again, was luck. I mean, the fact Michael even created a seat for me and paid me – I am still not even really sure why he did it. But it was lucky. So then Michael’s senior analyst at MFP left to take a job in 2006 at a brand new hedge fund called Breeden Capital Management and he needed a whole team. I ended up being the first analyst he hired. That was right when Farukh left our hedge fund job – a job opened up with Breeden Capital, through one of Michael’s senior analysts and I got lucky: he had a seat so I took it.

And the rest is history – I was there for five and a half years and then I left to take a job at Locust Wood Capital. I was there for seven and a half, almost eight, years and then, as you know, the story ends. I had a difficult year in 2018. I had decided to move my family to Colorado but we were not quite ready to move – you are catching me right at the end of this story: we are moving in exactly two weeks. But I was done with hedge funds, I was done with the industry and I was done with Locust Wood. I had been fortunate to do well enough where I did not have to work anymore so I just held up my hand, did the ‘peace out’ and now I do the podcast circuit apparently. That is my job!

JTR: That is an incredible journey – quite unique.  You have mentioned several times your formative time was in special situations and you are a special situations-type of investor. That can be difficult to define so can you walk us through what a special situation is exactly? What sort of assets or securities are of interest to you and what drives your curiosity?

MM: I would say there is a lot to that question. Stepping back for a second, I would say it this way – I love special situations. I find them fascinating because they are always so different. The way I hear it pitched when I am in a hedge fund meeting, as well, we focus on special situations because we try to find things that are undervalued and the special situation can often be the catalyst that unlocks that value. In my experience, that is true and that that excites me about special situations.

Usually what a special situation means to me is there is a fundamental change and that fundamental change can mean opportunity – that is where I start to get excited. But I do not really consider myself a special situations investor per se – I consider myself a value investor. I just happen to really enjoy special situations and I tend to find a lot of opportunity in special situations. But really what I am looking for when I wake up in the morning is a way to compound my money at 10%. That is how I spend my time. I do not spend my time necessarily looking for special situations – if I can find a way to compound my money at 10% in a slow, boring way, I am just as interested in that as a special situation.

But the way my brain works – and I do not know if it is right for the world or I do not think most people think this way – is I sort of gauge everything around this concept or idea of 10%. And I do not know a lot of things so I am very specific in what I can invest in and what I can underwrite. And I also do not feel comfortable that I can predict stock prices – particularly over short periods of time, say, one or two years – so that causes me to focus on businesses and their earnings power and what they are doing with those earnings.

So almost, when you think of it, I cannot really predict the future and I do not feel comfortable in my ability to see big structural change coming, so I depend on businesses’ earnings to pay the 10% I require so what does that do? That pushes you to things where, well, I am paying less than 10x earnings – 10% yield or more – and I am certain I am getting that capital back so can I accept my 10% or do I need a premium on that 10%? That is really what I am doing all day.

I talk a lot about special situations on Twitter because they are fun and they are interesting and you can find a lot of interesting situations where you can make a lot of money around them. And I have spent my career looking at them but, really, the way I think about investing is I am just trying to make 10%. I am not really trying to go out and underwrite a special situation that will give me a 50x or 20x. That stuff is great, they are really interesting stories, but I would have passed on probably one of the greatest trades of the last 10 years. That was Thomas Braziel buying Mt Gox trade claims at 70 cents on the dollar or whatever and getting bitcoin at $85 or something – I never would have invested in that. He would have pitched me on that and I would have been like, dude, I do not get it.

JTR: Is bitcoin nowadays a special situation?

MM: I do not know what bitcoin is – I will be the first to admit. It is funny – I mean, I brought up Thomas but, thinking about bitcoin, in 2017, when it did its first ‘rip’, the fund I worked for hired an expert to come in and give us a full download of bitcoin and cryptocurrencies. And I would like to think I am a rational person – I understand financial markets, at least a little bit, and have a base understanding of economics. So this kid comes in, he is 21 years old and he is the expert, right? He is like, this is cryptocurrency and we are creating coins and here is blockchain – he walks us through it.

I asked him questions for several hours – just downloading – and as we walk out of the meeting, my PM Steve says, Mike, what do you think? And I said, well, I am certain of two things. Number one, I do not understand anything that guy just said. And number two, I am pretty sure everybody else who is buying this also does not understand what that guy is talking about. So I do not really love the idea that I am making a big bet on something – or a bet at all on something – investing alongside people who have no idea what they are doing. That is usually a warning sign to me – and, needless to say, I am the idiot because it has done nothing but gone basically straight-up since.

But that is just not the way I look at the world. I mean, I buy stuff that people look at and they see something that looks like a disaster and I see something that I think can actually generate pretty solid returns for me with a high degree of confidence, even though it is not sexy and they do not have reinvestment opportunities. I just think differently ... and, by the way, that forecloses me from doing a lot of these ‘moon-shoot’ things – had I bought Microsoft using the same criteria in 2013 at 9x cash-adjusted earnings or something, if it had gone to 15x earnings, I would have taken a massive victory lap. I would have been out of it – and all the returns were generated after I would have sold, right?

So that thinking I have forecloses me from some of the big moon-shoot investments but I do not really care because it is good for me and it works for me – it is what I do. I am just trying to do what I do. I am sure people look at it and say, well, I do not like that, that sucks, you are not smart and I can do better – and it is like, I hope you do, man, I really do. I would love for you to do better. It is just about me being myself and staying true.

I want to feel comfortable that if, I lose money in something, I knew what I was doing – like, I went into it with x and x did not pan out. I could have bought bitcoin or chased ‘SaaS’ [software as a service] stocks at multiples I just did not understand it and you can make a lot of money doing that – so no shade being thrown from my end on the people who do it – but it is just not what I understand.

I buy businesses for low valuations where I think the money is coming back to me. I buy liquidations, which I think is a special situation – to get back to your original question. I love ‘spin splits’. I really love situations where assets have been under-managed or mismanaged – and not even because people do not want to do a good job. It is because the incentive structure around the management team and the people is not set up for them to do well.

I am a huge believer in human incentives and I think special situations can often refocus people. I am involved in a situation now where I think that is happening and people are really getting focused. Formula One was a situation I was involved with years ago where I thought that was the issue. I mean, you had a pretty famous Londoner running it a huge operation by himself for decades – and doing a great job – but you sort of think, well, is there an opportunity, if somebody comes in with a fresh set of eyes and a little bit of vigour, to maybe improve the popularity to sport?

I love stuff like that. I hear that and it just resonates that there is an opportunity to be had. If it fits my bucket of wanting to get 10% returns predictably – not necessarily evenly but I can predict over a period of time that is what is going to happen and feel very comfortable that it will – I get excited. That is a very long-winded answer. I am sorry about that.

JTR: Not at all. Special situations are quite difficult to define and that is what makes them so unique. So where does that 10% hurdle rate come from?

MM: Nothing fancy – I just picked it out of the air. For me, it really comes from two areas. Number one – the ‘rule of 72’ and doubling your money every seven years. That sounds appealing to me. And number two, it just seems to me – if 2003 was my internship, it is now coming up on 19 years – so, with 18 years under my belt of looking at securities over several different markets, it seems to me like I should be able to do that. But there is nothing fancy about it – 8% just seems too low and 12% seems too high. Really, that is how I came to the 10% number. And incidentally, if I hit 7%, it is not like that is going to be a problem. It is still going to be fine. But 10% just seems like a reasonable number to me.

There is also that compounding is such a crazy, wonderful thing. When you sit down and you start doing the math – I was doing this with [my wife] Carolyn when I retired. I am basically the CFO of our family – she is my CEO and my chairman but she is outsourcing all the financial decisions me. So when I decided to retire, she said, well, can we afford for you to retire? I was like, 100%. And I showed her – I was like, here is how much we spend, here is how much you make, here is how much we are getting from other sources. And we just do not spend a lot of money.

So I was going through this and I said, not only that, here is the best part – I go animated and excited, right? – you take what we have and we do not need and you assume I can double it every seven years. I am 39, right, so we double our investable net worth from the time I am 39 to the time I am 46 to the time I am 53 to 60 to 67 and 74 ... and you start hitting actuarial data saying I am going to die when I am 84 years old and I was like we are going to die with so much money, we are going to have to give it all away – we cannot spend this amount of money, if I am able to hit this. And, by the way, give me give me a margin of safety – do it every 10 years instead of every seven.

And the numbers start to get so wild that I was like, at this point, we have already won the game. We can keep playing the game if we want to but we have already won. It is another long-winded answer to your question but it was like, well, I should be able to do this. I feel comfortable that this is an attainable target – not that it will be easy, but it will be attainable – and I also feel like this is good enough where, if we just hit this every year, the three universities we give our money ... the real debate, to be honest, is how much of a cheque will we be writing them when we die?

Can I curse on this podcast? I do not want to upset Schroders  ... I won’t! But the truth is, I do not really care if Yale gets $20m or $50m – why do I care? You do not need it anyway. They care – the decisions I make today are impacting how much money they are going to get – but I am not giving it to my kids. So they do not care. It does not make a bit of difference. My house is going to be paid for, my wife’s practice is going to be paid, for my kids are going to college, I am going to still take vacations – really, the conversation we are having is how much money Yale University, the University of Oklahoma and Oklahoma State University are going to get – and the answer is, does not really matter. It makes no difference. So 10% feels attainable. I do not know – fingers crossed. So far, we are hitting that and exceeding it somewhat. Knock on wood, hopefully that trend continues.

JTR: That is fantastic. One thing I am interested in is the evolution of your mental process – from when you started as an analyst, then becoming a portfolio manager and most recently being a board member.

MM: There have been some things that have changed the way I think about the world – and the professional progression you just mentioned is one of those things, for sure. I would say, more important than that are the experiences I have had professionally, in markets and in business, which have done more to shape the way I think about the world versus the progression from analyst to really thinking about structuring a portfolio and taking risk and now moving on to board roles.

And then there is the personal – I look at the world very differently today than I did when I started at 24. And had I had no jobs in finance, I would still look at the world very differently at 42 – and a lot of that is my age and life experiences, being married and having children and all these things. So I look at the world very differently today than I did when I started.

Some things, though, are constant and consistent. One thing that is constant and consistent is I deeply care about the fundamentals of a business and an industry, right – that is a business, its fundamentals, the industry and its position and the economics and the economic structure of these businesses and industries over time. That stuff I have always been interested in. I do not know why this is true, but I love complexity – I have just been drawn to it and that has not gone away. I think it is just because I feel like most people are kind of too lazy to really do work. And so, when I see something that is complex, if I can find some gems in there, I start to get really excited.

These things have not changed. The things that have changed are that I used to be very OK or blasé about balance sheets – that is no longer the case. Balance sheets are incredibly important to me today. I think that is just age and conservatism and then also living through a really difficult time with a messed-up balance sheet and a mall-based jewellery retailer. So there are some base levels of conservatism I have now but then, offsetting that, I have also become much more concentrated as I have gotten older. So I find one or two things and I just sort of grab on to them. I ride those horses until the horses die and then I just stop and look for something new.

There was a big transition in my portfolio last year – I had owned a large cable company in the United States for years. It had been my biggest investment – at one point over 90% of my net worth was in it – and I sold all of it to buy Qurate, which is, which was a special situation last year, and I still own all of that. So concentration is something I have got more excited about as I have gotten older – but then balance sheets I have got a lot less excited about as I have gotten older. So there are just these strange changes.

Now with the board seats, it is just very different. There is a lot of virtue – and I used to hate this as a public equity investor, but it is true – there is a lot of virtue to private equity investing. It is not perfect but one of the things it allows you to do is ... it is almost like, when you are driving, you are not scared about it; but when you are in the passenger seat and somebody is driving like a madman, you are like, oh my God, because you have no sense of control. But when you are in the driver’s seat, you are like, oh, I have got it.

Now, whether you do or not is a different question but there is that sense of control. And private equity ... those people, in their minds, they never have to mark things to market – ever. They can always just say, well, I have got control and as long as we are generating cash ... you know, you can sort of keep rolling it – what’s the phrase? ‘Extend and pretend’. But in public markets, you cannot do it. You think back five years ago – and Company A [QVC, whose parent Qurate I own] used to be valued at ... can I talk about this just this one, not as a stock pitch but as an example? specific stock.

JTR: Yes – as long as you do not mention valuations, just the investment case.

MM: OK, that is exactly what I wanted to talk about but let me just do Company A, right. Five years ago, company A was trading for 10x earnings. Five years later, Company A is trading for 5x earnings. The earnings of Company A are almost exactly the same as they were five years ago but the valuation is cut in half. Now you could say, well, that is because the story is changing and go through all these things. If you are a private equity firm, you own the entire business. You did not value it at 10 five years ago and value it at five in your brain today – public markets have just decided that is true. Whether that should be true or not, is a whole different conversation but that is where the public markets are.

If you are in private markets, it makes no difference – like, I own the whole thing. It is my business. I do not care, right? If public markets want to offer me something I do not think it is worth, the answer is I am not selling – see you later. So, in my mind, there is a lot of virtue to private equity. Well, when you go on boards ... you have all these thoughts and views about a company when you go into it – and then you get on the board and now you are actually looking underneath the hood, right? Everything I thought was up here, was public information, synthesised somewhat but, also, everybody gets to see this information. So it is not perfectly detailed because you do not necessarily, for competitive reasons, want everybody to know the whole thing.

So you get to take a different view. I am now locked into this, right? I am illiquid now, essentially. But I now have perfect, up-to-the-minute information – I know everything about strategy and so on. So it allows you to think much more like a private equity owner, even though you have your public mark. And I think that is an evolution in thinking.

Even when I had consumer board seats in my prior life, where I was a board adviser and not a board member, it was not my money. I was investing for a few large pension funds so it was not my money so when I was on the board seat, it was very different. Now with my board appointments, when a bill comes through – say, we owe our lawyers $X for YZ transactions – I am actually sitting there going, OK ... so you take this fee, you multiply it by our ownership, how much is the Mitchell family contributing to this? And the reverse is true – I am like, oh, OK, you know, our P&L for last month was Y ... so then multiply that and how much did we make?

It is just a different mentality. I personally enjoy it more because I am so concentrated and I care so much about business fundamentals. The stock prices affect everybody – myself included, of course – but I also know that is just part of the deal. Like, you are going to have some times where you just feel like a king and you are killing it; and then you are going to have another time where you have this massive drawdown, and I almost do not even really care how much the drawdown is or how big the thing is – I am like, well, I am not selling, so who cares? If all my stocks are down X%, well, I am not selling so who cares? The same is true, by the way, if they rip and they are up 100%. At one Qurate was up 100%. It was like, oh, that’s great. But I am not selling so who cares?

I am going to live or die based on the profits Qurate generates and how they return them. And, to me, it is kind of the same with my board appointments – I am going to live or die based on the outcome of those businesses, not necessarily what happens to the stock price. Being on the board, though, you can kind of remove yourself from it because the way the stockmarket is reacting on one day or the next is like, well, sometimes the stockmarket gets things right and sometimes the stockmarket gets things wrong. And you know, sitting there at the board level and actually looking at everything and surveying situation, it is just a different vibe – and I prefer it. I would rather own a business outright ... I feel like sometimes the profits are easier to predict than stock prices so I am happier to live and die based on profits. I hope that answers the question.

JTR: Absolutely – it did. This podcast aims to explore how people drive a process that helps them make better decisions when dealing with uncertainty. I know you said you are not a special situations investor per se but you deal a lot with special situations and you have a lot of experience with them – and I guess one of the beauties of special situations is that the corporate action drives the situation to the point that, if everything goes all right, potentially, it shortens the time period until it resolves. But the opposite is true because many special situations, by definition, are very complex with many moving parts, which have a lot of uncertainty and can take a very long time to resolve. So how do you think about that from a process perspective in your analysis and how do you deal with that sort of uncertainty?

MM: Well, again, every situation is different. So it always depends on the situation – although, like I said before, there are a few things that just do not change for me. Let’s say I find a security I think is mispriced – effectively that is what we are all doing, right? I am looking for something that is trading for less than I think it is worth. So I find said security that I think is trading for less than it is worth and, as is usual, there is some reason why it is trading for less than I think it is worth.

And I notice in this case that there is a corporate action that I believe has the potential to unlock that value – the catalyst we were discussing earlier. So take GE, which has announced it is splitting into three piece and it is going to take two years. At my old firm, we used to say it very simply – and I always liked the simplicity – is it meaningful? And is it mispriced? So is the event of GE splitting into three pieces meaningful? Probably yes. I do not know – I have not done the work on GE, but probably yes. And so is it mispriced?

If I can get through the ‘meaningful’ and ‘mispriced’ and I can draw a line from A to B that just investing in the situation can make 10% compounded per year, I start to get very interested. The problem 10% is what I expect to make, right? So you have to overshoot it because you are not going to be right every time – your hope is you are right 55% of the time, right? So you know you are not going to make your 10% every time so you have to overshoot it.

So, in pretty simple terms, if you think GE is going to take three years, the question is, can I IRR this investment over three years at something well north of 10% to account for the fact that some of my stuff does not go right? And then, if you are counting on something like, in GE's case, the healthcare business, which is apparently their crown jewel, you are counting on the healthcare business to be the driver of those returns – so how comfortable are you that healthcare valuations are going to hold up?

I am not making a bet today, I am making a bet three years from now so how comfortable am I that this is what is going to pan out for three years. And incidentally, you do not have to be incredibly comfortable that all this is right – but the less comfortable you are, the bigger the margin of safety you need. And so part of the reason why I say ‘buy things cheap’ is because the cheaper it is, the shorter my duration – the less margin of safety I feel I need, the closer I can get to that sort of 10% and feel comfortable underwriting it.

So if the situation is going to be very short – let’s think of one example of a corporate action that is really, really short ... let’s think of a liquidation. So Keweenaw Land Corporation (KEWL) announces it is going to look at selling its timber assets and it is going to do a partial liquidation. They are going to pay you $100 over the next two years – 92 bucks today, eight bucks in 12 months and then you get to keep some mineral rights. They say that and it is like, well, OK, what is the stock trading for? It opens at 104, I am going to get 92% of your money back now, all guaranteed, and eight points back in 12 months. I say ‘guaranteed’ but obviously there is always risk – but they announced these distributions and the risk is low and my money is coming back to me so fast. I do not own KEWL, by the way, just be clear. I just look at this stuff. Anyway, if you have 95, 96%, 97% of your money coming back within a year, how much risk are you really taking?

So then the question is, are the mineral rights worth $4? But that to me is a much easier analysis than GE splitting into three and I am getting paid two years from now – and then you have to give it some time in case the pieces do not come together. So timing is a big component, the complexity of the business is a big component. Some transactions ... I have lived in ‘Malone World’ – John Malone and Liberty Media World – for a very long time: their transactions can be insanely complex, like spin-merges, tracking stocks sometimes, funky securities, including preferred securities in addition to equities, rights offerings ... so things can be insanely complex.

What I do is I try to boil it down to one simple little thing and say, well, what bet am I really making? Is it healthcare multiples in three years? If that is the bet, I am not super-comfortable so I need, not a 10% rate of return, I need a 25% rate of return, just to make sure. And then, if you find that rate of return and you get a shot to buy it, you do it.

One of the things with very long-term – I say very long-term – multi-year corporate actions ... one of the recent ones I did invest in that I do not own now was Car Auction Services. In 2018, they announced a split-off of their Salvage Auction Services business, which was their crown jewel. And when they announced it, I was excited because I thought the implied valuation for their salvage business, which was based on their comps or comp – there is only one – was pretty attractive: you could create this other business that nobody really wanted but you could create it for a very, very low multiple stock. The ran up on it, I did all the work and I waited. It was going to be a year to the split and, about nine months later, there was some public consternation over whether it the split would actually happen.

You sit on the board long enough and you find out that often when there is a transaction like that – and I am in the middle of one now – lawyers say you cannot talk about it, right? Everything has to go silent. So they stopped talking about the deal and people thought that meant it was not going to happen. The stock had some squishy earnings, it was down quite a bit and I was able to buy it because I waited. I did not know for sure that their car auction business, the ‘RemainCo’, was going to trade all that well, but I thought I was getting it so cheap, there was a price where you would take a swing – and we got that. It was like a week where we had that price and so I was just waiting for the bigger return. I knew the bet I was making was a high-valuation IRA and I felt like we would get that – we had gotten so close to where I was pretty sure we would get it, you get a chance to take a swing.

So for me, every situation is different. Like, with KEWL and Car and GE, it makes sense in my mind to have a view on all these things because they are just so different. You get these shareholders and analysts who have been covering something for 50 years or 40 years or however long and they have some very specific view about ‘ConglomerateCo’ – and the reality is, the story is changing, right? It is fundamentally structurally changing and that can lead to opportunity. So it is really fun to do and it can be very lucrative. You have got to pick your spots, obviously, but I think it is very interesting. And to your point on timing, timing, for me, is just a function of comfort level and then the discount that I am I am underwriting it to achieve that 10%. That is really the simple answer.

JTR: Do you consciously, or unconsciously, think about assigning probability scenarios to how the different parts might move or, because you are aiming for situations that are, not simple, but less complex, you do not need that kind of embedded thinking?

MM: At my old firm, they had this system that was probability weighting and upside and downside weighting cases, called Alpha theory, which is a really cool system. If anybody is looking for something that will do this, it was a cool website, where you input all your stock ideas, and they will say, well, you should buy this much percent of this one and this one. That was a neat sort of gut-check on what we owned. So I had to do that but I do not do that now.

What I do now is I say, Mike, what is a reasonable valuation for this asset that you are looking at? Meaning conservative, do not take a stretch? Do not give me the best case but, realistically, based on what you are looking at, what do you think this thing could be worth? Then you try to buy it at a discount to that.

Now, the other side of that equation is, how much do you think you can lose if you are wrong? So I no longer do a low case, a base case and a best case. I really kind of live on base cases – and then I spent a lot of time thinking about what happens if I am dead wrong. So, this company I was talking about earlier – if I am dead wrong on Company A, dead wrong, what happens? The reason that is important to me is because it affects sizing based on risk/reward.

If I feel like, if I am dead wrong, I can lose one – but if I am 100% right on my base case, which I think is conservative, that I can make five, then I am like, push chips, man, just push, push, push. I do not so much worry anymore about well, if I am wildly right, this is what can happen. And maybe that is a blind spot for me – I should probably should have done that with Microsoft at 9x earnings. The thing is, if I would have said Microsoft was going to 40x earnings, I would have gotten laughed out of every room. Like, this company has been trading at 9x earnings for 10 years – why do you think it is good?

So I do not do the ‘base best low’ anymore? I do – look, I think it is worth this, based on private market transactions, based on public comps, just based on rational ‘this is what I think the earnings power of this business will look like over the next three to five years’. This is a right multiple to use – and then my gut check is, well, if I am wrong, is it zero, right? If I have got 20% upside and zero downside, that is one up and five down – like, no. If the reverse is true, if it is, well, invest in a company and we have assets that could be sold ... when I invested in this mall-based jewellery retailer, Zales, back in 2007, my thesis was that we had a standby bidder in their largest competitor – it was a company called Sterling.

We had a bid out there – we knew it was there – and so my thought was, look, if I am right, we can make a lot of money; if I am wrong, I know they want to buy us. The problem with that one was we ended up going into a financial crisis and, it turns out, when Lehman went under, nobody went out to the mall and bought jewellery, which actually makes a lot of sense. Everybody was just scared so you were not buying bigticket items. So I got screwed on that one – but, ultimately, Sterling did acquire Zales. That was ultimately what happened.

That is the way my brain works – I want to know, if I am wrong, how much money can I lose? Part of that KEWL discussion we were having – OK, it was my monologue! – was, how much can I lose? It is like, oh, four points? OK, I put up 104 and I can lose four – I cannot lose a lot. So the question is, how much can we make if it works, and then do that risk reward in my head? That is pretty much the extent. Probability weighting – I do not so much live in that because I just do not feel like my probabilities are that ... I assume my base case is probably what is always going to happen and then I just want to make sure, if I am dead wrong, I am not totally going to blow up. That is the idea.

JTR: When you were on Bill Brewster’s podcast, you mentioned it is very important for you to understand what sort of investor you are and the psychology that is driving you. And you actually describe yourself as 80% Joel Greenblatt and 20% Warren Buffett or something along those lines. And something that has come across in this conversation is the way you think about stuff is very much absolute-driven – your hurdle rate, the way you think about sizing and opportunities – so how do you keep yourself grounded in an absolute-driven mentality when the world of investing is so relative-return driven?

MM: Well, it is relative because you make a relative, it is not relative because it is relative. I know people would take exception to that – and I would say, well, your LPs {limited partners], drive your relative thinking. I am not saying that is right or wrong but I do not live making fees from LPs – that is not how I pay my bills. My LP is my wife – so she asks what a reasonable expectation is, I give it to her and that is just it. If I worked for a hedge fund, and I was charging, you know, 150 and 20 and my LPs were, like, well, you have to beat the S&P – well, yes, then that is all I would do: sit around and focus on the S&P 500.

I do not want to do that with my life. I personally think that is a mistake. I do not think that is any fun. The reason I do not do it ... and the pushback on what I am saying is you can say, well, Mike, you could just invest in the S&P – and, yes, I always have that option, right? I can always go and buy the S&P 500. And actually, with my wife’s 403(b) plan, I cannot invest it so we have invested in the S&P and with my kids’ 529 plans, that is exactly what we have done – and I take no issue with that. But that is not what I want to do and it is my money, so I can do anything I want, right?

If I were going to start a fund, I would tell all my LPs, if you ever call me and say you have done XYZ relative to the index, I am sending all of your money back – 100%. I do not care what the index does. If you want to buy the index – go for it, dude. You can go buy it tomorrow. If you want to invest with me, what you should expect is that I am going to try to deliver 10% over time. If that does not sound appealing to you – run away. Some years it will be better, some years it will be worse. I do not care.

And this ties to your psychology question – the reason why I do it is I am trying to stay as mistake-free as I can. That is really what I am solving for. I am not trying to get the best outcome – I am trying to avoid the most amount of mistakes. So you say, well, what would be a mistake? Well, for me, a mistake would be doing something that I do not understand. I am OK losing money – it happens all the time. I do not mind if my investments do not work out. But what I want to be 100% sure is that I know what I am doing and I have a thought going in.

I am not buying, whatever – Beyond Meat or Peloton because somebody told me it was a great idea. I am buying stuff I feel like I understand at a price that I think is more than reasonable, where I am being compensated for the risk that I am taking. And that keeps my mental framework from going completely insane. So if something goes against me and I do not fully understand it, I worry that I would do something completely irrational – either chasing it or selling it or leveraging it, and God, please do not do that.

I have to stay within my own brain so I limit my mistakes. That is what I am trying to do. The problem with chasing an index for me is, if I spent a lot of time ... a guy that I worked with used to talk a lot about how the index is weighted X and we are weighted Y and I am like, who gives? Like come on – so you want to start with the index does this and then I should ... why don’t we just tell our investors to go buy an index? And you know the answer to that one, right? The answer is, well, because I cannot charge them fees if they buy an index – and it is like, OK, so now we know what you are really trying to do is just create a fee machine, which I am not doing.

JTR: It goes back to having the right incentives, as you were mentioning at the beginning.

MM: Exactly. It is like they are trying to create a fee machine. And I am like, I do not want to create a fee machine. I want to have good respectable returns and I want to be a trustworthy person who people feel like they can bet on it. And I want to do right by my family and not do something stupid. Well, if you put me up against the S&P, what am I going to do? The largest weighting in the S&P is Apple and I do not own any Apple. So if Apple goes up 40% and I am flat, regardless of whether I think I did a good job or not, I am going to look like I did a terrible job.

So what is that going to cause me to do? I am not going to focus on my stuff – I am going to focus on Apple, right, and I am going to get excited or bummed based on what Apple and Amazon, all the large stocks ... I think the top five weightings of the S&P have got to be over 20%, probably 25%-plus. So that is where I am going to spend my time – and I have no interest in looking at Apple every day. I just do not want to do it. So the most sure-fire way not to look at Apple is to just not care what Apple does. I just do not care, you know, and that keeps my brain free to focus on things I am interested in, not something that I really do not care about.

And what I would tell people is if you are looking to invest, then 99.99% of people – an overwhelmingly high percentage – should just buy the S&P 500, pay as low a fee as possible and forget they own it. I am 42 – if a 42-year-old male comes to me and says, what should I do with my money? Should I go buy X, Y or Z stock? The answer is no: you should buy the S&P 500 every single month – just do not even look at the price, every month just buy, buy, buy. And yes, you are going to call me one day when it is down. 30% and you will be like, what am I doing? This is a disaster. We need to sell on this. And I will say, don’t just buy ...

That is the only sure-fire way I know to get rich investing over time – just keep buying every single month, just do not worry about it. Just keep buying every single month, don’t pay high fees. Just keep buying the S&P. That is just not what I want to do. I want to go and sit on two boards and I want to look at individual securities. It is like a treasure hunt for me. I just enjoy it. It is a lot of fun. It is emotionally gratifying. It is mentally gratifying to me. But it is not for everybody.

I have been doing this for a long time and I am still learning stuff every day. It is not like I am an expert – but I do not care. I didn’t buy Apple – shame on me! And I didn’t do the work on Amazon – shame on me! But you know what, I do not care. Again, it is my money – LPs are not calling me, telling me I suck. And if they were, I would just send their money right back. Again, nobody wants to do that because they have created  few machines. And I am proud of them – that is a great way to get rich but it just not how I want to live my life.

JTR: How much of that mental process comes from formation – I mean, by that one single, unique summer internship with someone like Michael Price, who probably thinks just like that?

MM: It is probably my biggest professional regret as I would have loved to work with Michael for three, four or five years to really get inside and understand how he did things. And I know, based on what I have read and the conversations I have had, he had a very specific way of doing things when he was at Mutual Series – for example, taking Chemical Bank and merging it with Chase and some really big deals – and he was very active.

And as it switched to a family office, there was a little bit of that when I was there in 2003 but now I see a lot less of that – there is some activism stuff and some things going on but his portfolio is pretty broad. He owns a lot of different things – as John Malone would say, there are ‘a lot of dogs and cats in there’. And it is just different from what I am used to. And I am not sure because I was not there – I do not know what the transition was over time.

What I read about Michael is of a guy who is constantly looking for undervalued securities and, if they are being mismanaged, coming in and shaking things up to get them managed appropriately so that stock prices work. That is something that has always just resonated with me – I have loved it. I do think that it has dipped ... I worked on an activist fund for five and a half years and I do think a lot of boards and management teams, with information where it is now and with disclosures where they are now, I think a lot of those firms –especially the big ones – have already done all those things.

So I am not really sure there is as much ... the ‘dirty secret’ of the shift of activism – at least that I have witnessed – is it really went away from buying under-managed companies that could be fixed like National Beverage in 1986 with Nelson and it went to like, let’s buy something that is incredibly high-quality and pretty well managed now but then we can come in and suggest some changes around the margin to maybe improve returns. So it is more ‘suggestivism’ over the activism value kind of pioneered.

So it is it is just different – and, incidentally, that is an easier way to make a buck and it is a more consistent way to make a buck. So again, I am not throwing shade at it – I think it is smart. But that old school, 1985 Michael Price stuff that I really love and gravitate to – it is just not around so much anymore. You really just do not see it. And maybe one day, it will come back – we will see.

JTR: Is that perhaps a function of size as these businesses became so big?

MM: I think it is a combo of a lot of different things. This is me just spitballing because I have been out of the activist game for a long time but I think size – where they get so big – is part of the issue. I also think part of the issue is that markets have gone passive – and it is not just the amount of money that is passive-invested, it is where the flows are, right? So it is that all the new money is getting cycled into passive and that shifts ...

It is funny – I was thinking about this today. The guys who have done very well – and I mean very well – over the last decade had been very focused on flows. It is not even valuation that matters, it is where the money is going to move to – because money moves around. Now, some of that always goes into certain securities because we are buying the S&P 500 – but other money just sloshes around. And if you can get there before the money, when dollars show up – when there is limited supply and a bunch of money that comes in, right –what happens? It just explodes.

And people get those flows right. It is not a game that I know how to do and that I really would care to even try but people have done. I think part of the problem is so much of the flows have gone away from active and they have gone into passive. And so managers themselves have become innately focused on how to get involved in these index funds so they  can get part of these passive flows, right? Governance is part of it and doing the right things is part of it.

You can go and find companies that are completely mismanaged. Usually, they are small – so to your point about the hedge funds getting too big. Where they can do it, usually, they are small and, to be honest, it is way easier not to pick on one specific company. But, if you do, it is way easier to just go buy Cisco and then go in and say, you need to improve your distribution among the QSRs [quick service restaurants], than it is to go and find a $200m market cap company that is completely mismanaged and then, when you get in there, work for 80 hours a week for two years to unwind all the booby-traps they have set up because they just did not want to leave. It is just easier. I think that is part of it – and it sells well. You can raise a lot of money on Cisco or Chipotle or some of the really bigger names as activists you can invest in. It is easier for them and you can raise more money around it – frankly, it is is what I would be doing, if I were those managers.

JTR: Jason Zweig once wrote an average conceals more than it reveals while, on the After Hours podcast, I heard you argue the concept of the average is just a construct that does not exist, which was very interesting. The investment community, however, tends to normalise numbers towards an average – profits, margins or whatever – so how do you incorporate that as part of your analysis, when you are thinking about the future value of businesses or about base rates?

MM: Look, reversion to the mean is real but – and this is my personal opinion – you will find exceptions always. There is always a Standard Oil that will just find themselves in a situation where they outperform – and regulation, incidentally, does not even stop them from outperforming – those do exist. But, I think, for the vast majority of managers, for the vast majority of businesses, if your base case is that reversion to the mean will not happen – I think you really should stress-test that and, probably more importantly, have a view as to, if this does happen, will I recognise it? And then how much money will I lose?

So there is reversion to the mean for businesses and industries. That is the Toby thing – his Deep Value book argues that all businesses are going to revert to the mean, profits will revert to the mean, all of these things. I think there is a lot to that – history has kind of shown that, in capitalism, that is just what tends to happen. Of course there are always outliers – I think the difference is, there are not always a lot of outliers. The market is kind of predicting there will always be a lot of outliers right now – and I am not so sure that is the case. I guess we will find out.

When you are thinking about investment managers and investing around averages and the mean, that is where I am like, well, the average the S&P 500 is not so bad – that is not a bad outcome. Very few investors over time do better than the S&P 500. And my guess is that the ones who do a lot better for a period of time ... so some of the more famous investors now, who did much better for a long period of time, they have now raised so much money and their performance, if you look at any five-year trailing, where they have over $10bn in assets, they really tend not to – and, in a lot of cases, even before fees. So I look at it and I am like, well, it is hard to outperform the S&P 500 over time – there are a million studies that show that. You can get average. It is very cheap, actually, to get average and actually – surprisingly – really good for most people – even though most people do not do it.

I am a believer in reversion to the mean., I am a believer in market averages. Overconfidence really stresses me out. Sometimes it is very justified but it really stresses me out and that makes me think that, whenever anybody says, oh, this is going to be so great for so long, I am like, ah, we’ll see. I do not know. I have not been doing this that long. I have only been at it for – what did we decide? 18 years. Maybe I will be proven wrong. I would like to be. I am also not stubborn in that. So if anybody jumps up and says, well, you do not understand. It is like, no, I don’t understand. There is a lot I do not understand and I freely admit that. So not a great answer to your question but I am very suspicious of the conversation around averages and ‘better than average’, in particular. I guess time will tell. We’ll see.

JTR: Mike, we are coming to the end of our session and we always ask our guests two final questions. One is for an example of a bad decision you have made where the outcome was poor due to bad process rather than bad luck? And the other question is for a book recommendation.

MM: Let’s see ... a bad decision led by a bad process. The worst investment I have ever made, which I talked about earlier, was that mall-based jewellery retailer. The area where I messed up on that one ... I feel like my analysis itself was fine – I do not really take issue with that – but where I do take issue is how I dealt with it once I was a board adviser and I was telling them what to do. I was very aggressive with them and that aggression was a bad process because it did not leave us room if things went against us and it structurally cost us money. There is no doubt about it – the money I invested into the business ... well, I did not do it but the money I recommended they invest in the business ended up not only costing them on those purchases, but then taking away their liquidity at the wrong time.

And that has really shaped my thinking as I have gone forward – I am much less excited about doing that now because I have seen the outcome of that. It has led to me having a lot more conservatism in my 30s and 40s than I did when I was in my 20s as I have seen stuff go really south. That is one where the underwriting was not so terrible but the way I went about it and the things I voted for at the time – I did not have an official vote, but the things I recommended – I do take issue with so that is probably the number-one mistake.

I have held on to things for too long – I often like wait for total clarity that I am wrong and it is not out of being stubborn. It is that I really do not want stock prices to influence my thinking – and then a lot of times that works out. Sometimes the stock is dead right to be way down and I just look at fundamentals, I talk to management and sometimes that has caused me to hold some things that underperform for a long period of time.

That was QVC years ago – that is the one big example I have of that. I held on to it for probably a year longer than I should have because I just was not convinced the business was going against me. And I waited until it was pretty clear the business was definitely going against me and then I changed my mind and sold it – and since I have bought it all back because something changed and so I came back to it. But that is another example of something that – I am not sure – I wonder if I had have been a little more open-minded, I would have been out of there a little bit sooner. But we will never know.

On books, I have read several recently, none of which your audience would be interested in – they are all about starting a private practice for a physician. If anybody out there is a physician and they ever decide they want to start their own private practice, please hit me up on Twitter – there are not a lot of good books out there but I can give you some good recommendations.

As for my favourite investing books, there is a book [Charlie] Monger recommended a long time ago that I really love. It is so long I only read it once but it is called Guns, Germs & Steel [by Jared Diamond]. I really like it because it is not investing – it is all about humans and human systems and how things have played out that way and it was a book that really got me thinking. I do love The Outsiders by William Thorndyke – I think that is a wonderful book. If you have not read it, you should absolutely read it. And then, of course, a plug – probably my favourite investing book of all time is You Can Be a Stock Market Genius by Joel Greenblatt. That is like the Bible for special situations investing. It is like an actual ‘how to book’ so if you haven’t read that one, I would.

JTR: That is fantastic. Michael, thank you very much for being part of The Value Perspective.

MM: Happy to be here. Thanks for having me.


Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

I joined Schroders in January 2017 as a member of the Global Value Investment team and manage Emerging Market Value. Prior to joining Schroders I worked for the Global Emerging Markets value and income funds at Pictet Asset Management with responsibility over different sectors, among those Consumer, Telecoms and Utilities. Before joining Pictet, I was a member of the Customs Solution Group at HOLT Credit Suisse.  

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