WEBVTT - Tales of a Top 1% Fund Manager 0:00:13.600 --> 0:00:16.680 Hello, and welcome to What Goes Up, a Bloomberg Weekly 0:00:16.760 --> 0:00:20.200 Markets podcast. I'm Sarah plant Zach reporter on the Cross 0:00:20.200 --> 0:00:22.880 Asset Team, and I'm Mike Reagan, a senior editor on 0:00:22.920 --> 0:00:25.040 the Markets Team. This week on the show, in a 0:00:25.120 --> 0:00:29.520 world dominated by factor investing in passive strategies, we often 0:00:29.600 --> 0:00:32.400 hear about the quote unquote death of the stock picker, 0:00:32.800 --> 0:00:35.320 but is it actually true. We talked to a fund 0:00:35.360 --> 0:00:38.640 manager who ranked in the top one percentile of his 0:00:38.760 --> 0:00:42.479 category and also, after years of underperformance, is the value 0:00:42.479 --> 0:00:45.479 factor dead? And Sarah, before we start, I want to 0:00:45.520 --> 0:00:47.400 give a shout out to some of the listeners out 0:00:47.400 --> 0:00:50.239 there who have been providing valuable content for the for 0:00:50.280 --> 0:00:55.720 the program. Our longtime listener that character Twiggy Sunday on Twitter, 0:00:55.800 --> 0:00:59.920 He's contributed something for the Craziest Thing of the Week segment. 0:01:00.720 --> 0:01:03.680 He also predicted that I would win the Craziest Thing. 0:01:03.960 --> 0:01:07.280 I think I missed that part of his the show 0:01:07.959 --> 0:01:10.679 that once again I will win. And you know that brilliant, 0:01:10.720 --> 0:01:14.360 You're brilliant, twig The listeners have confidence, uh in my 0:01:14.400 --> 0:01:17.920 ability to clearly it doesn't matter that I'm the sole 0:01:18.000 --> 0:01:22.120 judge of it. Also, but also Ellie Panamy, we really 0:01:22.160 --> 0:01:27.160 thank you for your amazing contributions to our Crazy Things ideas, 0:01:27.200 --> 0:01:32.240 and we will eventually get one of your favorite guests 0:01:32.240 --> 0:01:34.759 back on the show. We will, we will. H Ellie 0:01:34.880 --> 0:01:37.720 or Eli or whatever his fake Twitter name is. H 0:01:37.880 --> 0:01:40.280 decided that the craziest thing he saw in markets would 0:01:40.319 --> 0:01:43.440 be like thirty year old picture of our colleague Chris 0:01:43.560 --> 0:01:46.440 Nag which, now I gonna say two listeners out there, 0:01:46.600 --> 0:01:50.640 if you're thinking about tweeting us embarrassing pictures of our colleagues, 0:01:50.720 --> 0:01:53.640 just take a minute, think twice about it, and then 0:01:53.680 --> 0:01:56.400 absolutely go ahead and tweet them directly to us. And 0:01:56.400 --> 0:01:58.960 there's also probably a better chance that if you were 0:01:59.000 --> 0:02:00.760 to ask us a question or share a crazy thing, 0:02:00.880 --> 0:02:04.720 that will actually use your absolutely and sorry, remember, listeners 0:02:04.760 --> 0:02:08.280 can actually appear on the show if they call our 0:02:08.360 --> 0:02:12.120 special what Goes Up hotline whose number I chronically forget, 0:02:12.200 --> 0:02:13.920 so hopefully you have it handy. I have it handy 0:02:13.960 --> 0:02:17.000 as always. It's six or six three two four three 0:02:17.240 --> 0:02:19.720 for nine zero, So feel free to give us a call, 0:02:19.760 --> 0:02:21.640 and if you do, we may even play your message 0:02:21.680 --> 0:02:24.080 on the show. But let's get right to it, and 0:02:24.320 --> 0:02:26.800 as you alluded to, we have a guest. UH and 0:02:26.880 --> 0:02:29.680 full disclosure. UH, this guy is actually a good friend 0:02:29.720 --> 0:02:31.760 of mine. But that's not why he's on the show. 0:02:31.760 --> 0:02:34.520 He's on the show because he has the reputation of 0:02:34.760 --> 0:02:37.360 pretty much a rock star, I would say as a 0:02:37.400 --> 0:02:41.600 stock picker, as you said he would he loves this, 0:02:41.880 --> 0:02:43.760 he likes what he hears. But he was the head 0:02:43.760 --> 0:02:47.480 of the small cap team at JP Morgan Asset Management. 0:02:47.680 --> 0:02:51.040 UH for a while. The small cap equity fund under 0:02:51.120 --> 0:02:54.440 his leadership, as you said, Top one per Cent won 0:02:54.480 --> 0:02:58.480 the Lipper Award in two thousand and thirteen for the 0:02:58.520 --> 0:03:01.600 best fund over ten years. UH in the small cap category. 0:03:01.840 --> 0:03:04.480 Two thousand and nine, it won the same award UH 0:03:04.520 --> 0:03:08.200 and small Caps for best fund over five years. And sorry, 0:03:08.240 --> 0:03:10.480 this is a guy whose brain I've been picking for 0:03:10.800 --> 0:03:14.519 years because we're both residents of the brainy borough of 0:03:14.639 --> 0:03:18.800 my touching. And typically my questions are like, Hey, what 0:03:18.840 --> 0:03:20.640 do you think of the market? Is it overvalued? How 0:03:20.639 --> 0:03:22.320 about bond yields? Are they going to go too high? 0:03:22.320 --> 0:03:24.720 What about growth versus value? Hey do you like small Catholic? 0:03:24.760 --> 0:03:27.560 You're asking me the wrong questions and his answer will 0:03:27.560 --> 0:03:30.120 always be Mike, I'm trying to coach my kids basketball 0:03:30.120 --> 0:03:31.440 team here will you? Will you leave me a lot? 0:03:31.960 --> 0:03:33.839 But finally I'm excited that we can get him down 0:03:33.880 --> 0:03:38.800 to sit down and talk about his process of picking stocks. 0:03:38.960 --> 0:03:42.120 He since left JP Morgan and started his own separate 0:03:42.120 --> 0:03:45.840 account business. It's called Byron Place Capital Management. I encourage 0:03:45.880 --> 0:03:47.800 you to google it and check him out. His name 0:03:47.920 --> 0:03:50.560 is Glenn Garotsky. Glenn, welcome to the show. Thanks for 0:03:50.560 --> 0:03:54.920 having me. This is great to talk to people. Yeah, 0:03:54.960 --> 0:03:57.200 Glenn's been hold up in his office stocks. He doesn't 0:03:57.280 --> 0:04:01.560 he doesn't get to see people too Offen Daylight and 0:04:01.640 --> 0:04:04.560 also joining the show this week, He's we welcome him 0:04:04.600 --> 0:04:07.640 back to the show. He's a guy who wrote for 0:04:07.720 --> 0:04:11.280 a newspaper for a long time that many listeners probably saw. 0:04:11.320 --> 0:04:14.480 It's the one with the very odd colored pages. I 0:04:14.520 --> 0:04:18.920 think Salmon Salmon the official name the Financial Times. It 0:04:18.920 --> 0:04:21.279 looks like it was printed on paper that was made 0:04:21.279 --> 0:04:23.520 from trees that only grow, like in a Doctor Seuss 0:04:23.560 --> 0:04:27.760 book or something. But I had a great analogy. I 0:04:27.839 --> 0:04:32.000 haven't visited London and seen all how many Delhi newspapers 0:04:32.040 --> 0:04:34.320 are stole in business even today in London, It's got 0:04:34.320 --> 0:04:36.800 to be like three hundred I think so. At least 0:04:36.839 --> 0:04:38.760 the color allows it to stand out on the on 0:04:38.800 --> 0:04:41.640 the news stand, so I think that was a brilliant strategy. 0:04:41.760 --> 0:04:45.520 It's been it's been pink since eighteen so it wasn't 0:04:45.560 --> 0:04:48.960 your idea. It was not. It wasn't around then. The 0:04:49.000 --> 0:04:52.240 most complaints the Financial Times ever had in one day 0:04:52.240 --> 0:04:56.240 while I worked there was on the centenary of When 0:04:56.279 --> 0:04:59.919 We Went Pink, when it was printed on white paper 0:05:00.160 --> 0:05:04.560 to emphasize how pink it normally looked, and so all 0:05:04.600 --> 0:05:08.159 these people from the city of London, you reading it 0:05:08.200 --> 0:05:13.320 for the shape, prices and stuff, freaked. It was almost 0:05:13.320 --> 0:05:19.239 impossible to the switchboard actually collapsed on various occasions. People 0:05:19.279 --> 0:05:23.960 were horrified that come out on white paper. This is 0:05:23.960 --> 0:05:26.240 a true story. Indeed, I just told you that was 0:05:26.320 --> 0:05:28.640 it was. It was really, It was really impossible to 0:05:28.640 --> 0:05:32.760 get anything done that day. Anyway. That writer's name is 0:05:32.839 --> 0:05:35.480 John Author's that voice you just heard. And now he's 0:05:35.520 --> 0:05:37.479 no longer writing on the pink paper. He's writing on 0:05:37.520 --> 0:05:41.200 that brilliant amber and black of the of the Bloomberg terminals. 0:05:42.360 --> 0:05:48.480 Orange fancy. It's a much not pink and orange amber. 0:05:50.120 --> 0:05:52.520 But Glenn, let's let's start with you because you know, 0:05:52.560 --> 0:05:55.800 as Sarah alluded to, uh, I feel like the whole 0:05:55.839 --> 0:06:02.479 factor investing and and Passive's has has really just taken 0:06:02.600 --> 0:06:08.040 over the investing landscape. However, you've still manage you're still 0:06:08.080 --> 0:06:11.840 managing year to year to pick stocks that beat the market. Um, 0:06:12.560 --> 0:06:15.000 so walk us through your your process. I know you 0:06:15.400 --> 0:06:18.640 start with a screen of stocks, uh, and your current 0:06:18.680 --> 0:06:21.479 strategy is all caps, so you'll you have some stocks 0:06:22.720 --> 0:06:26.120 million in market cap to up to Facebook and up 0:06:26.120 --> 0:06:28.560 to Microsoft. Yeah, up at one point four trillion down 0:06:28.600 --> 0:06:31.840 to a hundred million in market cap. So and happy 0:06:31.839 --> 0:06:35.200 to have Microsoft and the portfolio, I guess for sure. 0:06:35.240 --> 0:06:38.640 I mean that that's really where the market has been rewarding, 0:06:39.040 --> 0:06:41.680 you know, sustainable cash flow, and that's really but what's 0:06:41.680 --> 0:06:44.080 been working in this market, in this whole economic recovery 0:06:44.120 --> 0:06:46.440 that's you know, eleven years into the making right now. 0:06:46.920 --> 0:06:49.800 But there's a lot of value in small cap so 0:06:50.040 --> 0:06:54.400 and it's under you know, undercovered, and that creates a 0:06:54.440 --> 0:06:57.279 lot of opportunity for guys like me who you know, 0:06:57.400 --> 0:07:00.640 feel very comfortable meeting with these companies and talking to 0:07:00.680 --> 0:07:03.920 these management teams and understanding their businesses. Having in all 0:07:04.000 --> 0:07:07.440 caps strategy to me, sounds uh intimidating, just because it's 0:07:07.440 --> 0:07:09.840 such a big universe. So walk us through, Like, I know, 0:07:09.880 --> 0:07:12.120 you run some screens, what sort of price to free 0:07:12.120 --> 0:07:14.720 cash flow? What's what's your process for sort of narrowing 0:07:14.720 --> 0:07:17.160 down this massive universe. So, first of if, I started 0:07:17.200 --> 0:07:19.640 as a microcap analyst, so I looked at companies less 0:07:19.640 --> 0:07:22.800 than a couple hundred million in equity market capitalization, and 0:07:22.840 --> 0:07:26.239 then I moved to small cap and mid caps, and 0:07:26.720 --> 0:07:28.720 to me, I just wanted to look at more companies. 0:07:28.760 --> 0:07:33.120 I never wanted to limit myself, so I've always was 0:07:33.160 --> 0:07:35.560 itching to do all caps and look at everything under 0:07:35.600 --> 0:07:38.680 the sun. So um, you know, because my I'm I 0:07:38.800 --> 0:07:40.880 look at myself as a business analyst first, and the 0:07:40.960 --> 0:07:45.160 securities analysts analysts that ultimately is an equity analyst and 0:07:45.160 --> 0:07:48.000 trying to decipher what a business is worth and what 0:07:48.040 --> 0:07:50.920 the equity of that business is worth. So the way 0:07:51.040 --> 0:07:55.240 I start is, you know, my my rule of investing 0:07:55.240 --> 0:07:59.080 that supersedes everything and I never forget is that when 0:07:59.120 --> 0:08:01.560 I'm buying a style, I'm buying an equity ownership stake 0:08:01.600 --> 0:08:04.000 in a business. And I never forget that rule. So 0:08:04.040 --> 0:08:06.160 I'm always looking to invest in companies that have a 0:08:06.160 --> 0:08:09.800 sustainable competitive advantage, that are run by management teams who 0:08:09.840 --> 0:08:11.720 have a track record of success and are good stewarts 0:08:11.720 --> 0:08:14.120 of capital. And you want to buy these businesses in 0:08:14.200 --> 0:08:16.679 the stock market at a discount to their intrinsic values, 0:08:16.720 --> 0:08:19.800 so when they're undervalued. So it's all about looking for 0:08:19.880 --> 0:08:24.080 good businesses that are run by competent people and buying 0:08:24.120 --> 0:08:27.680 them at the right price. And you know again, you know, 0:08:27.760 --> 0:08:29.440 so in the US stock market, you know, let's just 0:08:29.480 --> 0:08:31.560 take the Russell three thousand if there's you know, there's 0:08:31.600 --> 0:08:35.720 more than three thousand stocks. But um, I do run screens. 0:08:35.760 --> 0:08:39.520 I try to. I mean, um kind of a financial 0:08:39.559 --> 0:08:41.760 nerd and a business nerd, and I like to look 0:08:41.800 --> 0:08:43.960 at everything under the sun and look at as many 0:08:44.000 --> 0:08:46.760 business as I as I can. And but I have 0:08:46.840 --> 0:08:49.840 to run screens just to focus my you know, where 0:08:49.840 --> 0:08:53.559 I need to focus. So I do run static screens 0:08:53.559 --> 0:08:55.240 that like you said that, like let's say a price 0:08:55.280 --> 0:08:58.280 to free cash flows screen or that are that are 0:08:58.360 --> 0:09:01.000 valuation sensitive, but they tend have to change much. So 0:09:01.080 --> 0:09:04.680 I look for what I call inflection points screens where 0:09:05.480 --> 0:09:08.840 I'll look for businesses where there maybe there's insider buying, 0:09:09.440 --> 0:09:13.240 or there's a management change, or there's you know, a 0:09:13.320 --> 0:09:18.839 company is doing a spinoff or change in operating momentum. 0:09:19.000 --> 0:09:22.120 Those are the screens that generate kind of something interesting 0:09:22.160 --> 0:09:24.800 because a lot of these times catalyst some type of 0:09:24.880 --> 0:09:26.800 catalyst to make me take a second look at a 0:09:26.840 --> 0:09:28.560 business I've might you know, I've been doing this for 0:09:29.080 --> 0:09:31.800 you know, fifteen twenty years that you know, so to 0:09:31.920 --> 0:09:34.400 make me look at a business again a second time. 0:09:34.600 --> 0:09:36.800 And like I said, you know, your stock picks are 0:09:36.840 --> 0:09:40.079 are handily beating the market. Uh so, so the strategy, 0:09:40.400 --> 0:09:43.160 uh the inception was in like early two thousand and sixteen, 0:09:43.240 --> 0:09:46.880 right February sixteen sixteen, and so the equity your equity 0:09:46.920 --> 0:09:50.400 picks are up a thirty percent since then, smps up. 0:09:51.240 --> 0:09:54.000 But the unusual thing about your strategy, at least one 0:09:54.000 --> 0:09:57.079 of the ones you run, is you don't go all in. 0:09:57.360 --> 0:10:01.360 You like to keep a really healthy cash balance as 0:10:01.440 --> 0:10:06.240 much as say forty UM. So what you end up 0:10:06.280 --> 0:10:09.319 with is very good risk adjusted returns a sharp ratio 0:10:09.360 --> 0:10:13.760 of like one point six um, but very conservative. So 0:10:13.840 --> 0:10:17.480 walk us through kind of how you uh manage cash 0:10:17.559 --> 0:10:20.040 because you know you'll flex between as much as fifty 0:10:20.040 --> 0:10:22.640 percent cash at some points, kind of waiting for the dip. 0:10:22.720 --> 0:10:25.480 Is it as simple as that. Uh? Yeah. Unfortunately people 0:10:25.480 --> 0:10:27.520 may look at it and say, I've I've been wrong, right, 0:10:28.480 --> 0:10:33.720 I've had a high cash percentage. It's up over right now. Uh. 0:10:33.960 --> 0:10:37.000 The reality is, when I first started this, so you know, 0:10:37.000 --> 0:10:39.160 I worked at JP Morgan Asset Management for a long 0:10:39.200 --> 0:10:42.240 time and I ran mutual funds there, and this was 0:10:43.040 --> 0:10:46.160 in the beginning. This was kind of a glorified family office, 0:10:46.640 --> 0:10:48.480 and I was managing my own money, and I wanted 0:10:48.600 --> 0:10:51.719 to manage it the way I thought was the right 0:10:51.760 --> 0:10:54.360 way to manage money, where you're not always say, hey, 0:10:54.400 --> 0:10:55.920 you need to be in equities, you need you know, 0:10:55.960 --> 0:10:59.560 you know. So I wanted to have good risk adjustive returns. 0:10:59.640 --> 0:11:03.520 And the reality is, I hate to lose money. I mean, 0:11:03.679 --> 0:11:06.240 but I also understand that you have to take risk 0:11:06.280 --> 0:11:08.959 in order to make money. But I love the idea 0:11:09.440 --> 0:11:13.000 of having capital there that's there when the opportunity arises. 0:11:13.400 --> 0:11:16.360 And you know, I look at the portfolio from the 0:11:16.360 --> 0:11:19.280 bottom up, each stock on its own merit and its 0:11:19.280 --> 0:11:20.840 own risk reward, and I look at it from the 0:11:20.840 --> 0:11:23.320 top down is to you know, is it a good time? 0:11:23.320 --> 0:11:26.000 But I mean really comes from the bottom up, and 0:11:26.480 --> 0:11:29.679 I want to have that cash available to all. Right, 0:11:29.760 --> 0:11:32.520 now is a great time to buy businesses are on sale. 0:11:32.880 --> 0:11:35.080 I mean, I don't see that right now, you know. 0:11:35.320 --> 0:11:37.640 I mean you could go back in February six team 0:11:37.679 --> 0:11:40.920 was a great time. Unfortunately, the market came back so 0:11:41.040 --> 0:11:43.720 fast right there, and I didn't get all that cash 0:11:43.760 --> 0:11:47.280 to work. Uh, but I'm happy if if the market 0:11:47.360 --> 0:11:48.760 is gonna be up twenty. I used to have this 0:11:48.800 --> 0:11:51.920 dilemma when I worked at on a mutual fund and 0:11:51.960 --> 0:11:53.480 there was a small cap mutual fund. It was like 0:11:53.520 --> 0:11:55.600 and I'd have this argument with my analysts team all 0:11:55.600 --> 0:11:58.559 the time, and it was like, Okay, the market's up 0:12:00.000 --> 0:12:05.960 and you're up. You know, not good for my career necessarily, right, 0:12:05.960 --> 0:12:09.480 I'm not generating alpha or the markets up? Are the 0:12:09.520 --> 0:12:14.560 markets down and I'm down? I look like a hero 0:12:14.800 --> 0:12:18.080 from a relative perspective. That never sat right with me, right, Like, 0:12:18.440 --> 0:12:20.280 you know, I don't like to lose money, right, I mean, 0:12:20.480 --> 0:12:23.440 but you know, in the financial crisis, I look like 0:12:23.480 --> 0:12:25.880 a hero even though I lost. You know, I don't 0:12:25.880 --> 0:12:28.280 know what the numbers were, but I lost or something. 0:12:28.320 --> 0:12:31.440 I look better relative to everybody else and you know 0:12:31.840 --> 0:12:34.480 the reality is I hated the idea of playing this 0:12:34.600 --> 0:12:38.560 relative game always so, so it's certainly been hard to 0:12:38.559 --> 0:12:40.560 find an opportunity to put money to work. Even this 0:12:40.600 --> 0:12:42.439 past week you have the SMP, the NADS at the 0:12:42.480 --> 0:12:45.600 Dow all hitting fresh record highs. John, I want to 0:12:45.600 --> 0:12:47.960 come to you because this is all in the phase. Uh. 0:12:48.040 --> 0:12:51.720 We have a spreading coronavirus. Um. Ubs was out saying 0:12:51.760 --> 0:12:54.360 that the most compelling bowl case right now is that 0:12:54.400 --> 0:12:58.800 there is no credible bear case at the moment. What 0:12:58.880 --> 0:13:02.120 do you say to align like that that? Because I've 0:13:02.120 --> 0:13:03.400 heard it a couple of times this week. The market 0:13:03.480 --> 0:13:05.400 keeps going up because there's no reason to be bearish, 0:13:05.480 --> 0:13:07.839 even when I think a couple of people would argue 0:13:07.960 --> 0:13:14.120 against that. Huh. I can think of a few reasons 0:13:16.880 --> 0:13:19.800 at that being said, I've been very good at coming 0:13:19.840 --> 0:13:22.360 up with reasons to be bearish for the last ten years, 0:13:23.960 --> 0:13:28.240 and they all seemed like really good, elegant, uh, you know, 0:13:28.440 --> 0:13:33.360 logical points, and they weren't totally right. Um. Coronavirus could 0:13:33.400 --> 0:13:39.240 yet really mess things up, um. And it's not necessarily 0:13:39.240 --> 0:13:41.719 it doesn't need to be the second Black Death. It 0:13:41.800 --> 0:13:45.360 doesn't need to be Spanish flu. It just needs to 0:13:45.520 --> 0:13:49.680 close down Chinese industry for long enough to put out 0:13:50.160 --> 0:13:54.360 people's calculations, people's expectations that they have been relying on. 0:13:54.800 --> 0:14:01.160 In particular, given the parlace state of Europe. You the Yeah, 0:14:01.440 --> 0:14:03.440 there is no country in the world that is more 0:14:03.559 --> 0:14:08.920 exposed to China amazingly than Germany. In many ways, Germany's 0:14:08.960 --> 0:14:13.640 manufacturing is in has been showing serious signs of decline. 0:14:14.480 --> 0:14:18.600 And then after that you call it craziest. Apparently it's 0:14:18.679 --> 0:14:20.600 very charming that I refer to it as the maddest 0:14:21.040 --> 0:14:25.800 and that I see in the markets. Um. Anyway, don't 0:14:26.280 --> 0:14:28.640 if you if you look at if you look at 0:14:29.040 --> 0:14:36.680 the US market, canes bringing British greater. My aid said 0:14:36.720 --> 0:14:39.520 that the market, the markets can stay irrational longer than 0:14:39.560 --> 0:14:43.120 you can stay solvent, which is very true. Uh. And 0:14:43.560 --> 0:14:47.080 markets can be overpriced and they can still get more overpriced, 0:14:47.080 --> 0:14:50.640 So you should never try to time the market based 0:14:50.920 --> 0:14:56.880 on valuation. That said, price to sales is not um 0:14:57.240 --> 0:15:02.240 it's one of the simplest, most straightforward, least manipulable numbers 0:15:02.440 --> 0:15:05.520 out there. And on a price to sales basis, the 0:15:05.640 --> 0:15:08.880 SMP has actually caught up with the top in two thousands. 0:15:10.040 --> 0:15:12.600 This isn't We don't have to have arguments about Schiller's cape, 0:15:12.640 --> 0:15:15.000 which is actually nowhere near as expensive as it was 0:15:15.480 --> 0:15:19.880 in two thousands. Um. This is a good, straightforward indicator 0:15:19.920 --> 0:15:23.960 that suggests that, unless it doesn't even require the economy 0:15:24.000 --> 0:15:27.480 to slow down, if American companies get a little less 0:15:27.520 --> 0:15:34.480 good at absolutely squeezing every last inch of every cent 0:15:34.560 --> 0:15:38.320 of profit out of their sales, they are going to 0:15:38.360 --> 0:15:44.440 look terribly overpriced. Um. So there were a few reasons 0:15:44.480 --> 0:15:51.720 to be buried there, right. And oh and Bernie, I 0:15:51.720 --> 0:15:54.320 mean Larry David. Just I can't do a Larry David 0:15:54.840 --> 0:16:01.480 level impersonation of Bernie. It's only a few months. For 0:16:01.560 --> 0:16:08.120 some reason, for some reason, people took Elizabeth Warren very seriously. Uh. 0:16:08.240 --> 0:16:11.640 And so when we had the season of people announcing 0:16:11.640 --> 0:16:16.360 their previews for which, like Christmas, comes earlier every year, 0:16:16.360 --> 0:16:22.880 so it was before Thanksgiving, people were terrified of her. Um. 0:16:22.960 --> 0:16:27.080 She doesn't call herself a socialist, she calls herself a capitalist. 0:16:27.880 --> 0:16:32.720 Bernie is now looking stronger than Elizabeth Warren ever did. 0:16:33.480 --> 0:16:37.400 And he calls himself a socialist, which is not market friendly. 0:16:38.000 --> 0:16:57.200 It's markets to capitalist. Let's get into some of these 0:16:57.280 --> 0:17:00.560 names in your protafolio because I love looking at uh 0:17:01.040 --> 0:17:04.960 different managers portfolios and oftentime you're like, wait, you sure 0:17:05.000 --> 0:17:06.240 that you look at it and you're like, you're sure 0:17:06.240 --> 0:17:09.159 this isn't an index fund. You do not make mistake 0:17:09.640 --> 0:17:11.520 with Glenn's picks, which is what I love. You know, 0:17:11.520 --> 0:17:13.639 I'm gonna skip over sort of the you know, the 0:17:13.680 --> 0:17:16.680 Microsoft United Health and I'm gonna quiz maybe we'll quiz 0:17:16.720 --> 0:17:20.080 authors on a fees heard of some of these same 0:17:20.080 --> 0:17:23.440 waiting as Facebook one point seven percent habit restaurants. Okay, 0:17:23.440 --> 0:17:25.560 all right, so they just they just got bought by 0:17:25.600 --> 0:17:32.200 Young Brands. Okay, so uh they're in a very very 0:17:32.240 --> 0:17:37.400 big way. Uh but what what Yeah, so the same 0:17:37.440 --> 0:17:40.840 thing is called young Brands. So I first saw them 0:17:40.880 --> 0:17:43.159 in November four team when the I p oed and 0:17:43.240 --> 0:17:45.400 it kind of was at the same time Shake Shack 0:17:45.520 --> 0:17:48.359 came public. And they're these guys are a strong a 0:17:48.359 --> 0:17:52.119 competitor in California to there in Santa Barbara, California and 0:17:52.160 --> 0:17:57.240 compete with um uh in Halburger of course, who's the 0:17:57.280 --> 0:18:00.320 dominant player there. And and they have you know, I 0:18:00.400 --> 0:18:03.000 knew the CEO. His name's Rust Bendl. He ran this 0:18:03.160 --> 0:18:05.640 company called Mimi's Cafe. When they were private, I met 0:18:05.680 --> 0:18:09.359 with them, and so they came public. They had great 0:18:09.440 --> 0:18:13.240 unit of economics. It's they fifty burger. But what what 0:18:13.320 --> 0:18:17.160 they do. Everything's fresh, high quality food. What they do 0:18:17.359 --> 0:18:21.919 differently is they they're kind of more so they'll have 0:18:22.119 --> 0:18:25.879 a good female presence. They they'll have good seared ahi 0:18:25.960 --> 0:18:31.800 tuna and salads, and so it was a differentiated concept. 0:18:33.040 --> 0:18:35.399 And so the stock took off, and you know, an 0:18:35.440 --> 0:18:37.240 I p oed in the mid teens and went up 0:18:37.240 --> 0:18:39.240 like just like shake Shack when everybody wanted their own 0:18:39.280 --> 0:18:42.160 restaurant stocks. Uh, And a lot of these companies came 0:18:42.200 --> 0:18:46.000 public and it went, you know, went into the forties. 0:18:46.040 --> 0:18:47.760 I watched it. I was intrigued by the concept of 0:18:47.760 --> 0:18:50.879 the valuation was ridiculous. And then as the restaurant stocks 0:18:50.880 --> 0:18:52.639 went out of favor, it collapsed. I mean it was 0:18:52.680 --> 0:18:57.119 in the single digits. They were still executing, and it got, 0:18:57.359 --> 0:19:00.400 you know, close to replacement value on a you know, 0:19:00.600 --> 0:19:03.320 a business that generates you know, their their union economics 0:19:03.320 --> 0:19:07.080 are returns on invested capital. So it got really attractive 0:19:07.080 --> 0:19:10.879 to me, and I started to take a position and ultimately. 0:19:11.359 --> 0:19:12.840 You know, I was hoping for a higher price than 0:19:12.880 --> 0:19:14.359 what they got taken out for. I was hoping this 0:19:14.359 --> 0:19:16.480 would get into the twenties, but it got taken out 0:19:16.520 --> 0:19:20.199 at fourteen by young brands. One more before we get 0:19:20.240 --> 0:19:21.800 to the craziest things. I think this one would be 0:19:21.800 --> 0:19:24.480 interest to our listeners who are are actually in the 0:19:24.480 --> 0:19:29.080 money management business. Diamond Hill Investment Group. Uh one point 0:19:29.160 --> 0:19:31.760 three waiting and your portfolio is never more than like 0:19:31.840 --> 0:19:35.960 thirty stocks, right usually, yeah, it's right now, right now, 0:19:35.960 --> 0:19:39.680 I'm at twenty. But tell us about Diamond Hill Investment Group, 0:19:39.720 --> 0:19:42.920 because I mean, I feel like asset management firms are 0:19:43.080 --> 0:19:46.720 somewhat uh radioactive to a lot of investors these days. 0:19:46.720 --> 0:19:49.760 The the active managers. What do you see about this stock? Right? 0:19:49.800 --> 0:19:53.320 Nobody wants to own active managers right now? So Diamond Hill. 0:19:53.359 --> 0:19:58.440 They're in Columbus, Ohio, mostly equities, uh, large cap value. 0:19:58.720 --> 0:20:03.440 You know. Um, I followed them for a long time. Uh. 0:20:03.640 --> 0:20:05.800 We owned it actually in our small cap portfolios when 0:20:05.840 --> 0:20:08.600 I was at JP Morgan. It got really expensive. They've 0:20:08.640 --> 0:20:10.600 done very very well, and it's twenty two billion in 0:20:10.640 --> 0:20:16.600 assets under management now. Uh, And it got really cheap, right, 0:20:16.640 --> 0:20:18.120 And I took a second look at it. I saw 0:20:18.440 --> 0:20:23.159 they hired a new CEO, Heather Brilliant from morning Star UM, 0:20:23.280 --> 0:20:26.840 and there was insider buying, and I took a look, 0:20:26.840 --> 0:20:30.520 and I'm like, it's six points seven times enterprise value 0:20:30.520 --> 0:20:33.560 to notepad. Now, I've run an investment management business. This 0:20:33.640 --> 0:20:38.040 is a really good, well run company that's an active manager. 0:20:38.080 --> 0:20:40.200 But it's not like they're charging egregious fees. The average 0:20:40.200 --> 0:20:42.919 fee sixty basis points. Uh. They have a long term 0:20:43.000 --> 0:20:45.760 track record. I would love telling this business if I 0:20:45.760 --> 0:20:47.720 if this was in the private markets and I could 0:20:47.760 --> 0:20:50.240 buy it for seven times, you know, and they have 0:20:50.280 --> 0:20:53.320 a pristine balance sheet, I'd own it all day and 0:20:53.359 --> 0:20:55.600 just waited out. Now, I don't know what's that's That's 0:20:55.640 --> 0:20:58.919 the beauty of the stock market. There's this volatility, and 0:20:59.119 --> 0:21:00.760 you know, if you have an idea of what you 0:21:00.800 --> 0:21:04.439 think of business is worth. Um, there's a lot of opportunity. 0:21:04.520 --> 0:21:06.760 And you just waited out. For those who've been waiting 0:21:06.760 --> 0:21:10.200 around lists for the craziest thing we saw in markets, 0:21:10.640 --> 0:21:13.680 it's time for your payoff, Sarah. I'm not as confident 0:21:13.680 --> 0:21:15.359 as I usually am in mine. You were in confident 0:21:15.480 --> 0:21:17.240 last week either, Yeah, I don't think. I think I 0:21:17.240 --> 0:21:20.800 still won though, didn't I Because you say that, I 0:21:20.840 --> 0:21:23.239 think if there was a popular vote here, I'm not 0:21:23.280 --> 0:21:26.560 sure that. You right, do I get one vote or 0:21:27.520 --> 0:21:32.040 I mean you you get a supervoter? Yeah? All right, 0:21:32.160 --> 0:21:35.119 let's let's start with that character, Twiggy Sunday, who the 0:21:35.160 --> 0:21:37.720 craziest thing he saw in markets this week? I think 0:21:37.760 --> 0:21:41.760 John Author's as a British Red Sox fan, you'll appreciate 0:21:41.800 --> 0:21:46.080 that he noticed that Keith Richards gave up smoking, and 0:21:46.119 --> 0:21:49.359 he he thought that might have some market implications. In fact, 0:21:49.400 --> 0:21:51.520 I looked, I look at al Tree's share price. It's 0:21:51.520 --> 0:21:54.199 down like double digits since the middle of January. So 0:21:54.200 --> 0:21:58.240 I think I think Twiggy might I might one this week. Yeah, 0:21:58.600 --> 0:22:01.199 so that that's a good one. But I'll start with 0:22:01.240 --> 0:22:03.600 mine because I'm not I'm not as proud as of 0:22:03.680 --> 0:22:05.240 this one. But I saw a story, I think it 0:22:05.280 --> 0:22:10.200 was CBS. Someone sold a single parking space. So we're 0:22:10.200 --> 0:22:13.359 talking about the real estate, the parking space real estate 0:22:13.400 --> 0:22:17.480 market in San Francisco. Uh, Clenn, what would you pay 0:22:17.480 --> 0:22:19.399 for a parking space in a touch in New Jersey? 0:22:19.960 --> 0:22:23.399 I pay fifty five a month on the touching Parking 0:22:23.440 --> 0:22:30.040 Authority actually the treasurer of the So you hear in 0:22:30.040 --> 0:22:33.760 San Francisco, what would you pay in services? I have? 0:22:34.000 --> 0:22:37.600 I've seen the articles eight hundreds to own a parking 0:22:37.600 --> 0:22:43.400 space and month. I think that's just no way more. Yeah, 0:22:43.880 --> 0:22:46.679 but John Arthur's what would you pay for it to 0:22:46.800 --> 0:22:49.679 have a car in San Francisco? Okay? So much to 0:22:49.720 --> 0:22:52.800 avoid having to drive in San Francisco negative negative interest, 0:22:53.520 --> 0:22:59.040 negative hundred grand for parking space in San Francisco. How 0:22:59.119 --> 0:23:01.600 much could you buy? Is there anywhere within the city 0:23:01.600 --> 0:23:03.840 of San Francisco you could buy a studio apartment for 0:23:03.840 --> 0:23:08.360 a hundred grand? Absolutely not? Right, absolutely not. Maybe it's 0:23:08.359 --> 0:23:13.080