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Speaker 1: M This is Mesters in Business with Very Renaults on

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Speaker 1: Bluebird Radio. This week on the podcast, I have an

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Speaker 1: extra special guest. Her name is Samantha McLamore and she

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Speaker 1: is a portfolio manager at Miller Value Partners where she

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Speaker 1: co manages the Opportunity Trust Fund with famed investor Bill Miller.

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Speaker 1: She is taking over the Opportunity Trust Fund from Bill

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Speaker 1: over the next couple of months. That's the transition, uh,

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Speaker 1: they created. And this is really quite a fascinating conversation.

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Speaker 1: If you're at all interested in value investing, stock selection,

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Speaker 1: portfolio construction, and what the difference between modern value investing

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Speaker 1: and the sort of Ben Graham historical value investing is. Uh,

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Speaker 1: You're gonna find this conversation to be absolutely fascinating. The

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Speaker 1: fund has put up spectacular numbers and it's not all Bill,

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Speaker 1: because she also runs the funds with Patient Capital Management,

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Speaker 1: which is the institutional entity she owns and that works

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Speaker 1: closely with Miller Value Partners, and her numbers have been

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Speaker 1: quite spectacular. I'm just gonna say, with no further ado,

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Speaker 1: my conversation with Samantha McLemore. This is Mesters in Business

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Speaker 1: with Very Renaults on Bloomberg Radio. My extra special guest

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Speaker 1: this week is Samantha McLamore. She is with Miller Value Partners,

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Speaker 1: where she co manages the Opportunity Trust Funds with Bill Miller.

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Speaker 1: She is also the founder and CEO of Patient Capital Management.

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Speaker 1: She was named to Baltimore's forty under forty by the

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Speaker 1: Baltimore Business Journal. Samantha McLemore, Welcome to Bloomberg Verry. Thank

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Speaker 1: you so much. I'm so excited to be here. I'm

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Speaker 1: a big fan of your podcast and I'm honored to

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Speaker 1: be a guest. Well, well, it's my pleasure. We've had

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Speaker 1: your partner, Bill Bill Miller on twice and he is

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Speaker 1: always a fascinating conversation. Let's talk a little bit about

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Speaker 1: how you met Bill. Tell us about how you got

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Speaker 1: into the financial services industry. I think it's quite an

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Speaker 1: interesting story. Yeah, you know, I always like to say

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Speaker 1: that I want the job lotteries. So, um, Bill and

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Speaker 1: I went to the same undergraduate school, Washington and Lee University. UM.

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Speaker 1: I was graduating after the tech bubble birth. I thought

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Speaker 1: I was going to go into investment banking. I was

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Speaker 1: ready to do those all nighters live in New York City.

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Speaker 1: I was really more interested in investment management, and I

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Speaker 1: was a member of the investment club at the school.

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Speaker 1: And Bill happened to come back the fall of my

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Speaker 1: senior year in two thousand one to speak to the

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Speaker 1: student body and attend some presentations of the investment club.

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Speaker 1: So I met him then and UM I ended up

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Speaker 1: asking him if I could send him my resume, UM

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Speaker 1: and low and behold. UM. I got a job as

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Speaker 1: a junior analysts with Bill straight out of college. I

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Speaker 1: thought I was going to be there for a couple

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Speaker 1: of years and go get my m b a UM,

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Speaker 1: but I've worked with him for for twenty years now.

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Speaker 1: How many people in your graduating class are still working

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Speaker 1: at the first gig they got right out of scho

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Speaker 1: That's a great question that I don't have the answer to,

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Speaker 1: but but I know it's not many. It's not got

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Speaker 1: to be very few. So so you started in the

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Speaker 1: early two thousands, and you had quite a baptism of fire. UM.

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Speaker 1: The flagship value trust funds in UM two thousand and

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Speaker 1: eight fell about the Opportunity Trust Fund, UH fell even

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Speaker 1: worse about tell us about that experience during the Great

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Speaker 1: Financial Crisis, and what did you learn from that? Just

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Speaker 1: a couple of years of mayhem. Yeah, that was It

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Speaker 1: was definitely a you know, a terrible and painful experience,

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Speaker 1: but it was it was one of the us learning

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Speaker 1: moments and and uh you know, a chance for improvement

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Speaker 1: and growth. And I think that often moments of pain,

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Speaker 1: you know, create that opportunity for uh, you know, for growth,

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Speaker 1: and so lots of lessons came out of that. I mean, certainly,

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Speaker 1: if I reflect back on my career, probably living through that,

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Speaker 1: you know, with hindsight, it was one of the most

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Speaker 1: instructive and helpful uh you know things you know for

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Speaker 1: me to do as an investor, and I got to

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Speaker 1: do it, uh, you know, in a shielded way with Bill,

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Speaker 1: you know, underneath build wing. But um, you know, we

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Speaker 1: came out of that with with so many lessons about

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Speaker 1: ways we could you know, improve our approach, and um,

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Speaker 1: you know, I remember, you know, one of the benefits

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Speaker 1: of working beside Bill is is I have all these

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Speaker 1: memories of you know, these pivotal moments and these lessons

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Speaker 1: from these pivotal moments. And I remember, you know, getting

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Speaker 1: at a restaurant in New York with Bill and a

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Speaker 1: couple of other fabulous investors in the fall of two

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Speaker 1: thousand eight, and they were, you know, discussing how terrible

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Speaker 1: the environment was and the risks. And I remember saying,

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Speaker 1: you know, as a as a true value investor, and

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Speaker 1: prices are down, and I was saying, but isn't this

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Speaker 1: one of the great you know, buying opportunities. I remember

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Speaker 1: them looking at me wide ied, you know, sort of

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Speaker 1: um surprise, and with hindsight over the very long term,

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Speaker 1: it was. But I probably didn't appreciate to the appropriate

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Speaker 1: extent the nerror term, you know, survival risks, and and

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Speaker 1: Bill has talked a lot about, you know, one of

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Speaker 1: the keys to success in this business is being able

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Speaker 1: to survive over the long term, because that's really difficult

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Speaker 1: to do, to survive, you know, in different environments. But

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Speaker 1: you know, there were there were so many lessons that

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Speaker 1: came out of that. And one of our favorite quotes

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Speaker 1: that we talked about a lot is Sir John Templeton's bowl.

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Speaker 1: Markets are born on pessimism, grow on skepticism, which are

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Speaker 1: on optimism, and die in euphoria. So really this bull

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Speaker 1: market that we're still in today, I think, which is

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Speaker 1: one of the strongest bull markets, and you know, you've

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Speaker 1: compounded it. The SMP has compounded it close almost nineteen

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Speaker 1: per years since then, which is nearly two times the

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Speaker 1: longer term average. And uh, the amount of pessimism that

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Speaker 1: this bull market was born on was you know, probably

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Speaker 1: a once in a lifetime extreme and so um and

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Speaker 1: it was it was a terrible environment. But we learned

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Speaker 1: a lot of lessons about distinguishing between different types of

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Speaker 1: crises and when do you play offense and when do

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Speaker 1: you play the friends? And uh, you know, how how

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Speaker 1: do you recognized risk signals? A lot of people, um,

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Speaker 1: you know, use price to tell them about risks. So

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Speaker 1: you know, many great investors I know of in the

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Speaker 1: financial crisis put in you know, stop losses um into

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Speaker 1: their process after that, which means the price is telling

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Speaker 1: you about the risk. But um, you know, when we

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Speaker 1: did an exhaustive review of our performance, I think what

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Speaker 1: came out of that, you know, after that was after

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Speaker 1: the financial crisis, after was really using finances or fundamentals

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Speaker 1: more as a risk signal. And so to avoid those

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Speaker 1: big losers or perennial losers. And so those can be

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Speaker 1: the classic value traps where our company looks cheap, but

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Speaker 1: it's not because it keeps you know, UM degrading over

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Speaker 1: time or you know, in the financial crisis, many of

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Speaker 1: those names looked cheap, but also they weren't because you know,

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Speaker 1: the pressures you know, built and the what appeared to

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Speaker 1: be the earnings power wasn't. There was extremely delayed. And

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Speaker 1: so you know, that was you know, a way that

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Speaker 1: we changed and adapted coming out of the financial crisis

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Speaker 1: to be more sensitive to UM and change our reaction

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Speaker 1: function a little bit to uh, you know, sell more

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Speaker 1: if the fundamentals keep disappointing us rather than oh that's

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Speaker 1: now more than price then and will buy more. Well,

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Speaker 1: clearly you learn the lessons because when I look at

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Speaker 1: the Opportunity Trust Fund that you co manage with Bill

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Speaker 1: over the past five years or so, uh, it's averaged

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Speaker 1: about percent a year, and that's outperformed. It's it's peers.

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Speaker 1: So that's a that's pretty impressive, especially when you consider,

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Speaker 1: you know, it's a nearly three billion dollar fund. This

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Speaker 1: is not a microcap fund. It's a decent size. To

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Speaker 1: what do you credit uh that run about performance? Yeah,

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Speaker 1: and you know, I think that that's a great question.

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Speaker 1: I mean, I think one, I fully believe that we

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Speaker 1: have a process that's you know, demonstrated results for now,

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Speaker 1: you know, for Bill for you know, over forty years,

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Speaker 1: and I've worked with him for twenty, so I have

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Speaker 1: a lot of confidence in our approach. But I also

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Speaker 1: think that, um, you know, the markets go through these

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Speaker 1: broad you know cycles, these longer term cycles. So when

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Speaker 1: I got into the business, you know, before I got

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Speaker 1: into business, when I was in college, we had this

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Speaker 1: big text bubble and valuations got extreme. And then that

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Speaker 1: first and I I joined Bill in two thousands two

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Speaker 1: nearly at the lows of that tech bubble. Then we

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Speaker 1: had this big bull market that was driven by global

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Speaker 1: cyclicals and the emergence of China, um, you know, and

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Speaker 1: the growth there. And then we had the housing bubble

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Speaker 1: in the financial crisis, and then we had, you know,

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Speaker 1: as I mentioned, this extreme period of you know, pessimism

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Speaker 1: and what I think of is post traumatic stress disorder,

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Speaker 1: you know, that resulted from the severity of the losses

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Speaker 1: in the financial crisis. And in that environment, you know,

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Speaker 1: post the financial crisis, you know, investors broadly really valued, um,

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Speaker 1: not losing money over making money, so they prioritized minimizing

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Speaker 1: volatility over earning returns. So that's the perfect environment earn returns,

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Speaker 1: you know, to to behave uh, you know, in the

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Speaker 1: opposite way. And and on the other hand, when people

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Speaker 1: are chasing for returns and there's a lot of euphoria,

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Speaker 1: that's when it makes sense to to you know, to

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Speaker 1: really prioritize lower volatility. So I think, you know, coming

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Speaker 1: off the financial crisis, I think we have capitalized on

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Speaker 1: opportunities when when we believed, uh, there was high perceived risk,

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Speaker 1: but actual risk, real risk was much lower. And um,

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Speaker 1: I think that that's been a very profitable strategy. And

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Speaker 1: a good example of that is you know, home builders

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Speaker 1: and banks and so you know, those companies obviously were

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Speaker 1: hit the hardest and hurt the most in the financial crisis. Um,

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Speaker 1: but they made some of the biggest fundamental changes to

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Speaker 1: their balance sheets and how they operate. Coming out of

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Speaker 1: the financial crisis, for the fundamental picture was really much different.

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Speaker 1: And uh, you know in two thousand oven at the

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Speaker 1: end of that year, Um, you know, those names all

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Speaker 1: traded down. Uh. You know, there's a lot of fear

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Speaker 1: about Europe breaking up and the year Zone debt crisis.

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Speaker 1: And at the same time, the fundamentals for the home

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Speaker 1: builders were you know, improving for the very first time,

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Speaker 1: and so it was a stark, stark disconnect and and

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Speaker 1: they've all, you know, outperformed the market nicely over the

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Speaker 1: past decade, even though it's been a challenging environment for

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Speaker 1: for value stocks or for UM stocks that weren't high growth.

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Speaker 1: So I think that that's helped us. And I think

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Speaker 1: remaining focused on the long term and the long term opportunities.

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Speaker 1: We talk a lot about time arbitrage and UM the

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Speaker 1: ability to stay focused on the long term. And you know,

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Speaker 1: we tend to hold names at least three to five years,

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Speaker 1: but some names will own you know, Amazon we've owned

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Speaker 1: for decades. So when when you say time arbitrage, are

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Speaker 1: you referring to some people with a shorter time horizon

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Speaker 1: giving into volatility and selling and you using the volatilities

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Speaker 1: and opportunity to buy the dip. Yes, I think that's

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Speaker 1: exactly right. So I think, UM, so again, if we

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Speaker 1: if we are focused on, you know, what is the

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Speaker 1: business worth and what does it look like in five years,

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Speaker 1: then a lot of times the near term, Uh, there's

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Speaker 1: a lot of noise in the near terms. That matters

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Speaker 1: a lot less. If you can remain focused on that

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Speaker 1: and I think at the aggregate market level, you can

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Speaker 1: think about that really well. I mean, people react to

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Speaker 1: you know, five percent pullbacks are very common. Ten percent

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Speaker 1: pullbacks are pretty common. A lot of people sell on

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Speaker 1: those moves, which, really, if you can remain long term,

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Speaker 1: that doesn't make a lot of sense. I think the

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Speaker 1: markets you know, up a little over half of all days,

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Speaker 1: it's up seventy five percent a year of years, one

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Speaker 1: year period it's up you know, eighty seven and a

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Speaker 1: half percent of five year periods, of ten year periods,

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Speaker 1: and a percent of twenty year periods. So why would

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Speaker 1: you react to these normal market gyrations? Again, if you

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Speaker 1: have a long term time horizon and you can remain

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Speaker 1: you know, focused on that, your odds of making money,

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Speaker 1: you know, and staying in the market are very high.

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Speaker 1: So we we try to think about, you know, as

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Speaker 1: we think about risk like real impairments to capital, or

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Speaker 1: as I think about opportunities. Now, maybe an example is UM,

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Speaker 1: you know, I think there's you know, great value and

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Speaker 1: a great opportunity and um some of the airlines and

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Speaker 1: we own Norwegian Cruise Line, and so when we're thinking

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Speaker 1: about what does that business model look like and what's

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Speaker 1: this earning power, with this cash generation, with his growth

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Speaker 1: potential you know, over five years. Then shorter term moves,

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Speaker 1: whether it's Amy Cron popping up and cancelations in the

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Speaker 1: near terms, they just matter a lot less unless you

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Speaker 1: believe that they're going to be continuing for you know,

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Speaker 1: a much longer duration, really really interesting. And you're taking

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Speaker 1: over from Bill the full management of the Opportunity Trust fund,

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Speaker 1: is that right, That's correct. We just announced a succession

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Speaker 1: and transition plans, so nothing is changing in the short term.

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Speaker 1: But I will assume responsibility for management of the Opportunity Trust,

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Speaker 1: you know, once Bill goes off at the end of

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Speaker 1: the year, and you know, I will assume management of

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Speaker 1: the team and UM. You know that will be done

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Speaker 1: through Patient Capital, which you mentioned that I started in early.

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Speaker 1: Bill is a minority UM owner and investor and Patient.

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Speaker 1: He's you know, a great mentor of mine, and I

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Speaker 1: joke with him that, you know, I've worked with him

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Speaker 1: for twenty years now and I intend to work with

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Speaker 1: him for twenty more. And so I Bill and I

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Speaker 1: will keep I will keep talking to Bill about markets

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Speaker 1: and about companies, you know, for as long as I can.

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Speaker 1: But the formal responsibilities and structure will change as we

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Speaker 1: execute this. And could you explain the relationship between Patient

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Speaker 1: Capital and Miller Value. I know Bill owns a piece

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Speaker 1: of Patient Capital, and Patient Capital does work for Miller Value,

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Speaker 1: but to the outside world it's a little complex and confusing. Yes. So, um, So, first,

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Speaker 1: you know, I've worked with Bill and we were at

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Speaker 1: leg Mason and then split off from the rest of

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Speaker 1: our group and Miller Value Partners became independent, and so

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Speaker 1: I'm still an employee and a co manager with Bill

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Speaker 1: at Miller Value Partners. Um. I launched Patient in and

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Speaker 1: the drivers for that were you know, there were a

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Speaker 1: few one Um, when Bill you know, launched Miller Value

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Speaker 1: or we split off, he would he would always describe

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Speaker 1: it as a family office and he would welcome like

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Speaker 1: minded investors. He'd been at leg Mason for many years,

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Speaker 1: built a big business, you know, managed a big team.

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Speaker 1: He wasn't interested, um in doing that anymore. You know,

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Speaker 1: I'm younger. I wanted to prove myself. I was interested

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Speaker 1: in in building a business and growing something. I also,

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Speaker 1: you know, so we had a retail business primarily. You know,

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Speaker 1: all of our assets were in you know, the mutual

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Speaker 1: fund and our overseas, uh you know, fun, and we

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Speaker 1: didn't really have an institutional business. We did back in

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Speaker 1: the leg Mason days, but we we hadn't. And again,

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Speaker 1: Bill was an interest in growing a business. So I

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Speaker 1: saw an opportunity, um, you know, to build a business.

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Speaker 1: And there was also you know demand for women and

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Speaker 1: minority um owned uh you know, investment opportunities. So I

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Speaker 1: saw that opportunity as well. I was also interested in

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Speaker 1: growing the team and um and again you know, to me,

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Speaker 1: the mission is extremely important. And I love this idea

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Speaker 1: of you know, the partners first and clients first approach.

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Speaker 1: And Charlie Ellis talked a lot about you know, per

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Speaker 1: distinguishing between the profession versus the business and how you know,

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Speaker 1: investment investment managers should operate more as a profession in

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Speaker 1: other words, doing what's best for the client, rather than

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Speaker 1: as a business doing what's best for the business. So

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Speaker 1: the idea of building a business around that. And also

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Speaker 1: you know the importance of role models and and um,

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Speaker 1: you know, I'd love to help provide more women role

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Speaker 1: models for young girls out there. I have two daughters.

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Speaker 1: You know, the more people they see like them, uh,

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Speaker 1: you know, doing a job I think the more they

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Speaker 1: can see themselves doing it, them and others like them.

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Speaker 1: And so I set this up, and you know, I

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Speaker 1: hired a few employees. We were co operating, We have

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Speaker 1: co operated, so really it's the same team at both

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Speaker 1: and on the portfolio management side, I view us as

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Speaker 1: operating as one team, one philosophy, one process, and so

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Speaker 1: we're just doing the work of, um, you know, finding

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Speaker 1: investment opportunities that we think are really attractive and then

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Speaker 1: um if if if I think they're attractive, they going patient.

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Speaker 1: And then Bill and I are having the conversation on

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Speaker 1: the opportunity side, and so there's a co decision maker

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Speaker 1: making function there. So really it's I see it as

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Speaker 1: a streamline process of you know, all the same work,

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Speaker 1: you know, and then will distinguish at the decision making

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Speaker 1: level between where things go. But this also created a

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Speaker 1: structure that allowed the transition to happen quite smoothly, because

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Speaker 1: you know, we can just assume again we have to

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Speaker 1: go through the process and get the approvals, but we

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Speaker 1: can assume and transfer over uh you know, the fun

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Speaker 1: contracts and the employees and and really do it in

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Speaker 1: a seamless stable way. So let's talk a little bit

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Speaker 1: about value investing the way Bill Miller, and I'm going

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Speaker 1: to assume you by extension, look at value. Isn't the

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Speaker 1: traditional Benjamin Graham classic value? Is that a fair statement?

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Speaker 1: And if it is, explain why? Well, I would say,

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Speaker 1: we still have a you know, a lot in common

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Speaker 1: with uh, you know Ben Graham's classic value model. I mean,

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Speaker 1: I had The Intelligent Investor is one of my favorite books.

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Speaker 1: I have a doggyeared I have it sitting on my

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Speaker 1: bookshelf right next to my desk. I refer to it.

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Speaker 1: And so there's many things about that classic approach that

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Speaker 1: I think are similar. Um. So, you know, he talks

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Speaker 1: a lot about distinguishing between price and value, so prices,

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Speaker 1: what you pay, value is what you get, um, making

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Speaker 1: that distinction, doing you know, careful company analysis to understand,

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Speaker 1: you know, what the value of the businesses. He talked

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Speaker 1: a lot about market behavior and how fluctuating prices to

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Speaker 1: create opportunities for investors to take advantage of, you know,

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Speaker 1: the behavioral extremes of greed and fear that the market, uh,

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Speaker 1: you know undergoes. And so there's a lot that's very

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Speaker 1: very similar. I would say, you know, really what's different.

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Speaker 1: And I would characterize it as an evolution. And it

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Speaker 1: didn't really start with us, because you know Warren Buffett,

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Speaker 1: who's a student of Ben Graham Um. Again, he used

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Speaker 1: to do the cigar but sort of investing, and then

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Speaker 1: you know, he really evolved his approach and talks about

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Speaker 1: you know, he'd met rather buy a wonderful business at

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Speaker 1: a fair price than a fair business at a wonderful price.

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Speaker 1: And so the idea of extending out that time horizon

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Speaker 1: and compounding again, you know, I think that's directionally the stuff.

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Speaker 1: And then maybe Bill certainly was criticized in the late

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Speaker 1: nineties early two thousand's, I don't know when it stopped,

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Speaker 1: but for not being a true value investor, for investing

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Speaker 1: in names like A. O. L. And Dell and Amazon,

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Speaker 1: these names that appeared, you know, very high multiple. But

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Speaker 1: when I joined Bill, I think one of the things

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Speaker 1: that struck me the most because again, when when I

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Speaker 1: reviewed UM, we bonded over very classic value. That was

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Speaker 1: my natural orientation, and so we shared that. But what

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Speaker 1: I didn't appreciate much and and you know I remember

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Speaker 1: Bill talking about listen, you know, during this time when

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Speaker 1: he was criticized, he was like, no one knows what

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Speaker 1: the best values in the market are today. We just

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Speaker 1: don't know because it depends on the future, and we

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Speaker 1: don't know the future. But we do know, and we

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Speaker 1: can look back over a long term, over say ten years,

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Speaker 1: and say, what were the best values ten years ago,

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Speaker 1: because you can see what has done the best, and

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Speaker 1: so we actually know what that is. And when we

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Speaker 1: look at that, the best values in the market are

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Speaker 1: always you know those names that can you know drive, uh,

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Speaker 1: you know, profitable growth and free cash flow growth and

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Speaker 1: business value growth the best. So they tend to be

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Speaker 1: you know, in the in the short term, they appear

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Speaker 1: to be higher you know, multiple businesses because um, you know,

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Speaker 1: they're prospects, are you know, the most attractive? And so

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Speaker 1: he said, why would you engineer a process that explicitly

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Speaker 1: excludes what you know are the best values in the market.

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Speaker 1: And that doesn't make a lot of sense to me. Uh,

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Speaker 1: That's what he said, and I agree with that wholeheartedly.

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Speaker 1: And so what we attempt to do is, um, be

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Speaker 1: open minded to looking for what might be the best

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Speaker 1: opportunities over you know, truly a long term basis. And

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Speaker 1: I think Ben Graham would talk about those as more speculative.

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Speaker 1: And again, if if those beginning expectations are higher and

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Speaker 1: you're more dependent on truly long term fundamentals UM, you know,

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Speaker 1: there was a higher perceiver risk there, and there's probably

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Speaker 1: there is a higher real risk there too, I would agree,

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Speaker 1: because the percentage of companies that actually can go on

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Speaker 1: to execute that UM is low, and the number of

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Speaker 1: companies who are priced to you know, achieve those sort

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Speaker 1: of outcomes are much higher than the companies that actually do.

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Speaker 1: But you know, Will has always been open minded. We

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Speaker 1: are open minded about trying to identify and invest, you know,

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Speaker 1: over the long term, and opportunities like that really interesting.

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Speaker 1: So I want to delve a little more into how

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Speaker 1: you guys define value because you mentioned Amazon before. Most

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Speaker 1: investors think of Amazon as a growth stock, in part

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Speaker 1: because it's grown so much and in part because it's

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Speaker 1: got such a technology um aspect to it, although arguably

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Speaker 1: the bulk of their revenues come from just being a retailer,

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Speaker 1: albeit one that has a rather substantial online presence. How

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Speaker 1: do you define Amazon as a value stock over the

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Speaker 1: past twenty years? Well, I guess back to the story.

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Speaker 1: What we know is Amazon, What was one of the

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Speaker 1: best you know, most undervalued stocks twenty years ago, because

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Speaker 1: we can look at how it's done since. So it

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Speaker 1: didn't appear that way on the near term fundamentals at

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Speaker 1: the time. You know, near term I guess metrics, accounting

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Speaker 1: metrics at the time, but we know with hindsight that

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Speaker 1: it was. And so when we talk about how we

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Speaker 1: define value or what we see as value, you know,

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Speaker 1: we use the standard textbook definition. So the value of

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Speaker 1: any investment is the present value of the future free cashloads.

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Speaker 1: And no one really disagrees with it. It's about how

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Speaker 1: do you identify or calculate those and we do scenario analysis.

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Speaker 1: But you know, I think many times, you know, the

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Speaker 1: simplification of dividing the world between growth and value it is,

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Speaker 1: you know, it is an oversimplification. And you know, Buffett

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Speaker 1: talks about growth being an input in the value equation,

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Speaker 1: and that's absolutely entirely true because it is a you know, again,

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Speaker 1: if a company can earn above its cost of capital,

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Speaker 1: you know, growth will be the most important value driver

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Speaker 1: and um and so again we Amazon still may look

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Speaker 1: expensive on current metrics, but we're always again we're focused

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Speaker 1: on the long term for our companies. We're doing at

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Speaker 1: least ten year discount of cash hole models. And Amazon

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Speaker 1: has we believe, you know, some of the best, if

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Speaker 1: not the best, competitive advantages in the market. It still

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Speaker 1: has great growth potential. Uh you know, it has a

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Speaker 1: number of different has the retail business, as logistics business,

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Speaker 1: has AWS, it's it's investing in new areas like healthcare.

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Speaker 1: And so when we look at it, we think, you know,

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Speaker 1: if you just even if you just mark to market there,

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Speaker 1: you know cloud business, the AWS and their advertising business,

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Speaker 1: you're getting the retail business for you know, pretty close

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Speaker 1: to free right now. And again, they've just gone through

429
00:25:47,640 --> 00:25:52,359
Speaker 1: an investment cycle. Um and Amazon typically doesn't hasn't historically

430
00:25:52,400 --> 00:25:54,439
Speaker 1: traded well when it's gone through one of those, but

431
00:25:54,560 --> 00:25:57,400
Speaker 1: coming out the other side, it's normally done much better

432
00:25:57,440 --> 00:25:59,800
Speaker 1: and it's about to drive significant pre cash flow. But

433
00:26:00,000 --> 00:26:04,840
Speaker 1: we're always trying to think carefully about the business and uh,

434
00:26:04,880 --> 00:26:08,159
Speaker 1: you know, it's ability to drive that long term pre

435
00:26:08,320 --> 00:26:10,920
Speaker 1: cash flow and how that compares to what's embedded in

436
00:26:10,960 --> 00:26:14,280
Speaker 1: the current stock price. So here's a question I always

437
00:26:14,359 --> 00:26:17,440
Speaker 1: wrestle with and I speak to my c f A buddies,

438
00:26:17,760 --> 00:26:21,120
Speaker 1: and I'm never satisfied with the answers I get when

439
00:26:21,200 --> 00:26:25,240
Speaker 1: you have a company like Amazon enter Jeff Bezos retires,

440
00:26:25,840 --> 00:26:29,600
Speaker 1: or Apple and they lose Steve Jobs, how do you

441
00:26:29,880 --> 00:26:33,560
Speaker 1: figure that into your calculus as to what the company

442
00:26:33,640 --> 00:26:37,240
Speaker 1: looks like going forward. It's pretty clear both of those

443
00:26:37,359 --> 00:26:41,359
Speaker 1: former c e o s were enormously influential on the

444
00:26:41,400 --> 00:26:45,679
Speaker 1: success of the companies. How do you calculate the loss

445
00:26:45,720 --> 00:26:50,200
Speaker 1: of such significant executives. Yeah, no, that's a great question.

446
00:26:50,240 --> 00:26:53,440
Speaker 1: I'll probably disappoint you with my own my answer too. So,

447
00:26:53,960 --> 00:26:56,960
Speaker 1: um so, I think probably the reason you're disappointed is

448
00:26:57,000 --> 00:26:59,040
Speaker 1: I don't think it's easy to calculate, you know, the

449
00:26:59,040 --> 00:27:02,919
Speaker 1: impact of that. Uh, it's not easy to quantify. I

450
00:27:02,960 --> 00:27:06,520
Speaker 1: think in both those cases, you know, Steve Jobs and

451
00:27:06,640 --> 00:27:11,040
Speaker 1: Jeff Bezos, we know that they were critical to driving

452
00:27:11,560 --> 00:27:15,479
Speaker 1: you know, the innovation that those companies produced. Um. Apple

453
00:27:15,520 --> 00:27:19,320
Speaker 1: has gone on to do extraordinarily well, uh, you know

454
00:27:19,600 --> 00:27:22,439
Speaker 1: post Steve Jobs, which was questioned, you know, for a

455
00:27:22,440 --> 00:27:25,480
Speaker 1: long time after the death, despite the fact that many

456
00:27:25,520 --> 00:27:29,160
Speaker 1: would argue they haven't come out with, you know, any new,

457
00:27:29,240 --> 00:27:32,480
Speaker 1: big innovation. They've driven it all on the existing base

458
00:27:32,600 --> 00:27:35,679
Speaker 1: of business. And so again, I think you can also

459
00:27:35,760 --> 00:27:38,480
Speaker 1: think through an Amazon again, I think we like to

460
00:27:38,520 --> 00:27:40,600
Speaker 1: think about and I know you've had Michael Mogison on here,

461
00:27:40,600 --> 00:27:43,320
Speaker 1: and I worked with Michael, and he's wonderful, and you know,

462
00:27:43,440 --> 00:27:45,960
Speaker 1: he talked a lot about and just came out with

463
00:27:46,040 --> 00:27:49,359
Speaker 1: his expectations investing that his new version of the book

464
00:27:49,760 --> 00:27:54,160
Speaker 1: and and our approach, you know, is created from his process.

465
00:27:54,240 --> 00:27:56,840
Speaker 1: And so we think a lot about what is embedded

466
00:27:56,840 --> 00:27:58,920
Speaker 1: in the current stock price. And so sometimes it makes

467
00:27:58,920 --> 00:28:01,240
Speaker 1: it easier to think through issues like that because if

468
00:28:01,240 --> 00:28:04,480
Speaker 1: we believe that Amazon, you're not even paying for the

469
00:28:04,520 --> 00:28:07,320
Speaker 1: retail business at the current crisis, then you're not paying

470
00:28:07,359 --> 00:28:12,000
Speaker 1: for any of the you know, later innovation that maybe

471
00:28:12,040 --> 00:28:15,159
Speaker 1: would be more at risk without Jeff. Again, I know

472
00:28:15,280 --> 00:28:18,640
Speaker 1: that Amazon believes, and Jeff believes, and the folks there

473
00:28:18,680 --> 00:28:21,520
Speaker 1: believe that what makes one of the things that makes

474
00:28:21,560 --> 00:28:26,400
Speaker 1: Amazon special is they've created a machine that can produce

475
00:28:26,520 --> 00:28:31,320
Speaker 1: innovations and upscale and so Jeff really was very explicit

476
00:28:31,359 --> 00:28:36,440
Speaker 1: about creating processes and structures to do that. Now it

477
00:28:36,640 --> 00:28:39,440
Speaker 1: will have to see whether they pull that off, you know,

478
00:28:39,760 --> 00:28:42,640
Speaker 1: if he's less involved, and that's that's no one knows

479
00:28:42,640 --> 00:28:45,240
Speaker 1: the future. We don't know, but we don't think we

480
00:28:45,280 --> 00:28:48,000
Speaker 1: don't think that needs to happen, uh, you know, for

481
00:28:48,040 --> 00:28:50,880
Speaker 1: the stock to still be attractive, given the total addressable

482
00:28:50,920 --> 00:28:54,560
Speaker 1: markets of their proven businesses where they're already you know,

483
00:28:54,760 --> 00:28:59,400
Speaker 1: very far along and um and so again, it is

484
00:28:59,400 --> 00:29:02,880
Speaker 1: a difficult questions to answer. I think I don't necessarily

485
00:29:02,920 --> 00:29:06,400
Speaker 1: think you always need to answer it. So let me

486
00:29:06,520 --> 00:29:10,120
Speaker 1: ask you, um a different question that might be more

487
00:29:10,160 --> 00:29:14,280
Speaker 1: in your sweet spot, which is, you know, it appears

488
00:29:14,680 --> 00:29:19,320
Speaker 1: to someone like me that Bill Miller and yourself have

489
00:29:19,560 --> 00:29:24,480
Speaker 1: a somewhat different approach to value investing that puts a

490
00:29:24,600 --> 00:29:29,800
Speaker 1: heavier weight on future growth prospects. But it also appears

491
00:29:29,840 --> 00:29:34,320
Speaker 1: that lots and lots of quote unquote traditional value investors

492
00:29:35,000 --> 00:29:39,040
Speaker 1: are still approaching that methodology the way it was taught

493
00:29:39,040 --> 00:29:42,200
Speaker 1: in the nineteen fifties. Why do you think so many

494
00:29:42,240 --> 00:29:47,320
Speaker 1: people are stuck with you know, the classic version of this,

495
00:29:47,600 --> 00:29:53,080
Speaker 1: where perhaps they're missing companies like Amazon for you guys,

496
00:29:53,200 --> 00:29:56,080
Speaker 1: or you mentioned Warren Buffett, one of the biggest investors

497
00:29:56,080 --> 00:29:59,640
Speaker 1: in Apple over the past couple of decades. Why have

498
00:29:59,760 --> 00:30:03,680
Speaker 1: p people been so slow to adjust? Yeah, that's a

499
00:30:03,680 --> 00:30:07,120
Speaker 1: great question. I mean, I think that most investors that

500
00:30:07,160 --> 00:30:10,800
Speaker 1: have survived and exist today have evolved and now you

501
00:30:10,920 --> 00:30:13,400
Speaker 1: see in value portfolios a lot of these names like

502
00:30:13,480 --> 00:30:17,600
Speaker 1: Google and Facebook and Amazon. So what you don't see

503
00:30:17,600 --> 00:30:20,120
Speaker 1: and where we might be a little bit different is

504
00:30:20,520 --> 00:30:23,520
Speaker 1: again if you go you know, down the spectrum of

505
00:30:24,240 --> 00:30:28,920
Speaker 1: companies earlier in their life cycle, where it's less proven

506
00:30:29,440 --> 00:30:32,160
Speaker 1: what the business model is or what the you know,

507
00:30:32,280 --> 00:30:35,560
Speaker 1: earnings potential can be. We are willing to look at

508
00:30:36,120 --> 00:30:39,000
Speaker 1: names like that, and I think you know, many value

509
00:30:39,040 --> 00:30:43,320
Speaker 1: investors aren't comfortable with that. UM I think you know

510
00:30:43,400 --> 00:30:46,560
Speaker 1: Warren Buffett for a long time. You know, he talked

511
00:30:46,600 --> 00:30:49,440
Speaker 1: a lot about your circle of competence and making sure

512
00:30:49,480 --> 00:30:52,720
Speaker 1: you define what your circle of competence is, and and

513
00:30:52,840 --> 00:30:56,440
Speaker 1: he didn't believe that he you know, technology was within

514
00:30:56,600 --> 00:31:00,400
Speaker 1: his circle of competence. I think one thing that allowed

515
00:31:00,440 --> 00:31:04,080
Speaker 1: Bill to make investments in there's technology companies in the

516
00:31:04,160 --> 00:31:07,600
Speaker 1: late nineties was his relationship with the Santa Fe Institute,

517
00:31:07,720 --> 00:31:11,000
Speaker 1: which he talks a lot about and they do, um,

518
00:31:11,040 --> 00:31:15,480
Speaker 1: you know, research on complex adoptive systems and you know,

519
00:31:15,600 --> 00:31:19,080
Speaker 1: broad cross sectional research and the work of Brian Arthur

520
00:31:19,840 --> 00:31:23,160
Speaker 1: who has studied complexity economics and he wrote, you know,

521
00:31:23,280 --> 00:31:27,480
Speaker 1: increasing returns and past dependence and you know he wrote

522
00:31:27,480 --> 00:31:30,480
Speaker 1: the book on that, and he allowed Bill to realize,

523
00:31:31,000 --> 00:31:35,440
Speaker 1: you know, early in the nineties that while technologies changed quickly,

524
00:31:35,520 --> 00:31:38,840
Speaker 1: and that was always buffetts concern is these companies can

525
00:31:38,880 --> 00:31:41,320
Speaker 1: earn you know, great returns for a very short term,

526
00:31:41,960 --> 00:31:44,600
Speaker 1: uh for the very short term, but then they're disrupted

527
00:31:44,760 --> 00:31:49,080
Speaker 1: because you know, some new technology comes along. And Brian's

528
00:31:49,120 --> 00:31:54,280
Speaker 1: work showed that while the technologies change um quickly, technology

529
00:31:54,320 --> 00:31:58,040
Speaker 1: market share actually doesn't. And so, you know, the biggest

530
00:31:58,080 --> 00:32:02,440
Speaker 1: monopolies in history have have been based on technology, whether

531
00:32:02,520 --> 00:32:05,600
Speaker 1: it's you know, A T and T or Microsoft. And

532
00:32:05,680 --> 00:32:09,840
Speaker 1: now there's all the um, you know, consternation and hearings

533
00:32:09,880 --> 00:32:13,120
Speaker 1: on the current big technology companies. So there is lock

534
00:32:13,200 --> 00:32:16,160
Speaker 1: in and past dependence that makes uh, you know, the

535
00:32:16,200 --> 00:32:19,360
Speaker 1: stability of those earnings much better than it would appear

536
00:32:19,360 --> 00:32:23,120
Speaker 1: if you're looking at you know, the individual products products,

537
00:32:23,160 --> 00:32:25,600
Speaker 1: and I think the reason you know, people aren't more

538
00:32:25,600 --> 00:32:30,400
Speaker 1: comfortable going you know, for the earlier stage companies um

539
00:32:30,400 --> 00:32:34,120
Speaker 1: and then Graham talks a lot about you know, companies

540
00:32:34,160 --> 00:32:38,640
Speaker 1: that are uh you know, loved or where the valuation

541
00:32:38,920 --> 00:32:43,080
Speaker 1: just depends on uncertain prospects far in the future, them

542
00:32:43,160 --> 00:32:46,400
Speaker 1: being much more speculative and we know that you know,

543
00:32:46,880 --> 00:32:49,400
Speaker 1: growth is growth rate are not linear, so there can

544
00:32:49,440 --> 00:32:52,320
Speaker 1: be higher volatility in those names. And we also know

545
00:32:52,440 --> 00:32:56,600
Speaker 1: that um again, the companies that are able to be

546
00:32:56,680 --> 00:33:00,440
Speaker 1: successful and drive that growth drive the market returns. UM.

547
00:33:00,480 --> 00:33:03,800
Speaker 1: So it's you know, there's some work out of you know,

548
00:33:03,840 --> 00:33:08,760
Speaker 1: the air Arizona State professor UM who showed that the

549
00:33:08,920 --> 00:33:12,080
Speaker 1: entire wealth creation since I think the nineteen twenties has

550
00:33:12,160 --> 00:33:15,240
Speaker 1: depended has been driven by four percent of companies. So

551
00:33:15,680 --> 00:33:18,920
Speaker 1: it's really a very narrow set that creates all of

552
00:33:19,000 --> 00:33:21,800
Speaker 1: the wealth. And what that means is most companies that

553
00:33:22,040 --> 00:33:24,760
Speaker 1: aren't able to do that and um so there are

554
00:33:24,760 --> 00:33:27,760
Speaker 1: many companies that are priced to do that and don't,

555
00:33:28,080 --> 00:33:30,960
Speaker 1: and so there can be higher volatility. Amazon, you know,

556
00:33:31,200 --> 00:33:34,400
Speaker 1: lost of its value after the tech bubble burst, Bill

557
00:33:34,440 --> 00:33:37,120
Speaker 1: bought it all the way down. UM. So even if

558
00:33:37,160 --> 00:33:41,560
Speaker 1: you could identify it, identify an opportunity, having the stomach

559
00:33:41,600 --> 00:33:44,640
Speaker 1: to hold it and to add to it um and

560
00:33:44,640 --> 00:33:48,040
Speaker 1: and and you know, retain it in the portfolio for

561
00:33:48,520 --> 00:33:51,640
Speaker 1: as long as it takes to you know, capture the

562
00:33:51,680 --> 00:33:54,640
Speaker 1: returns is pretty difficult and it's pretty hard to do.

563
00:33:54,880 --> 00:33:57,680
Speaker 1: And so I think that that's why more people don't

564
00:33:57,680 --> 00:34:01,720
Speaker 1: do it huh really quite fast and they So we

565
00:34:01,720 --> 00:34:04,920
Speaker 1: were talking earlier about how you don't really fall neatly

566
00:34:05,120 --> 00:34:08,760
Speaker 1: into any buckets, and the same as true for Bill Miller.

567
00:34:08,840 --> 00:34:12,920
Speaker 1: But when I look at your specific portfolio, some of

568
00:34:12,920 --> 00:34:17,080
Speaker 1: these names are are definitely outside of the traditional value

569
00:34:17,200 --> 00:34:24,400
Speaker 1: universe matterport Capital one, Ali Baba, Gray Scale, Bitcoin Trust.

570
00:34:24,480 --> 00:34:28,560
Speaker 1: I mean that is not your typical free cash flow uh,

571
00:34:28,719 --> 00:34:31,680
Speaker 1: deep value stock. Tell us what it's like to be

572
00:34:32,239 --> 00:34:35,400
Speaker 1: free from the shackles of the morning Star style box.

573
00:34:35,880 --> 00:34:39,520
Speaker 1: I I think it's a huge advantage. UM, So we

574
00:34:39,640 --> 00:34:43,160
Speaker 1: can we can look broadly for what we believe are

575
00:34:43,200 --> 00:34:46,840
Speaker 1: the best opportunities, which I think definitely helps us construct

576
00:34:46,880 --> 00:34:50,200
Speaker 1: portfolios that we think have the most potential. When you

577
00:34:50,239 --> 00:34:54,000
Speaker 1: when you start putting in constraints, um, obviously that hinders

578
00:34:54,000 --> 00:34:59,040
Speaker 1: your ability to optimize because they hurt your flexibility. So

579
00:34:59,239 --> 00:35:02,080
Speaker 1: you know, Bill I mentioned earlier, talks a lot about

580
00:35:02,560 --> 00:35:05,440
Speaker 1: how difficult it is to survive in this business, and

581
00:35:05,920 --> 00:35:09,840
Speaker 1: he outperformed in the late nineties during the tech bubble

582
00:35:09,920 --> 00:35:12,840
Speaker 1: and then also in the early two thousand's, you know,

583
00:35:12,920 --> 00:35:17,040
Speaker 1: when the tech bubble burst, and um, what enabled him

584
00:35:17,040 --> 00:35:19,719
Speaker 1: to do that with his ability to shift between so

585
00:35:19,920 --> 00:35:24,040
Speaker 1: called style boxes. He had tech investments, uh you know

586
00:35:24,120 --> 00:35:26,120
Speaker 1: in the late nineties that helped. They were the only

587
00:35:26,160 --> 00:35:28,960
Speaker 1: thing that outperformed, so you had to have them to outperform.

588
00:35:29,560 --> 00:35:31,800
Speaker 1: But then and I think it's one of the greatest

589
00:35:31,840 --> 00:35:35,160
Speaker 1: calls in the history of the business. He uh you know,

590
00:35:35,480 --> 00:35:38,480
Speaker 1: in early two thousand thought it was game over and

591
00:35:38,840 --> 00:35:42,160
Speaker 1: massively took down his holdings in those sort of names

592
00:35:42,200 --> 00:35:45,680
Speaker 1: and so um you know, took the more classic value

593
00:35:46,200 --> 00:35:48,479
Speaker 1: names up, which is what did well when the tech

594
00:35:48,520 --> 00:35:51,560
Speaker 1: bubble burst. So again having you know, if he if

595
00:35:51,600 --> 00:35:53,799
Speaker 1: he had been constrained in one or the other of

596
00:35:53,880 --> 00:35:57,560
Speaker 1: growth or value, that wouldn't have been possible because it

597
00:35:57,600 --> 00:36:00,799
Speaker 1: was so segmented. What what did well? So I think

598
00:36:00,880 --> 00:36:05,600
Speaker 1: that having that flexibility is critical to you know, generating

599
00:36:05,640 --> 00:36:08,480
Speaker 1: long term returns. It it can hurt your ability to

600
00:36:08,600 --> 00:36:13,520
Speaker 1: grow assets because you know, the institutional marketplace is you know,

601
00:36:13,760 --> 00:36:18,440
Speaker 1: set up and structured in a way, um that you

602
00:36:18,480 --> 00:36:21,160
Speaker 1: can be precluded if if you operate like that. But

603
00:36:21,280 --> 00:36:24,600
Speaker 1: that's okay because you know, I think we'd rather produced

604
00:36:24,600 --> 00:36:28,680
Speaker 1: excellent returns for fewer clients than mediocre returns for many.

605
00:36:29,000 --> 00:36:32,200
Speaker 1: So style boxes matter at least if you're looking for

606
00:36:32,840 --> 00:36:36,400
Speaker 1: institutional clients. Yeah, I mean, I think Warren Buffett. You know,

607
00:36:36,480 --> 00:36:40,040
Speaker 1: he talks about, you know, the keys are what he

608
00:36:40,120 --> 00:36:43,719
Speaker 1: thinks is are the keys to being a great investor,

609
00:36:44,040 --> 00:36:52,800
Speaker 1: and um, he talks about emotional emotional stability, UM, independent thinking,

610
00:36:52,960 --> 00:36:57,799
Speaker 1: and a keen understanding of institutional and individual behavior. So

611
00:36:58,000 --> 00:37:00,120
Speaker 1: i Q doesn't make it up on that list. But

612
00:37:00,640 --> 00:37:03,120
Speaker 1: you know, the reason behavior is is so important is

613
00:37:03,160 --> 00:37:07,680
Speaker 1: because again, uh, you know, there are structures and constraints

614
00:37:07,719 --> 00:37:11,400
Speaker 1: that pop up that create certain opportunities. Again, the markets

615
00:37:11,400 --> 00:37:14,239
Speaker 1: are very efficient and so it's very difficult to outperformed,

616
00:37:14,280 --> 00:37:17,279
Speaker 1: so there has to be some reason, you know, or

617
00:37:17,360 --> 00:37:20,160
Speaker 1: something that's existing that you know creates an opportunity and

618
00:37:20,160 --> 00:37:22,359
Speaker 1: makes the market wrong. And those aren't easy to come by.

619
00:37:22,560 --> 00:37:25,800
Speaker 1: So again, if people are defaulting to a certain behavior

620
00:37:25,840 --> 00:37:29,160
Speaker 1: that might be suboptimal from a return perspective, that uh,

621
00:37:29,200 --> 00:37:32,040
Speaker 1: you know that doing the opposite might be what helps

622
00:37:32,080 --> 00:37:36,440
Speaker 1: you burn returns. So how much do you and build

623
00:37:36,520 --> 00:37:40,719
Speaker 1: together buy into the Peter Lynch philosophy of by what

624
00:37:40,880 --> 00:37:43,400
Speaker 1: you know? It seems like a lot of the companies

625
00:37:43,440 --> 00:37:46,959
Speaker 1: that you're an investor in, you guys have a very

626
00:37:47,080 --> 00:37:51,960
Speaker 1: deep pool of um familiarity with and over and above

627
00:37:52,000 --> 00:37:56,720
Speaker 1: what we traditionally think of as a basic research return.

628
00:37:57,440 --> 00:38:00,640
Speaker 1: Do you buy into the Lynch philosophy? Well, any great

629
00:38:00,680 --> 00:38:04,239
Speaker 1: investor who's done really well and and earned returns. I

630
00:38:04,280 --> 00:38:06,799
Speaker 1: try to learn whatever I can from them, and the

631
00:38:06,840 --> 00:38:10,680
Speaker 1: same It's true a Bill and so certainly I've studied

632
00:38:10,719 --> 00:38:14,040
Speaker 1: Peter and UM. And I think that if you have

633
00:38:14,160 --> 00:38:17,239
Speaker 1: an intimate experience with a product or a company, you

634
00:38:17,280 --> 00:38:20,000
Speaker 1: can understand it, you know, in a you know, in

635
00:38:20,040 --> 00:38:23,960
Speaker 1: a more in depth way. And so uh that might

636
00:38:24,200 --> 00:38:27,600
Speaker 1: you know, when when we bought Peleton, for instance, UM,

637
00:38:27,640 --> 00:38:31,719
Speaker 1: I had that idea because um of my personal experience

638
00:38:31,960 --> 00:38:35,320
Speaker 1: with Peloton, and my husband had asked for a Peloton

639
00:38:35,440 --> 00:38:38,000
Speaker 1: for Christmas, and I said, are you kidding me? I'm

640
00:38:38,040 --> 00:38:41,120
Speaker 1: a value investor. Do you know how much those bike's costs?

641
00:38:42,080 --> 00:38:43,680
Speaker 1: But you know, I was trying to beat such a

642
00:38:43,760 --> 00:38:46,480
Speaker 1: nice life, So I got him the Peloton And this

643
00:38:46,520 --> 00:38:49,160
Speaker 1: is before it came public, and I ended up you know,

644
00:38:49,200 --> 00:38:52,360
Speaker 1: I wasn't a big spin or bike person, but I

645
00:38:52,440 --> 00:38:54,680
Speaker 1: ended up using it so much more than I would

646
00:38:54,680 --> 00:38:57,560
Speaker 1: have ever expected, and they had broader programming and I

647
00:38:57,640 --> 00:38:59,680
Speaker 1: loved it. And I didn't really go to the gym

648
00:38:59,719 --> 00:39:03,880
Speaker 1: anym war and uh so when it came public, you know,

649
00:39:03,920 --> 00:39:05,560
Speaker 1: we wanted to do the work on it and see

650
00:39:05,560 --> 00:39:08,399
Speaker 1: what the valuation was on it. And again I thought

651
00:39:08,400 --> 00:39:12,479
Speaker 1: it was highly misunderstood. Um you know at that time.

652
00:39:12,560 --> 00:39:15,080
Speaker 1: It's you know again, I think people started to understand

653
00:39:15,080 --> 00:39:18,359
Speaker 1: it better in the UM in the financial crisis when

654
00:39:18,440 --> 00:39:21,279
Speaker 1: they were such a huge beneficiary and we exited because

655
00:39:21,280 --> 00:39:23,440
Speaker 1: we thought it became fully priced. But I still think

656
00:39:23,440 --> 00:39:26,839
Speaker 1: it's misunderstood because some of those same old criticisms about

657
00:39:26,880 --> 00:39:30,160
Speaker 1: it being a Scottish hardware company are now you know,

658
00:39:30,200 --> 00:39:33,600
Speaker 1: back in vogue after its decline. But certainly, you know,

659
00:39:33,719 --> 00:39:38,080
Speaker 1: if living in the world and coming across things, um

660
00:39:38,239 --> 00:39:41,040
Speaker 1: I I definitely believe that that can be a source

661
00:39:41,080 --> 00:39:45,320
Speaker 1: of both you know, better understanding and advantage and also

662
00:39:45,480 --> 00:39:49,240
Speaker 1: you know, idea generation. So that raises an interesting question.

663
00:39:49,880 --> 00:39:53,880
Speaker 1: You're both stock pickers at hard but obviously the macro

664
00:39:54,239 --> 00:39:57,920
Speaker 1: landscape makes an impact, as we learned during the pandemic

665
00:39:57,960 --> 00:40:01,640
Speaker 1: and lockdown. How much do you think about what's going

666
00:40:01,680 --> 00:40:06,239
Speaker 1: on in the macro world. Does that affect how you

667
00:40:06,239 --> 00:40:10,920
Speaker 1: construct your portfolio, doesn't affect stock selection or is it

668
00:40:11,000 --> 00:40:12,879
Speaker 1: just one of those things that you have to grit

669
00:40:12,920 --> 00:40:15,920
Speaker 1: your teeth and deal with. Well. I think Bill is

670
00:40:15,960 --> 00:40:19,080
Speaker 1: one of the best macro spinkers that I've ever encountered,

671
00:40:19,239 --> 00:40:21,360
Speaker 1: and so I've been fortunate to learn from him. I

672
00:40:21,440 --> 00:40:24,520
Speaker 1: remember when I joined him and sitting in our first

673
00:40:24,520 --> 00:40:27,399
Speaker 1: research meetings and going home and feeling like I had

674
00:40:27,480 --> 00:40:29,840
Speaker 1: drank from a fire hose because it was such a

675
00:40:29,960 --> 00:40:33,480
Speaker 1: learning curve that I had not really been exposed to.

676
00:40:33,880 --> 00:40:40,160
Speaker 1: So we certainly expend effort trying to understand the environment

677
00:40:40,239 --> 00:40:42,920
Speaker 1: that we're operating in, and you know that that can

678
00:40:42,960 --> 00:40:45,279
Speaker 1: take significant time and trying to think about it. We

679
00:40:45,400 --> 00:40:51,080
Speaker 1: do construct portfolios and selected investments on a bottoms up basis. Uh,

680
00:40:51,120 --> 00:40:53,320
Speaker 1: you know, we do scenario analysis, so we're trying to

681
00:40:53,400 --> 00:40:55,480
Speaker 1: understand the value of businesses in a range of SCE

682
00:40:55,560 --> 00:40:59,640
Speaker 1: areas because we don't know the future. But obviously, you know,

683
00:41:00,280 --> 00:41:05,160
Speaker 1: the environment can interact critically with the fundamentals of businesses,

684
00:41:05,239 --> 00:41:08,160
Speaker 1: so you have to try to understand, you know, the

685
00:41:08,280 --> 00:41:12,960
Speaker 1: environment in which you're operating. So so we definitely do that. Interesting. Um,

686
00:41:13,040 --> 00:41:16,600
Speaker 1: you mentioned how efficient the markets have become. How do

687
00:41:16,640 --> 00:41:20,560
Speaker 1: you look at the shift from active to passive. Is

688
00:41:20,600 --> 00:41:25,320
Speaker 1: that changing markets? Does that affect the way you think about, um,

689
00:41:25,360 --> 00:41:28,880
Speaker 1: how quickly information gets built into price. Yeah, that's a

690
00:41:28,880 --> 00:41:32,960
Speaker 1: great question, and it's definitely uh, you know, a big

691
00:41:33,000 --> 00:41:37,680
Speaker 1: secular trend that we expect to continue. Um so I

692
00:41:37,800 --> 00:41:41,440
Speaker 1: haven't and we haven't seen data or evidence to support

693
00:41:41,600 --> 00:41:45,960
Speaker 1: that it's made the markets less efficient yet, although you know,

694
00:41:46,000 --> 00:41:48,560
Speaker 1: there's a lot of speculation that it will at some point,

695
00:41:48,640 --> 00:41:51,400
Speaker 1: and you would think it would at some point. I know,

696
00:41:51,640 --> 00:41:53,520
Speaker 1: you know, I know some folks at Santa Fe are

697
00:41:53,560 --> 00:41:58,040
Speaker 1: now uh studying whether there's any evidence that you're you know,

698
00:41:58,200 --> 00:42:01,840
Speaker 1: seeing that. Um, you know, I guess we have seen

699
00:42:02,239 --> 00:42:05,600
Speaker 1: certain market structure issues that I think do lead to

700
00:42:06,360 --> 00:42:11,120
Speaker 1: some you know, inefficiencies and whether it's uh we talked

701
00:42:11,120 --> 00:42:14,359
Speaker 1: about time arbitrage, show the market becoming so short term

702
00:42:14,440 --> 00:42:20,000
Speaker 1: focus that it creates some inefficiencies on longer time horizons,

703
00:42:20,239 --> 00:42:23,960
Speaker 1: or you know, with all the ets that have popped

704
00:42:24,040 --> 00:42:26,480
Speaker 1: up and now you know, back in the days when

705
00:42:26,520 --> 00:42:30,000
Speaker 1: Bill built the business, you know, there were financial advisors

706
00:42:30,000 --> 00:42:33,120
Speaker 1: and their number one job what they did was they

707
00:42:33,160 --> 00:42:37,560
Speaker 1: selected stocks and now that's hardly ever the case. They're uh,

708
00:42:37,600 --> 00:42:41,560
Speaker 1: you know, allocators and there you know, allocating capital between

709
00:42:41,800 --> 00:42:44,600
Speaker 1: different opportunities, and they use ets so we can see

710
00:42:44,600 --> 00:42:48,360
Speaker 1: from time to time. Again, just the homogenization where stocks

711
00:42:48,360 --> 00:42:50,640
Speaker 1: will move together as a group in the short term,

712
00:42:50,680 --> 00:42:53,239
Speaker 1: irrespective of fundamentals. I think over the long term the

713
00:42:53,280 --> 00:42:56,279
Speaker 1: market can sort that out, but in the short term

714
00:42:56,360 --> 00:42:59,760
Speaker 1: it may not. You know, there might be some micro structure,

715
00:43:00,239 --> 00:43:03,440
Speaker 1: you know, inefficiencies there. Again, I haven't seen data to

716
00:43:03,520 --> 00:43:07,480
Speaker 1: actually support that. It's it's more just observing, uh, you know,

717
00:43:07,520 --> 00:43:12,400
Speaker 1: the behavior. So people love to talk about stocks, but

718
00:43:12,560 --> 00:43:16,600
Speaker 1: we rarely hear people talk about portfolio management, which is

719
00:43:16,640 --> 00:43:21,239
Speaker 1: a very different skill. How do you figure out how

720
00:43:21,280 --> 00:43:24,719
Speaker 1: to spread your bets out across different sectors and and

721
00:43:24,840 --> 00:43:28,480
Speaker 1: how to size different positions. Yeah, I think it's a

722
00:43:28,520 --> 00:43:31,760
Speaker 1: great question. You're right, people don't focus on it enough

723
00:43:31,840 --> 00:43:35,000
Speaker 1: for a lot um. I again, I feel so fortunate

724
00:43:35,080 --> 00:43:38,680
Speaker 1: to have learned from Bill on this. Uh. You know,

725
00:43:38,760 --> 00:43:40,839
Speaker 1: I'm not sure if you're familiar with Novous, but they

726
00:43:40,880 --> 00:43:44,719
Speaker 1: study managers and actually look at, you know, where their

727
00:43:44,840 --> 00:43:47,640
Speaker 1: edges or where they have a competitive advantage. And when

728
00:43:47,640 --> 00:43:49,879
Speaker 1: they looked at you know, the history of the fun

729
00:43:49,960 --> 00:43:54,000
Speaker 1: and the history of Bill, Uh, they actually identified sizing

730
00:43:54,280 --> 00:43:57,960
Speaker 1: as a strength and you know, an advantage and something

731
00:43:58,080 --> 00:44:01,319
Speaker 1: that uh you know, generated returns. So I've been very

732
00:44:01,360 --> 00:44:04,200
Speaker 1: fortunate to learn from him on this. I think, you know,

733
00:44:04,239 --> 00:44:09,279
Speaker 1: the overall objective is to uh, you know, size positions

734
00:44:09,440 --> 00:44:14,120
Speaker 1: relative to risk adjusted returns and so um you know,

735
00:44:14,160 --> 00:44:17,919
Speaker 1: so our typical starting position size is anywhere from two

736
00:44:17,960 --> 00:44:21,240
Speaker 1: to two and a half percent. But again if it's

737
00:44:20,960 --> 00:44:24,319
Speaker 1: we could have a one percent position if it's higher risk.

738
00:44:24,440 --> 00:44:27,719
Speaker 1: But you know, if it's a binary biotech where you know,

739
00:44:27,760 --> 00:44:29,320
Speaker 1: I might lose all its money or it's going to

740
00:44:29,400 --> 00:44:32,759
Speaker 1: go up a lot. Again, I think you know I've

741
00:44:32,760 --> 00:44:35,839
Speaker 1: occurred Dennis Lynch, you know, talking about you know, there's

742
00:44:35,840 --> 00:44:38,200
Speaker 1: a place in the portfolio for investments like that. You

743
00:44:38,239 --> 00:44:41,600
Speaker 1: just have to size them uh correctly and then you know,

744
00:44:41,680 --> 00:44:45,000
Speaker 1: we can go larger if we have high conviction um

745
00:44:45,040 --> 00:44:47,640
Speaker 1: in in a name and really you know, we might

746
00:44:47,640 --> 00:44:50,640
Speaker 1: start at three. But what we try to do is

747
00:44:50,719 --> 00:44:54,399
Speaker 1: let our winners run and again you know, we'll let

748
00:44:54,480 --> 00:44:57,840
Speaker 1: names get to a large you know, percentage of the

749
00:44:57,920 --> 00:45:02,040
Speaker 1: portfolio again if they work. And one of the behavioral

750
00:45:02,760 --> 00:45:06,799
Speaker 1: uh flaws that people tend to do is you know,

751
00:45:06,920 --> 00:45:10,600
Speaker 1: sell their winners and to their losers. So we explicitly

752
00:45:10,640 --> 00:45:13,920
Speaker 1: try to you know, counteract that and let our winners

753
00:45:14,000 --> 00:45:16,359
Speaker 1: run and so we can have you know, more concentrated

754
00:45:16,400 --> 00:45:19,719
Speaker 1: positions at the at the top of the portfolio, you

755
00:45:19,760 --> 00:45:22,279
Speaker 1: know from that. Yeah, Bill has talked about in the

756
00:45:22,320 --> 00:45:26,400
Speaker 1: past that if you're gonna just hug the benchmark and

757
00:45:26,480 --> 00:45:31,799
Speaker 1: have nothing but one percent positions, you're you're less of

758
00:45:31,840 --> 00:45:36,840
Speaker 1: an active manager than you are a closet indexer, which

759
00:45:37,800 --> 00:45:41,480
Speaker 1: I assume implies that you guys build a little bit

760
00:45:41,520 --> 00:45:45,960
Speaker 1: more of a concentrated portfolio. Yeah, that's exactly right. We um.

761
00:45:46,000 --> 00:45:48,759
Speaker 1: You know, the academics have written about this concept of

762
00:45:48,880 --> 00:45:52,839
Speaker 1: active share. So you know, they've quantified how different does

763
00:45:52,920 --> 00:45:57,080
Speaker 1: your portfolio look from the benchmark and we have very

764
00:45:57,160 --> 00:46:00,320
Speaker 1: high active share. Uh, you know, the academic re search

765
00:46:00,719 --> 00:46:04,640
Speaker 1: suggests that, uh, you know that funds with high active

766
00:46:04,640 --> 00:46:06,640
Speaker 1: share tend to do better. And that's for exactly the

767
00:46:06,640 --> 00:46:09,520
Speaker 1: reason that you just mentioned that Bill talks about, which

768
00:46:09,560 --> 00:46:13,040
Speaker 1: is if you're a closet indexer and your portfolio looks

769
00:46:13,080 --> 00:46:14,799
Speaker 1: a lot like the benchmark, but then you just have

770
00:46:14,920 --> 00:46:18,400
Speaker 1: higher fees, then that's the recipe for very consistent underperformance

771
00:46:18,480 --> 00:46:22,239
Speaker 1: that compounds over time. And so we're very benchmark agnostic,

772
00:46:22,360 --> 00:46:25,759
Speaker 1: and we're constructing portfolios, you know, from the bottoms up,

773
00:46:25,840 --> 00:46:29,320
Speaker 1: and we're finding names and ideas that we think are attractive,

774
00:46:29,360 --> 00:46:32,399
Speaker 1: and we're not paying a lot of attention to, uh,

775
00:46:32,440 --> 00:46:34,440
Speaker 1: you know, whether they're in the benchmark or what their

776
00:46:34,440 --> 00:46:37,280
Speaker 1: weight is in the benchmark. Again, are we have return

777
00:46:37,320 --> 00:46:39,839
Speaker 1: objectives and we're trying to meet our return objectives over

778
00:46:39,880 --> 00:46:43,000
Speaker 1: the long term. And obviously we do think about, you know,

779
00:46:43,080 --> 00:46:45,400
Speaker 1: what kind of returns we think are possible, you know,

780
00:46:45,600 --> 00:46:49,000
Speaker 1: for the market overall, because that's uh, you know, that's

781
00:46:49,000 --> 00:46:51,520
Speaker 1: our bogey, that's what we want to be um. But

782
00:46:51,520 --> 00:46:55,799
Speaker 1: but when we're constructing portfolios, we are concentrated and uh,

783
00:46:55,840 --> 00:46:58,680
Speaker 1: you know, we have we're looking very different from the benchmark.

784
00:46:59,120 --> 00:47:02,960
Speaker 1: So the other port folio construction question is the flip

785
00:47:03,000 --> 00:47:06,000
Speaker 1: side of what to buy, which is how do you

786
00:47:06,040 --> 00:47:09,360
Speaker 1: know when to sell something? Is is there anything in

787
00:47:09,400 --> 00:47:13,600
Speaker 1: particular you look at, Um, it doesn't appear you guys

788
00:47:13,680 --> 00:47:18,680
Speaker 1: use stop losses because both you and Bill and the

789
00:47:18,719 --> 00:47:22,600
Speaker 1: fund have a history of being comfortable buying on the

790
00:47:22,640 --> 00:47:26,080
Speaker 1: way down when a stock gets repriced and you mentioned

791
00:47:26,120 --> 00:47:28,759
Speaker 1: Amazon as an example, how do you know when to

792
00:47:29,480 --> 00:47:33,240
Speaker 1: fish or cut bait. Yeah, that's a great question. And UM,

793
00:47:33,280 --> 00:47:36,759
Speaker 1: and I wish more people would do work on uh,

794
00:47:37,080 --> 00:47:41,760
Speaker 1: you know, sell discipline and and and how to really

795
00:47:42,239 --> 00:47:44,840
Speaker 1: improve that because you know, there's a lot of literature

796
00:47:45,040 --> 00:47:48,479
Speaker 1: and and managers in general are you know, very good

797
00:47:48,560 --> 00:47:51,080
Speaker 1: or much better on the buy side. And I think

798
00:47:51,080 --> 00:47:54,080
Speaker 1: there's just a lot less focus on the sell side.

799
00:47:54,160 --> 00:47:56,600
Speaker 1: And and some of our biggest mistakes again have been

800
00:47:57,280 --> 00:47:59,799
Speaker 1: selling too early, really some of these big winners. And

801
00:47:59,840 --> 00:48:02,000
Speaker 1: we filled Apple. We did quite well an Apple, but

802
00:48:02,000 --> 00:48:05,440
Speaker 1: we filled it way too early. And so UM again,

803
00:48:05,480 --> 00:48:09,480
Speaker 1: I think it's an area where the evidence indicates the

804
00:48:09,480 --> 00:48:13,719
Speaker 1: scenario where UM most managers, all managers can improve. But

805
00:48:13,800 --> 00:48:16,440
Speaker 1: when we sell something, we usually think about selling it

806
00:48:16,480 --> 00:48:20,040
Speaker 1: in three scenarios. One, it reaches our assostsment of what

807
00:48:20,160 --> 00:48:22,920
Speaker 1: the company is worth, so it becomes you know, fairly valued,

808
00:48:22,960 --> 00:48:24,880
Speaker 1: and we don't think that we can earn access or

809
00:48:24,960 --> 00:48:31,320
Speaker 1: turns um too, we conclude that we're wrong. And so again,

810
00:48:31,360 --> 00:48:35,319
Speaker 1: if there's something about our investment case that we come

811
00:48:35,360 --> 00:48:39,160
Speaker 1: to no longer believe, or again we talked about fundamentals

812
00:48:39,160 --> 00:48:43,839
Speaker 1: continuous continuously disappointing us. UM, if we conclude were wrong

813
00:48:43,880 --> 00:48:46,920
Speaker 1: for any reason that would be a reason to sell

814
00:48:47,320 --> 00:48:51,399
Speaker 1: or you know, the third UM scenario is we find

815
00:48:51,440 --> 00:48:54,959
Speaker 1: a better investment opportunity. So you know, we're always doing

816
00:48:55,000 --> 00:48:57,160
Speaker 1: work on new names that if we come across something

817
00:48:57,680 --> 00:49:00,000
Speaker 1: that we think is even more attractive, you know, we'll

818
00:49:00,040 --> 00:49:02,360
Speaker 1: sell a name to fund you know, a new idea,

819
00:49:03,120 --> 00:49:08,160
Speaker 1: really really interesting. So so we keep dancing around UM

820
00:49:08,440 --> 00:49:12,560
Speaker 1: big kept tech. And one of the risk factors for that,

821
00:49:12,719 --> 00:49:14,840
Speaker 1: or at least some people think it's a risk factor,

822
00:49:15,680 --> 00:49:19,839
Speaker 1: is UM regulatory risk and the concept that you know,

823
00:49:20,320 --> 00:49:23,319
Speaker 1: an Amazon on Facebook, of Google and Apple could get

824
00:49:23,360 --> 00:49:26,879
Speaker 1: broken up. What are your thoughts on either regulatory risk

825
00:49:27,120 --> 00:49:33,520
Speaker 1: or forcing what have become technological conglomerates to be broken

826
00:49:33,600 --> 00:49:36,319
Speaker 1: up into their component pieces. Yeah, I think it's a

827
00:49:36,360 --> 00:49:40,560
Speaker 1: great question. I mean, certainly there's a lot of regulatory

828
00:49:40,640 --> 00:49:44,960
Speaker 1: and attention on these names, and so, uh, you know

829
00:49:45,040 --> 00:49:48,080
Speaker 1: that risk exists. I will say, you know, even back

830
00:49:48,520 --> 00:49:51,760
Speaker 1: I remember back at UM in our leg Mason Capital

831
00:49:51,800 --> 00:49:54,879
Speaker 1: Management days in two thousand and eight, our analysts who

832
00:49:54,960 --> 00:49:59,480
Speaker 1: covered Google recommended selling it because of regulatory risks. So

833
00:49:59,600 --> 00:50:01,960
Speaker 1: this because it's not new, it's been around a long time,

834
00:50:02,200 --> 00:50:06,040
Speaker 1: and the reason we haven't seen actual actions is because

835
00:50:06,080 --> 00:50:09,280
Speaker 1: it's very complex and it's not easy to figure out

836
00:50:09,600 --> 00:50:14,960
Speaker 1: what the right regulations should be. So um. So again,

837
00:50:15,120 --> 00:50:18,719
Speaker 1: you know, I would expect, you know, something, but whether

838
00:50:18,719 --> 00:50:21,440
Speaker 1: it's material to these businesses, and it is an entirely

839
00:50:21,480 --> 00:50:26,560
Speaker 1: different story. I would be surprised to see a breakup. Um.

840
00:50:26,560 --> 00:50:29,279
Speaker 1: But if we were to see breakups again, I think

841
00:50:29,640 --> 00:50:32,520
Speaker 1: for the businesses we own, we think, uh, you know,

842
00:50:32,760 --> 00:50:36,600
Speaker 1: that would actually highlight you know, more of the embedded

843
00:50:36,680 --> 00:50:40,000
Speaker 1: value and and it would you know, actually help some

844
00:50:40,080 --> 00:50:43,120
Speaker 1: of the stocks. So we talked earlier about Amazon and

845
00:50:43,120 --> 00:50:45,960
Speaker 1: how we believe, uh, you know, the current market prices

846
00:50:46,000 --> 00:50:49,319
Speaker 1: are uh, you know, basically valuing that retail piece at

847
00:50:49,440 --> 00:50:51,799
Speaker 1: post to zero. And so again, if you were to

848
00:50:51,840 --> 00:50:55,759
Speaker 1: break off aws from the retail business, obviously they you know,

849
00:50:55,840 --> 00:50:58,640
Speaker 1: they benefit each other, so there would be some negative

850
00:50:58,680 --> 00:51:02,280
Speaker 1: impact there. But I think the value realization of breaking

851
00:51:02,280 --> 00:51:05,719
Speaker 1: those businesses apart, uh you know, you could wind up

852
00:51:05,760 --> 00:51:09,520
Speaker 1: actually doing well, at least in the short term, doing better,

853
00:51:10,040 --> 00:51:13,360
Speaker 1: you know, from the stock perspective. Um. But again I think,

854
00:51:13,640 --> 00:51:16,839
Speaker 1: you know, I would be surprised to see breakups. It's

855
00:51:16,880 --> 00:51:20,440
Speaker 1: not at all clear you know, how that would happen.

856
00:51:20,640 --> 00:51:24,680
Speaker 1: And um, again, maybe maybe it could happen at sometime

857
00:51:24,719 --> 00:51:26,640
Speaker 1: in the future, but in the near term, I think

858
00:51:26,680 --> 00:51:30,160
Speaker 1: that's unlikely. Huh. Really kind of interesting. Since we're talking

859
00:51:30,160 --> 00:51:34,080
Speaker 1: about tech, let's talk about the rise of intangibles, things

860
00:51:34,080 --> 00:51:37,680
Speaker 1: like patents, algorithms, copyrights. What do you think this has

861
00:51:37,760 --> 00:51:41,399
Speaker 1: done to the valuations that are out there and how

862
00:51:41,400 --> 00:51:45,759
Speaker 1: does this play into the sort of squishy line that's

863
00:51:45,800 --> 00:51:52,120
Speaker 1: developed between value growth at a reasonable price and pure growth. Yeah,

864
00:51:52,120 --> 00:51:53,719
Speaker 1: I think it's a great question, and you had the

865
00:51:53,719 --> 00:51:57,400
Speaker 1: expert on this, Michael On, on your podcast. But you know,

866
00:51:57,440 --> 00:51:59,960
Speaker 1: what we know is this has definitely been an area

867
00:52:00,000 --> 00:52:03,680
Speaker 1: of growth, and you know, it matters from a value perspective,

868
00:52:03,920 --> 00:52:08,120
Speaker 1: and again, people are getting better at sorting through it.

869
00:52:08,160 --> 00:52:10,799
Speaker 1: But I think we're really early, you know, in that.

870
00:52:11,040 --> 00:52:14,920
Speaker 1: And so again, you know, some trends that we know exists,

871
00:52:14,960 --> 00:52:19,120
Speaker 1: as you know, just broadly, returns on capital of you know,

872
00:52:19,239 --> 00:52:23,080
Speaker 1: US companies have risen over time, and you know, uh,

873
00:52:23,120 --> 00:52:27,120
Speaker 1: you know, lower return pieces of businesses have moved offshore

874
00:52:27,400 --> 00:52:31,279
Speaker 1: and you know what state here is higher return businesses.

875
00:52:32,200 --> 00:52:35,120
Speaker 1: Um So that will impact valuations and a lot of

876
00:52:35,120 --> 00:52:38,560
Speaker 1: people again, you know, don't make adjustments when thinking about

877
00:52:38,880 --> 00:52:43,279
Speaker 1: valuations relatives to history. And certainly, I think what we

878
00:52:43,360 --> 00:52:46,960
Speaker 1: always try to do if we're doing companies specific analysis

879
00:52:47,080 --> 00:52:51,520
Speaker 1: is think very carefully through the economics of the business.

880
00:52:51,560 --> 00:52:53,880
Speaker 1: And so you know, if you're doing if you're a

881
00:52:53,960 --> 00:52:58,799
Speaker 1: quant fund and you're just doing uh you know, accounting metrics, again,

882
00:52:58,840 --> 00:53:01,279
Speaker 1: that's pretty problematic. You're looking at price to book and

883
00:53:01,320 --> 00:53:04,040
Speaker 1: you're not adjusting for that. Um you know, I know that,

884
00:53:04,400 --> 00:53:06,719
Speaker 1: you know, some of the better quants have started doing it,

885
00:53:06,760 --> 00:53:10,400
Speaker 1: and the signals have improved once they make those adjustments.

886
00:53:11,280 --> 00:53:14,680
Speaker 1: Um So, so it's certainly important to understand what that

887
00:53:14,760 --> 00:53:16,799
Speaker 1: looks like. I think when we're looking at some of

888
00:53:16,800 --> 00:53:22,080
Speaker 1: these earlier stage uh you know companies where again you

889
00:53:22,160 --> 00:53:25,759
Speaker 1: can't see from the near term uh you know numbers,

890
00:53:25,800 --> 00:53:28,600
Speaker 1: what the potential is that the business. Again, we try

891
00:53:28,680 --> 00:53:32,600
Speaker 1: to think through carefully, uh you know, what our actual

892
00:53:32,680 --> 00:53:35,839
Speaker 1: costs to support the current business, what our investments because

893
00:53:35,840 --> 00:53:37,560
Speaker 1: again a lot of those investments are running through the

894
00:53:37,560 --> 00:53:40,320
Speaker 1: income statement now and not you know, they're not capital

895
00:53:40,360 --> 00:53:43,840
Speaker 1: investments that are just running through the cash flist statement.

896
00:53:43,960 --> 00:53:46,480
Speaker 1: So again, if you really want to understand the business,

897
00:53:46,520 --> 00:53:49,320
Speaker 1: you have to attempt to you know, break those things

898
00:53:49,320 --> 00:53:52,319
Speaker 1: out and think about them carefully, and it can be

899
00:53:52,400 --> 00:53:55,160
Speaker 1: challenging given disclosures, and we try to do that and

900
00:53:55,200 --> 00:53:57,560
Speaker 1: we try to talk to our companies about what that

901
00:53:57,600 --> 00:54:02,000
Speaker 1: looks like really kind of intrigue. So so you guys

902
00:54:02,040 --> 00:54:05,440
Speaker 1: have done well over the course of the past decade,

903
00:54:05,960 --> 00:54:09,680
Speaker 1: but that decade was very much a challenge for the

904
00:54:09,800 --> 00:54:14,120
Speaker 1: more traditional approach to value. Why do you think this

905
00:54:14,239 --> 00:54:19,520
Speaker 1: is uh? And and are the traditional buckets of value

906
00:54:19,600 --> 00:54:23,799
Speaker 1: no longer no longer worthwhile? Well, I think it's a

907
00:54:23,840 --> 00:54:27,840
Speaker 1: really interesting question. I think that there are two main reasons.

908
00:54:28,000 --> 00:54:31,640
Speaker 1: One is, I think, you know, we observed that these markets,

909
00:54:31,680 --> 00:54:35,200
Speaker 1: that markets go through these long cycles and and we

910
00:54:35,280 --> 00:54:38,040
Speaker 1: talked about that earlier sort of the long cycles that

911
00:54:38,080 --> 00:54:41,640
Speaker 1: we've gone through, and you know, the two thousands, it

912
00:54:41,800 --> 00:54:45,120
Speaker 1: was you know, value lead, and it was global cyclicals,

913
00:54:45,160 --> 00:54:47,440
Speaker 1: and it was material stocks, and it was energy stocks

914
00:54:47,480 --> 00:54:50,399
Speaker 1: on the back of China's growth, So it had this long,

915
00:54:50,480 --> 00:54:54,839
Speaker 1: prolonged period about performance and um again, it drew in

916
00:54:54,880 --> 00:54:59,480
Speaker 1: a lot of capital to those companies, to those investment styles,

917
00:55:00,200 --> 00:55:02,880
Speaker 1: and you know, that's reversed over the course of the

918
00:55:02,920 --> 00:55:05,840
Speaker 1: past decade as again we've sort of had you know,

919
00:55:05,880 --> 00:55:09,520
Speaker 1: the second reason, as you know, so again expectations rose,

920
00:55:09,719 --> 00:55:12,960
Speaker 1: and so that makes a more challenging starting point, and

921
00:55:13,000 --> 00:55:15,400
Speaker 1: so you know it's just natural to see some reversal.

922
00:55:15,960 --> 00:55:21,720
Speaker 1: But then we've had this massive period of disruption, and um,

923
00:55:21,760 --> 00:55:25,799
Speaker 1: you know, it's interesting to think back. I've been so

924
00:55:25,960 --> 00:55:29,799
Speaker 1: fortunate to work with Bill and to uh you know,

925
00:55:30,000 --> 00:55:33,040
Speaker 1: have him as a mentor and to have these moments

926
00:55:33,080 --> 00:55:36,279
Speaker 1: that I remember and I remember. So I joined him

927
00:55:36,280 --> 00:55:40,120
Speaker 1: in two thousand two, and in two thousand three, uh

928
00:55:40,160 --> 00:55:42,800
Speaker 1: you know, he had a big investment conference in Las Vegas,

929
00:55:42,800 --> 00:55:45,520
Speaker 1: and Jeff Bezos came to speak at it, and he

930
00:55:45,680 --> 00:55:51,280
Speaker 1: gave his uh washing machine talk, and he talked about how,

931
00:55:51,520 --> 00:55:54,640
Speaker 1: you know, the Internet at that time in the early

932
00:55:54,680 --> 00:55:58,440
Speaker 1: two thousand's was that uh you know, was He likened

933
00:55:58,480 --> 00:56:01,920
Speaker 1: it to the early days fire to electricity, and he

934
00:56:02,000 --> 00:56:06,160
Speaker 1: talked about the nineteen o a hurly washing machine, and

935
00:56:06,239 --> 00:56:09,319
Speaker 1: he said it was this giant machine that was outside,

936
00:56:09,360 --> 00:56:11,560
Speaker 1: so you had to go outside to use it. They

937
00:56:11,560 --> 00:56:14,839
Speaker 1: didn't have electricity, they didn't have electrical outlets. You had

938
00:56:14,880 --> 00:56:16,960
Speaker 1: to plug it in. You had to unscrew your light

939
00:56:17,040 --> 00:56:20,360
Speaker 1: bulb and plug it in to your light socket. Um,

940
00:56:20,400 --> 00:56:22,960
Speaker 1: it didn't have an on off switch. It was giant.

941
00:56:23,160 --> 00:56:26,839
Speaker 1: It was dangerous because you couldn't turn it off and

942
00:56:26,960 --> 00:56:29,239
Speaker 1: so it had injuries. It was really difficult to use.

943
00:56:29,640 --> 00:56:31,920
Speaker 1: And he likened where we were at the Internet at

944
00:56:31,960 --> 00:56:34,799
Speaker 1: that time, uh, you know, to that, and he said,

945
00:56:34,840 --> 00:56:37,680
Speaker 1: we're so early here and things are difficult to use.

946
00:56:37,719 --> 00:56:41,040
Speaker 1: And he talked about DSL and wireless networks and how

947
00:56:41,120 --> 00:56:44,919
Speaker 1: challenging it was, and um, it was notable at the time,

948
00:56:44,920 --> 00:56:47,640
Speaker 1: but it's even more notable in hindsight now that you've

949
00:56:47,680 --> 00:56:50,520
Speaker 1: seen things like what happened with a WS or with

950
00:56:50,600 --> 00:56:54,800
Speaker 1: iPhones and how much easier you know, the technology has

951
00:56:55,120 --> 00:56:57,560
Speaker 1: uh you know, gotten to use and how embedded it

952
00:56:57,640 --> 00:57:00,480
Speaker 1: is in our daily life. So over the past decade,

953
00:57:01,040 --> 00:57:04,200
Speaker 1: you know, really the infrastructure was fully built out in

954
00:57:04,239 --> 00:57:07,880
Speaker 1: a way and you know AWS and cloud uh you

955
00:57:07,920 --> 00:57:10,520
Speaker 1: know was built out that it allowed this you know,

956
00:57:10,680 --> 00:57:12,920
Speaker 1: massive period of innovation and you know there was a

957
00:57:12,960 --> 00:57:15,520
Speaker 1: lot of capital that was you know, going into to

958
00:57:15,680 --> 00:57:19,240
Speaker 1: venture funds. So you've had this massive you know, innovation

959
00:57:19,320 --> 00:57:22,560
Speaker 1: disruption cycle. And so I think you know a lot

960
00:57:22,600 --> 00:57:27,800
Speaker 1: of value investing depends on you know, current earnings being

961
00:57:27,840 --> 00:57:30,960
Speaker 1: stable because you're you're looking at discounts on on what

962
00:57:31,040 --> 00:57:34,520
Speaker 1: companies are currently doing. So if there's some heightened risk

963
00:57:34,560 --> 00:57:38,400
Speaker 1: of disruption, uh, you know, that makes that approach you know,

964
00:57:38,560 --> 00:57:41,439
Speaker 1: more challenging. And so you know, I think you've had

965
00:57:41,960 --> 00:57:44,600
Speaker 1: you know, some of both of those things going on,

966
00:57:44,920 --> 00:57:48,800
Speaker 1: where it's a natural market cycle that's reversed what we

967
00:57:48,800 --> 00:57:52,120
Speaker 1: saw in the previous decade, and you know there's been

968
00:57:52,160 --> 00:57:55,160
Speaker 1: some you know headwinds I think to uh, you know

969
00:57:55,320 --> 00:57:59,880
Speaker 1: value companies or you know companies that might be you know,

970
00:58:00,240 --> 00:58:03,960
Speaker 1: getting more disrupted by some of these new companies that

971
00:58:04,000 --> 00:58:08,919
Speaker 1: are coming along. Really interesting. So my last two questions

972
00:58:09,040 --> 00:58:12,120
Speaker 1: for you before we get to our favorite questions. The

973
00:58:12,280 --> 00:58:17,160
Speaker 1: first is you've been putting out what more traditional managers

974
00:58:17,160 --> 00:58:20,720
Speaker 1: would call their quarterly fun letter, but but you've kind

975
00:58:20,720 --> 00:58:24,120
Speaker 1: of been doing it online in a blog format. UM

976
00:58:24,280 --> 00:58:26,840
Speaker 1: tell us about that experience. What sort of feedback do

977
00:58:26,880 --> 00:58:31,080
Speaker 1: you get on on those quarterly posts that you've been doing.

978
00:58:31,600 --> 00:58:33,680
Speaker 1: I mean, I think we get you know, I can

979
00:58:33,760 --> 00:58:36,040
Speaker 1: take no credit for this. I would have to you know,

980
00:58:36,120 --> 00:58:39,560
Speaker 1: give credit to you know, our marketing UM lead because

981
00:58:39,600 --> 00:58:43,240
Speaker 1: she was a big proponent of the blog. So we

982
00:58:43,320 --> 00:58:45,880
Speaker 1: all write for the blog and we get I think

983
00:58:45,880 --> 00:58:49,600
Speaker 1: it's a great way to communicate with our shareholders are

984
00:58:49,680 --> 00:58:52,480
Speaker 1: people who are you know, interested in what we're doing.

985
00:58:53,040 --> 00:58:56,720
Speaker 1: And again, I think our our approach is different and differentiated,

986
00:58:56,920 --> 00:58:59,800
Speaker 1: and so, uh, you know, we want people to under

987
00:59:00,080 --> 00:59:03,760
Speaker 1: stand what we're doing. We want them to understand we

988
00:59:03,840 --> 00:59:06,920
Speaker 1: sometimes have volatility. We want people to understand that coming

989
00:59:06,920 --> 00:59:09,360
Speaker 1: in and then when we go through those periods, we

990
00:59:09,400 --> 00:59:12,120
Speaker 1: want them to understand, you know, how we're thinking about

991
00:59:12,160 --> 00:59:14,800
Speaker 1: the opportunities that and those are oftentimes the best best

992
00:59:14,840 --> 00:59:17,920
Speaker 1: times to buy. And so it's important to have that communications.

993
00:59:18,000 --> 00:59:20,800
Speaker 1: So again, I think it's been you know, it's been

994
00:59:20,920 --> 00:59:24,920
Speaker 1: very positive overall to to have that. And and my

995
00:59:25,040 --> 00:59:28,720
Speaker 1: final regular question is a little bit of a curveball.

996
00:59:29,320 --> 00:59:34,920
Speaker 1: Tell us about the vermont In. Uh. Yes, So the

997
00:59:35,080 --> 00:59:40,600
Speaker 1: vermont In is an in that I purchased in twenty eleven. Um.

998
00:59:40,720 --> 00:59:43,280
Speaker 1: I grew up in Vermont and so my family all

999
00:59:43,320 --> 00:59:47,200
Speaker 1: lives there. So uh, you know, at that time, again,

1000
00:59:47,520 --> 00:59:52,120
Speaker 1: we were just you know, the first inklings of emergence, uh,

1001
00:59:52,160 --> 00:59:55,160
Speaker 1: you know, an improvement in housing and housing overall. We

1002
00:59:55,240 --> 00:59:57,600
Speaker 1: had invested in a lot of housing stocks. You know,

1003
00:59:57,680 --> 01:00:01,880
Speaker 1: I had had my first child, you know, right before that, UM,

1004
01:00:02,000 --> 01:00:05,480
Speaker 1: and you know my I think my father had told

1005
01:00:05,520 --> 01:00:07,960
Speaker 1: me about this in that was for sale, and I

1006
01:00:08,000 --> 01:00:10,439
Speaker 1: said to my husband, let's let's go to the foreclosure action.

1007
01:00:10,720 --> 01:00:12,480
Speaker 1: Sort of a sign of our times. I've always had

1008
01:00:12,520 --> 01:00:17,600
Speaker 1: an entrepreneurial interest. I didn't actually expect to, uh, you know,

1009
01:00:17,680 --> 01:00:19,960
Speaker 1: purchase the in going in that I did do work

1010
01:00:20,000 --> 01:00:23,200
Speaker 1: on what I thought it was worth and um. And

1011
01:00:23,240 --> 01:00:26,080
Speaker 1: so we got there and you know, there was someone

1012
01:00:26,160 --> 01:00:28,760
Speaker 1: made the first bid, and then I made the second bid,

1013
01:00:28,840 --> 01:00:30,080
Speaker 1: and then I was like, I'm not going to do

1014
01:00:30,120 --> 01:00:33,680
Speaker 1: that again, but it was sold sold to you and

1015
01:00:33,760 --> 01:00:37,240
Speaker 1: so um, so we had to figure out again. I

1016
01:00:37,280 --> 01:00:39,040
Speaker 1: think that was in October, and we had to figure

1017
01:00:39,040 --> 01:00:42,840
Speaker 1: out how to get the in open again. We wanted

1018
01:00:42,840 --> 01:00:44,720
Speaker 1: to get it open because the busy season there and

1019
01:00:44,840 --> 01:00:47,600
Speaker 1: Vermont is you know, starts in December, so we wanted

1020
01:00:47,600 --> 01:00:50,280
Speaker 1: to get it open by December. And it had some issues.

1021
01:00:51,040 --> 01:00:55,480
Speaker 1: Um and so my brother in law actually ran the in.

1022
01:00:55,800 --> 01:00:58,240
Speaker 1: I made every mistake you could possibly make as a

1023
01:00:58,560 --> 01:01:01,959
Speaker 1: you know, small business owner, Austin tee owner going into

1024
01:01:02,000 --> 01:01:05,320
Speaker 1: business with family. I learned from great lessons from that experience.

1025
01:01:05,360 --> 01:01:07,760
Speaker 1: We got it turned around and then I sold it

1026
01:01:07,800 --> 01:01:10,479
Speaker 1: a few years later, I realized I I will stick

1027
01:01:10,520 --> 01:01:14,040
Speaker 1: to the markets where I can you know, sit here

1028
01:01:14,040 --> 01:01:18,480
Speaker 1: and read and learn. And uh, you know, Bill likes

1029
01:01:18,520 --> 01:01:20,800
Speaker 1: to joke about when he got how he got in

1030
01:01:20,800 --> 01:01:22,960
Speaker 1: the business was he was mowing the lawn all day

1031
01:01:23,000 --> 01:01:25,000
Speaker 1: and he earned a quarter and he asked that his

1032
01:01:25,120 --> 01:01:28,400
Speaker 1: dad what the stock picks were and um, or what

1033
01:01:28,440 --> 01:01:30,480
Speaker 1: the stock prices in the newspaper were, and he said

1034
01:01:30,480 --> 01:01:31,840
Speaker 1: those are stocks. And he's like, you mean you can

1035
01:01:31,920 --> 01:01:33,840
Speaker 1: make money and not do anything. You can just sit

1036
01:01:33,880 --> 01:01:37,240
Speaker 1: there and um He's like, that's the job for me.

1037
01:01:37,680 --> 01:01:39,680
Speaker 1: And he didn't. He says he didn't learn so much later,

1038
01:01:39,760 --> 01:01:42,120
Speaker 1: just how much work you have to do. But the

1039
01:01:42,240 --> 01:01:44,760
Speaker 1: kind of work of reading and talking to companies and

1040
01:01:45,240 --> 01:01:48,160
Speaker 1: you know, doing finish the model, doing financial modeling that

1041
01:01:48,200 --> 01:01:50,840
Speaker 1: suits me much better than running it. In So it

1042
01:01:50,880 --> 01:01:53,520
Speaker 1: was it was a great experience. We we did, uh,

1043
01:01:53,560 --> 01:01:55,439
Speaker 1: you know, well on it. But I will not own

1044
01:01:55,480 --> 01:01:59,560
Speaker 1: any more. And so let's jump to our favorite questions

1045
01:01:59,600 --> 01:02:03,440
Speaker 1: that we ask all of our guests, starting with tell

1046
01:02:03,520 --> 01:02:05,920
Speaker 1: us what you're streaming these days? Give us your favorite

1047
01:02:06,320 --> 01:02:10,360
Speaker 1: Netflix or Amazon, Brime or anything that's been keeping you

1048
01:02:10,640 --> 01:02:14,560
Speaker 1: entertained during lockdown. Yeah, so that's a great question. I

1049
01:02:14,640 --> 01:02:18,800
Speaker 1: might have the most disappointing answer for you because, uh,

1050
01:02:18,840 --> 01:02:21,920
Speaker 1: you know, my third child was born in eighteen and

1051
01:02:21,960 --> 01:02:24,480
Speaker 1: then I launched patient in twenty twenty, so I I

1052
01:02:24,600 --> 01:02:29,040
Speaker 1: have not you know, had time or focused on streaming

1053
01:02:29,080 --> 01:02:33,160
Speaker 1: anything actually until um just the past few weeks. We

1054
01:02:33,320 --> 01:02:35,720
Speaker 1: had some sickness to go through our house over the holiday.

1055
01:02:35,760 --> 01:02:38,800
Speaker 1: Unfortunately not COVID, but it was a COVID scare. But um,

1056
01:02:38,840 --> 01:02:42,360
Speaker 1: so we did we did do some uh you know binging.

1057
01:02:42,520 --> 01:02:45,800
Speaker 1: It wasn't anything new. Um My kids are you know,

1058
01:02:45,880 --> 01:02:48,800
Speaker 1: really into Survivor. So we watched you know, the most

1059
01:02:48,840 --> 01:02:52,760
Speaker 1: recent uh Survivor as a family, and then we watched

1060
01:02:53,240 --> 01:02:57,240
Speaker 1: some We also watched some of the old Seinfeld episodes

1061
01:02:57,360 --> 01:03:01,840
Speaker 1: and I hadn't watched those in gosh so many years,

1062
01:03:01,920 --> 01:03:04,280
Speaker 1: and they were you know, they were just as funny

1063
01:03:04,320 --> 01:03:06,640
Speaker 1: and they were great and they were so entertaining, and

1064
01:03:06,880 --> 01:03:09,800
Speaker 1: um my kids thought that they were funny. So those

1065
01:03:09,840 --> 01:03:12,760
Speaker 1: are the only things I've watched lately. But I, you know,

1066
01:03:12,800 --> 01:03:16,880
Speaker 1: both were enjoyable. I'm surprised how well Seinfeld has held

1067
01:03:16,960 --> 01:03:21,280
Speaker 1: up over the years. Other other sitcoms, um don't seem

1068
01:03:21,360 --> 01:03:25,360
Speaker 1: to have aged as gracefully. So, so my next surprise

1069
01:03:25,520 --> 01:03:28,640
Speaker 1: to still find it as entertaining. I didn't think I would,

1070
01:03:28,640 --> 01:03:32,320
Speaker 1: but it was funny, it was really funny. It's uh

1071
01:03:32,800 --> 01:03:34,680
Speaker 1: and and at the time I thought it was kind

1072
01:03:34,680 --> 01:03:38,480
Speaker 1: of an acerbic show until you start watching carb your

1073
01:03:38,560 --> 01:03:41,880
Speaker 1: enthusiasm and then you really see what sort of acid

1074
01:03:42,040 --> 01:03:45,960
Speaker 1: humor is like. Um. Normally now I ask who your

1075
01:03:46,160 --> 01:03:50,600
Speaker 1: mentors are, but I kind of have a sneaking suspicion

1076
01:03:50,640 --> 01:03:53,640
Speaker 1: I know the answer to that question. You definitely know

1077
01:03:53,800 --> 01:03:57,080
Speaker 1: the top. You know the top mentor. I mean, Dell

1078
01:03:57,440 --> 01:04:00,640
Speaker 1: is my number one. I'm so for I have so

1079
01:04:00,720 --> 01:04:04,440
Speaker 1: much gratitude to have learned from him, and and just

1080
01:04:04,920 --> 01:04:06,800
Speaker 1: he's not just a great mentor, and I've learned the

1081
01:04:07,000 --> 01:04:09,880
Speaker 1: craft of investing, but I also learned I think he's

1082
01:04:09,920 --> 01:04:13,440
Speaker 1: an intellectual giant and um and I really thought he

1083
01:04:13,480 --> 01:04:16,120
Speaker 1: taught me how to take better and and he's also

1084
01:04:16,160 --> 01:04:19,200
Speaker 1: a great friend and so um so I just feel

1085
01:04:19,240 --> 01:04:21,320
Speaker 1: so fortunate to have shared this journey. And he's been

1086
01:04:21,360 --> 01:04:25,200
Speaker 1: so generous with his time with me, and so he's

1087
01:04:25,200 --> 01:04:27,680
Speaker 1: he definitely is right up there at the top of

1088
01:04:27,720 --> 01:04:31,200
Speaker 1: the list. Quite quite interesting. Tell us about some of

1089
01:04:31,200 --> 01:04:34,640
Speaker 1: your favorite books and what are you reading right now? Yes,

1090
01:04:34,760 --> 01:04:37,280
Speaker 1: so I am so bad at favorite And when I

1091
01:04:37,280 --> 01:04:39,640
Speaker 1: saw this question, I really tried to think. I'm I

1092
01:04:39,680 --> 01:04:42,000
Speaker 1: have lots of books I like, but you know what,

1093
01:04:42,280 --> 01:04:44,600
Speaker 1: how can you choose just one as a favorite. So

1094
01:04:44,640 --> 01:04:46,800
Speaker 1: I guess when I was thinking through, what are some

1095
01:04:46,880 --> 01:04:50,840
Speaker 1: of my favorite business type books? Uh, The Psychology of

1096
01:04:50,880 --> 01:04:55,000
Speaker 1: Money by Morgan households wonderful and as soon as my

1097
01:04:55,080 --> 01:04:57,000
Speaker 1: kids my oldest is time but I finished he's old

1098
01:04:57,080 --> 01:04:59,200
Speaker 1: enough to you know, which might be within the next

1099
01:04:59,280 --> 01:05:01,320
Speaker 1: year or two, I'm going to have them read that

1100
01:05:01,360 --> 01:05:05,120
Speaker 1: book to understand how to think about money. Um, you know,

1101
01:05:05,200 --> 01:05:08,000
Speaker 1: Rich or Wise Are Happier by William Green is excellent.

1102
01:05:08,080 --> 01:05:10,840
Speaker 1: And I love books that cover, you know, great investors

1103
01:05:10,840 --> 01:05:13,720
Speaker 1: and how they think. Um, you know, I think the

1104
01:05:13,760 --> 01:05:18,080
Speaker 1: Halo Effect by Phil Rosen'swag is a classic and it

1105
01:05:18,120 --> 01:05:20,680
Speaker 1: talks about you know, Bill likes to say that the

1106
01:05:20,760 --> 01:05:24,400
Speaker 1: story follows the price and um, and so I think

1107
01:05:24,400 --> 01:05:27,120
Speaker 1: that that's true and that happens. He talks about, you know,

1108
01:05:27,160 --> 01:05:30,040
Speaker 1: when there's been some uh, you know, company that's done

1109
01:05:30,040 --> 01:05:32,840
Speaker 1: really well, people write about all the reasons why. But

1110
01:05:33,360 --> 01:05:36,920
Speaker 1: again it's not a very scientific study. Um, you know,

1111
01:05:36,920 --> 01:05:39,880
Speaker 1: Annie Dix Thinking and best. You know. Outside of that,

1112
01:05:40,120 --> 01:05:42,160
Speaker 1: you know, one book that really struck me and I

1113
01:05:42,200 --> 01:05:46,520
Speaker 1: really liked a lot, uh Chema Chendren, who's a Buddhist monk.

1114
01:05:46,560 --> 01:05:50,680
Speaker 1: Her book Thanks Fall Apart, All Apart, which I also like, uh,

1115
01:05:50,720 --> 01:05:53,200
Speaker 1: you know, the fictional book by Kinna hb By the

1116
01:05:53,240 --> 01:05:54,800
Speaker 1: same name, but this is a different one. And that

1117
01:05:54,840 --> 01:05:59,760
Speaker 1: book really talks about, uh, you know, moving towards your

1118
01:05:59,760 --> 01:06:02,360
Speaker 1: pain and being with your pain. And I think it's

1119
01:06:02,360 --> 01:06:05,640
Speaker 1: important from just a life perspective in terms of uh,

1120
01:06:05,640 --> 01:06:07,760
Speaker 1: you know, again those are growth opportunities, but from an

1121
01:06:07,760 --> 01:06:10,840
Speaker 1: investment perspective, there's a lot of parallels in terms of,

1122
01:06:11,360 --> 01:06:14,240
Speaker 1: you know, how do you execute on the process that

1123
01:06:14,920 --> 01:06:17,200
Speaker 1: you know delivers the best return when sometimes you know

1124
01:06:17,240 --> 01:06:20,280
Speaker 1: it can be emotionally painful, and how do you you know,

1125
01:06:20,400 --> 01:06:23,120
Speaker 1: deal with that? And I guess, you know, this is

1126
01:06:23,160 --> 01:06:26,240
Speaker 1: a very long winded answer, but what I'm reading now,

1127
01:06:26,560 --> 01:06:29,960
Speaker 1: what I just finished, was the Book of Hope by

1128
01:06:30,080 --> 01:06:35,280
Speaker 1: Jane Goodall and Douglas Abrahams, which was great and you know,

1129
01:06:35,320 --> 01:06:38,840
Speaker 1: there's such rates of you know, depression and anxiety now

1130
01:06:38,920 --> 01:06:41,880
Speaker 1: and that book was you know, all about you know,

1131
01:06:42,160 --> 01:06:44,919
Speaker 1: hope and why we should be hopeful and the indomitable

1132
01:06:45,000 --> 01:06:48,320
Speaker 1: human spirit. So that was really good. I've been reading

1133
01:06:48,320 --> 01:06:51,080
Speaker 1: some books on leadership given the transition, so I read

1134
01:06:51,080 --> 01:06:57,960
Speaker 1: Cole and Tells autobiography. We just read Principles by Ray Dalio. UM.

1135
01:06:58,040 --> 01:07:00,480
Speaker 1: So you know, there's a few others that in reading.

1136
01:07:00,480 --> 01:07:03,000
Speaker 1: But that's you know, that's a that's the tasting. That's

1137
01:07:03,000 --> 01:07:06,520
Speaker 1: a handful. That is let let me let me ask

1138
01:07:06,520 --> 01:07:12,000
Speaker 1: you things fall apart. The novel is by a Shiba,

1139
01:07:12,160 --> 01:07:20,360
Speaker 1: Is that right? And the nonfiction is by Pemma Yet

1140
01:07:20,520 --> 01:07:24,560
Speaker 1: children got it really interesting? Um, that's a that's quite

1141
01:07:24,560 --> 01:07:27,920
Speaker 1: a great list on I'm impressed. Uh at the breath

1142
01:07:27,960 --> 01:07:31,520
Speaker 1: of what what you're reading? Um? Our last two questions,

1143
01:07:31,560 --> 01:07:35,320
Speaker 1: starting with what sort of advice would you give to

1144
01:07:35,560 --> 01:07:39,400
Speaker 1: a recent college grad who was interested either in a

1145
01:07:39,480 --> 01:07:43,360
Speaker 1: career in finance or a career as a portfolio manager.

1146
01:07:43,680 --> 01:07:45,880
Speaker 1: I think, you know, if you love learning and you

1147
01:07:46,000 --> 01:07:50,480
Speaker 1: love competing, there's almost no better skill than investment in finance.

1148
01:07:50,560 --> 01:07:54,080
Speaker 1: It's just it's so interesting. You learn new things every day,

1149
01:07:54,280 --> 01:07:56,720
Speaker 1: and you can compete, and you need to compete at

1150
01:07:56,720 --> 01:08:00,439
Speaker 1: the at the highest levels, and you you her die

1151
01:08:00,480 --> 01:08:03,440
Speaker 1: by your result, which is both amazing because you know,

1152
01:08:03,440 --> 01:08:06,840
Speaker 1: it's a true meritocracy, but it's also very high pressure

1153
01:08:07,160 --> 01:08:10,800
Speaker 1: because it's not easy to be successful. And so if

1154
01:08:10,840 --> 01:08:13,160
Speaker 1: people are interested in that and that sounds like a

1155
01:08:13,200 --> 01:08:17,200
Speaker 1: fit with you know, their general demeanor and what they like,

1156
01:08:17,920 --> 01:08:20,960
Speaker 1: my advice would be, you know, just get your foot

1157
01:08:20,960 --> 01:08:24,880
Speaker 1: in the door. However you can. I remember people telling me, um,

1158
01:08:24,920 --> 01:08:27,720
Speaker 1: you can never get an investment job, you know, right

1159
01:08:27,720 --> 01:08:29,600
Speaker 1: out of college, which I listened to them, and I

1160
01:08:29,680 --> 01:08:32,599
Speaker 1: ended up getting really lucky because you know, Bill happened

1161
01:08:32,600 --> 01:08:35,840
Speaker 1: to come. But I didn't try other than meet Bill

1162
01:08:35,920 --> 01:08:39,000
Speaker 1: and send in my resume. So I think, like, you

1163
01:08:39,040 --> 01:08:41,800
Speaker 1: can try, and you know, don't ever tell let people

1164
01:08:41,840 --> 01:08:45,280
Speaker 1: tell you you can't accomplish something. We just hired, you know,

1165
01:08:45,880 --> 01:08:49,000
Speaker 1: you know, a couple of months ago, a wonderful junior analyst.

1166
01:08:49,080 --> 01:08:52,639
Speaker 1: He's extremely passionate, he has the right attitude. I'm willing

1167
01:08:52,680 --> 01:08:55,439
Speaker 1: to do whatever it takes. Uh, you know, how can

1168
01:08:55,479 --> 01:08:57,320
Speaker 1: I help you? How can I add value if you

1169
01:08:57,360 --> 01:09:00,960
Speaker 1: really have that you know sort of attitude and uh,

1170
01:09:01,000 --> 01:09:04,400
Speaker 1: you know, survey the landscape broadly and our passionate and

1171
01:09:04,439 --> 01:09:06,519
Speaker 1: our self taught. You know, I think you have a

1172
01:09:06,560 --> 01:09:10,720
Speaker 1: good shot at you know, finding an opportunity interesting And

1173
01:09:10,760 --> 01:09:15,559
Speaker 1: our final question, what do you know about the world

1174
01:09:15,640 --> 01:09:19,840
Speaker 1: of investing in portfolio management today? You wish you knew

1175
01:09:20,520 --> 01:09:24,280
Speaker 1: twenty or so years ago? Yeah, that's a great question. Um,

1176
01:09:24,360 --> 01:09:26,519
Speaker 1: you know, anything I knew about the future would have

1177
01:09:26,520 --> 01:09:29,960
Speaker 1: been super helpful. Um, you know, like because you could

1178
01:09:30,120 --> 01:09:32,960
Speaker 1: use that to earn repairings where it was housing bubble

1179
01:09:33,040 --> 01:09:36,200
Speaker 1: or financial crisis or uh, you know the sick local

1180
01:09:36,280 --> 01:09:39,280
Speaker 1: boom innovation boom pandemic. I would I would have loved

1181
01:09:39,479 --> 01:09:41,800
Speaker 1: to know anything about it. I mean, I guess if

1182
01:09:41,840 --> 01:09:44,559
Speaker 1: we step back and think about when I entered the business,

1183
01:09:45,000 --> 01:09:48,720
Speaker 1: what are you know some you know, broader, more timeless

1184
01:09:49,360 --> 01:09:52,040
Speaker 1: lessons that I didn't know then that I wish I had,

1185
01:09:52,560 --> 01:09:54,600
Speaker 1: you know, So I again, I think I mentioned I

1186
01:09:54,720 --> 01:09:59,800
Speaker 1: was very classic value to start. That was my approach. Um,

1187
01:10:00,120 --> 01:10:05,080
Speaker 1: I didn't understand you know, the you know, the nuances

1188
01:10:05,160 --> 01:10:07,840
Speaker 1: of returns on capital and the importance of those and

1189
01:10:08,200 --> 01:10:10,559
Speaker 1: you know how to earn returns. Are you know the

1190
01:10:10,600 --> 01:10:14,200
Speaker 1: importance of those to driving returns and the differences between

1191
01:10:14,800 --> 01:10:17,479
Speaker 1: buying a you know, fair business that a you know,

1192
01:10:17,840 --> 01:10:20,160
Speaker 1: at a wonderful price versus a wonderful business at a

1193
01:10:20,160 --> 01:10:24,120
Speaker 1: fair price, you know, and growth. Unfortunately, I started working

1194
01:10:24,120 --> 01:10:27,280
Speaker 1: with a great mentors and I was able to learn

1195
01:10:27,320 --> 01:10:29,920
Speaker 1: all of that. But those are things, you know, I

1196
01:10:29,960 --> 01:10:33,320
Speaker 1: think that are critical as you think about investing. That again,

1197
01:10:33,360 --> 01:10:36,719
Speaker 1: I didn't understand well when I first got into the business.

1198
01:10:37,439 --> 01:10:40,120
Speaker 1: Thank you Samantha for being so generous with your time.

1199
01:10:40,240 --> 01:10:44,280
Speaker 1: We have been speaking with Samantha McLemore, portfolio manager at

1200
01:10:44,360 --> 01:10:49,040
Speaker 1: Miller Value Partners. If you enjoy this conversation, well, be

1201
01:10:49,120 --> 01:10:52,080
Speaker 1: sure and check out any of our hundreds of prior

1202
01:10:52,200 --> 01:10:56,560
Speaker 1: such discussions. You can find those at iTunes, Spotify, Bloomberg,

1203
01:10:56,880 --> 01:11:00,799
Speaker 1: wherever you get your podcast from. We love your comments,

1204
01:11:00,800 --> 01:11:04,080
Speaker 1: feedback and suggestions. You can write to us using the

1205
01:11:04,160 --> 01:11:08,479
Speaker 1: email address m ib podcast at Bloomberg dot net. Sign

1206
01:11:08,560 --> 01:11:12,200
Speaker 1: up from my daily reading list at Ridholtz dot com.

1207
01:11:12,280 --> 01:11:15,040
Speaker 1: Follow me on Twitter at Rid Halts. I would be

1208
01:11:15,120 --> 01:11:17,680
Speaker 1: remiss if I did not thank the crack team that

1209
01:11:17,800 --> 01:11:22,520
Speaker 1: helps put these conversations together each week. Marks and Ascalchie

1210
01:11:22,720 --> 01:11:27,480
Speaker 1: is my audio engineer. Michael Batnick is my head of research.

1211
01:11:27,880 --> 01:11:31,559
Speaker 1: Attica val Broun is our project manager. Harris World is

1212
01:11:31,600 --> 01:11:35,960
Speaker 1: our producer. I'm Barryhaltz. You're listening to our ministers in

1213
01:11:36,040 --> 01:11:37,960
Speaker 1: business on Bloomberg Radio