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Invest Like the Best

Exploring the ideas, methods, and stories of people that will help you better invest your time and money. Learn more and stay-up-to-date at InvestorFieldGuide.com
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Now displaying: February, 2018
Feb 27, 2018

It has been a while since we discussed private equity on the show, so I was excited for this week’s conversation. My guest is Dan Rasmussen, the founder of Verdad advisers. Dan worked in private equity and has spent years studying the entire field.

Dan identified several key drivers of private equity’s outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren.

We cover a ton of ground, discussing the prospective returns for equities, forecasting, and tons of investing strategies.

Please enjoy this conversation with Dan Rasmussen.

 

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Links Referenced

Subscribe to Dan

The Gospel According to Michael Porter

Tobias Carlisle

Steven Pinker

E.O. Wilson

 

Books Referenced

What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All Time

Quantitative Value, + Web Site: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors

Expert Political Judgment: How Good Is It? How Can We Know?

Superforecasting: The Art and Science of Prediction

 

Show Notes

2:03 – (First Question) – The current state of private equity investing       

4:09 – The three myths of private equity 

6:51 – Taking a deeper dive into the myth of growth through operational improvements

            9:29 – What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All Time 

11:25 – Valuations for private market investment and where they’re going 

14:03 – Private equity companies that have a higher chance of delivering results that exceed expectation 

16:39 – Other observations on the private equity space that would be interesting to investors considering the asset class 

19:33 – Importance of being very purposeful in picking your reference classes

            19:42 – Subscribe to Dan 

22:03 – How do the lessons Dan has learned in private equity translate to his investment strategies 

25:21 – How do you apply purely technical, systematic thinking into public market investing 

29:23 – Analyzing leveraged stocks and the value they could create 

30:06 – How Dan thinks about the direction of debt vs just the level 

33:11 – Predicting a firms ability to deleverage 

35:20 – How Dan’s company whittle down a company and are able to see value beyond their quantitative screens 

41:29 – How does Dan think about the global vs US opportunity set 

44:22 – What originally drew Dan to the Japan market 

47:03 – How do rising rates impact Dan’s strategy in investing in highly leveraged companies

51:19 – Importance of having investor money locked up for a longer period of time both for the fund and investor

55:03 – Porter’s five forces

            55:25 - The Gospel According to Michael Porter

1:00:51 – How Dan thinks about competitive advantage

1:04:41 – Exploring Dan’s personal process in pursuit of his ideal strategy

            1:05:19 – Quantitative Value, + Web Site: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors

            1:05:20 – Tobias Carlisle

            1:06:27 – Steven Pinker

            1:06:28 – E.O. Wilson

1:07:11 – What other markets pique Dan’s interest

1:09:39 – Why there is such a focus on small for Dan

1:11:11 – Source or person that Dan has learned the most from that might surprise people

            1:11:24 – Expert Political Judgment: How Good Is It? How Can We Know?

            1:11:28– Superforecasting: The Art and Science of Prediction

1:12:54– What was it like writing the book

1:17:19 – If Dan was going to write another book today, what would it be about

1:19:08– Kindest thing anyone has done for Dan

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Feb 20, 2018

My guest this week, back for a second conversation, is Pat Dorsey. Pat ran equity research at Morningstar before leaving to start his own asset management company: Dorsey Asset Management. His areas of deep interest are competitive advantage and capital allocation. He believes that capital allocation should be in service of competitive advantage and invests in a concentrated portfolio that he and his team feel embody these ideas. 

If you have not already, I strongly recommend listening to our first conversation, which is a sort of crash course on moats. In this conversation, we cover different ground. We spend much more time on individual stocks like Facebook, Google, and Chegg, using them as examples to explore Pat’s investment philosophy and strategy. 

Across a few conversations with Pat, I can tell he is in love with this stuff, and I always enjoy talking to investors like him who so passionately pursue and edge. Please enjoy round two with Pat Dorsey.  

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Links Referenced

Pat Dorsey's first appearance on the podcast

HQ - Live Trivia Game Show

 

Books Referenced

World After Capital

Principles: Life and Work

 

Show Notes

2:15 – (First Question) – Pat’s methods for valuing a business 

4:17 – Is this process done after they would first identify potential targets for investment 

5:11 – Pat’s take on how the market classifies stocks as growth vs value 

6:40 – Qualitative insights and why the market can’t price them very accurately 

9:57 – The business model behind zero marginal cost distribution business model 

12:00 – Network effects and the potential downside to them down the road 

13:54 – Valuing Facebook as a business heavily reliant on network effects

16:45 – What would have to change for Pat’s position on Facebook to radically change 

18:58 – Most important lessons that a smaller/private business could learn from Facebook or Google’s business models 

19:48 – Where is Amazon in Pat’s portfolio 

20:27 – Primary research and the value that is derived from it 

22:06 – An example of where primary research led to a big surprise about a company 

24:05 – The value of travel in this business, starting with recent travel to India 

26:05 – Why are they targeting India and Japan 

27:24 – How does he think about the risk of investing in foreign markets 

29:52 – His thinking on relative vs absolute market share 

31:26 – Exploring the SaaS business model 

34:35 – The application of moats and pricing power with SaaS businesses

            34:36 – Pat Dorsey's first appearance on the podcast 

36:17 – Understanding how to evaluate a SaaS or subscription-based business (Lifetime Value of the Customer vs Acquisition Cost) 

40:07 – Other models that Pat explores and how to screen for them 

41:37 – How does he parse the difference between attention and demand 

43:19 – How would Pat monetize something like HQ - Live Trivia Game Show that has aggregated massive amount of attention 

45:19 – How does Pat react to the idea that attention is scarce and human capital is so crucial

            45:14 – World After Capital 

47:04 – How does Pat evaluate human capital in a business 

48:09 – Experience in starting an asset management business 

50:20 – What are the levers that are biggest value drivers in the asset management business 

53:57 – Pat’s view on the strength of the relationship between risk and return        

57:06 – The most risk Pat has taken in the face of uncertainty 

59:23 – Favorite recent learning resource

            59:43 – Principles: Life and Work

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Feb 13, 2018

Long-time listeners will have heard me joke before that this podcast should really be called “this is who are you up against.” I’ve been waiting for the right episode to deploy the joke as a title, and this week we have it. 

The joke is meant to convey how incredibly impressive these people are who we get to hear from every week. My guest this week is Josh Wolfe, a founding and managing partner at Lux Capital in New York City. Lux is a venture capital firm, but a highly unique one. They’ve spent more time in hard sciences and interesting nooks and crannies of the market than the typical VC firm.

Some of investing is zero sum: my outperformance is someone else’s underperformance. Sometimes, though, investing is positive sum. The combination of capital, ideas, people, drive, and raw energy leads to amazing new things. 

I think the best investing and best investors of the future will be more collaborative than competitive. After finishing with Josh, I couldn’t stop thinking “god, do I want to be involved with whatever he’s doing, if only just to learn.” 

This conversation made me rethink my joke “this is who are you up against.” Now I won’t think of it as a zero-sum joke, but instead as a reminder: this is the kind of person who is out there. You better find your niche, and still be the absolute best you can within that niche.  

Please enjoy this killer conversation with Josh Wolfe. We cover just about everything. 

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Links Referenced

Investing in Biofuels or Biofools?

Ali Hamed podcast

Alex Moazed podcast

Andy Rachleff podcast

Popplet

@wolfejosh

 

Books Referenced

Modern Monopolies: What It Takes to Dominate the 21st Century Economy

 

World After Capital

 

Show Notes

2:35 – (First Question) – Lux Capital and the kind of investments they have made over the years 

5:42 – The formation of the investment philosophy for Lux 

8:17 – Why randomness and optionality are important cornerstones to the philosophy 

9:52 – Investment philosophy 100-0-100 (ambition, arrogance, intellectual humility) 

10:40 – How Josh manages his time and attention

            12:53 – Investing in Biofuels or Biofools? 

13:29 – Obsession with nuclear 

15:15 – Investment in metamaterials 

18:28 – Focus on autonomous vehicles 

21:02 – How all of these gambles are viewed by Josh’s investors 

22:56 – Tattoo technology

            24:20 – Ali Hamed podcast 

24:36 – How Josh evaluates people when considering early stage investments

            24:45 – Alex Moazed podcast

            24:49 – Modern Monopolies: What It Takes to Dominate the 21st Century Economy 

28:10 – Why the minority opinion tends to lead to the best outcomes 

29:50 – Memorable experience investing in a founder 

30:44 – The idea of thesis driven approach to private investment    

            30:56 – Andy Rachleff podcast   

32:38 – Crazy thesis – understanding the emotional needs of our pets 

34:59 – Crazy thesis – Turning genetic abnormalities into treatments and cures for common conditions

38:03 – Josh’s learning process through these theses

            38:34 – Popplet

39:56 – Understanding rebel scientists when it’s impossible to predict what is going to happen

44:35 – Can the charge forward mindset be cultivated, or does it have to come naturally

45:49 – Investors that Josh has learned the most from

47:37 – Josh’s comfort investing outside of his usual asset class

            49:03 – @wolfejosh

50:56 – What is the thinking with the short strategy at Lux

52:31 – SpaceX vs Tesla, good business vs bad business

53:42 – How Josh approaches the quality of a business

            54:15 – World After Capital

55:16 – How does Josh evaluate competitive advantage

56:45 – Where are we in the venture capital landscape

1:01:42 – How does his outlook on venture capital affect the way Lux is run

1:02:48 – thoughts on cryptocurrency

1:05:28 – An overview of Santa Fe Institute

1:07:22 – What is the most memorable conversation Josh has ever had

1:09:34 – What is Josh’s objective function in life

1:12:43 – Are there people that Josh disagrees with but deeply respects

1:13:32 – Kindest thing anyone has ever done for Josh  

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

Feb 6, 2018

My guest this week is Harvey Sawikin, a co-founder and lead portfolio manager at Firebird Management, which manages funds dedicated to investing in emerging market equities. Emerging markets are often a blind spot for investors of all types: most of us have never traveled to the far east or eastern Europe, where many of the thousands of emerging market public equities operate.

I’ve been very lucky to travel quite a bit in Asia and the Middle East, but never to eastern Europe, which where Firebird focuses its investments. Harvey and I discuss his 24 years of experience evaluating emerging and frontier market countries, industries, and individual stocks. We discuss his experience buying privatization vouchers in Russia, banks in the Baltics, and how today’s emerging market opportunity set compares to the past. 

Like so many of these conversations with investors who have earned significant excess returns, its clear investing opportunities in emerging markets are often disguised. Finding them requires risk, hard work, discipline, and a dose of luck and timing. Please enjoy my conversation with Harvey on Emerging Market Opportunities. 

For more episodes go to InvestorFieldGuide.com/podcast.

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

Follow Patrick on Twitter at @patrick_oshag

 

Links Referenced

Via

Books Referenced

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

Education of Rick Green, Esquire

 

Show Notes

2:26 – (First Question) – Most memorable travel experience since the beginning of Firebird

5:41 - How Harvey got interested in emerging markets investing, specifically, Eastern Europe and Russia

10:00 – How does the landscape for emerging markets today compare to when he first started

12:30 – What are the factors of an emerging market to look at and why do some not pan out

15:04 – Do countries have to meet minimum criteria before Harvey and his team will even start to do work on an emerging market

17:33 – How does Harvey distinguish between frontier and emerging markets

18:37 – Thoughts on the access points that regular investors have into emerging markets, such as ETF’s and Mutual Funds

23:48 – How does Harvey think about risk exposure when constructing a portfolio

25:56 – Looking at the bottom up part of the equation, what factors within a company or sector are considered as part of the investing decision

31:05 – Dividends in emerging markets

33:09 – How do US equities stack up as an investment against fixed income

         34:53 - The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

36:52 - How do US equities stack up as an investment against emerging markets

39:38 – What type of investor allocate funds to emerging markets

42:37 – The value of travel in understanding emerging markets

50:19 – Biggest mistakes that emerging market investors make

54:49 – What in today’s markets has the smell of opportunity

55:53 – Harvey’s interest in Via

56:58 – Interest in buying gold coins

1:00:05 – If Harvey could only choose one country to visit, business or pleasure, where would he go

1:01:09 – Kindest thing anyone has done for Harvey

            1:01:38 – Education of Rick Green, Esquire

Learn More

For more episodes go to InvestorFieldGuide.com/podcast

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag

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