The Business Brew

Rick Van Nostostrand is a Partner and Senior Portfolio Manager at Cornerstone Investment Partners. Cornerstone is an investment boutique in Atlanta, Georgia.  The firm manages "mid $2Bn" across a number of value strategies.  They have a qualitative approach with a quantitative model that guides them.  See https://cornerstone-ip.com/. 

  Prior to Conerstone, Rick was a voting member of the investment committee at EARNEST Partners and served on the Fundamental Value product at Invesco Capital Management. Previously, he worked in management consulting where he served clients across industries at both McKinsey & Company and Accenture (the Anderson Consulting).  Rick earned an MBA with a concentration in Finance from Wharton (U Penn), and holds a Bachelor of Science in Computer Science Engineering from Southern Methodist University.    This conversation covers: ~2:30 - Rick's Background ~3:53 - His consulting career at Accenture and McKinsey ~7:11 - College businesses, one of which could have been quite successful if Amazon existed ~13:57 - The theory that in the real world prices and value are seldom aligned ~ 16:23 - Need to develop an investment process and Cornerstone's philosophy ~ 22:21 - What Cornerstone's model told them about Microsoft that the market missed ~ 24:08 - Looking for high quality companies building value over time ~ 26:21 - ESG discussion ~29:36 - Risk subsidies driving valuation ~32:31 - Indexes and how they impact investment results and the market ~37:00 - What happened to certain stocks after the 1999 bubble burst ~38:00 - Investing in the late 90s ~43:00 - Buying the dip may not work forever ~45:00 - Avoiding financials in 2009 ~50:50 - Real option theory in valuation ~54:05 - Where Wells Fargo erred in remediation ~ 57:19 - Why Citigroup was a palatable turnaround investment ~1:01:00 - The benefit of investing with a team ~ 1:05:00 - Avoiding groupthink as a team ~1:07:00 - How to have investment teams function well ~1:14:00 - Building teams to last and culture ~1:19:00 - Miscellaneous discussion

Jason Buck (@JasonMutiny on Twitter), Co Founder and CIO of Mutiny Funds, stopped by for the first in person interview on The Business Brew.  Mutiny is releasing the Cockroach Portfolio, a portfolio designed to survive any market conditions.  See https://mutinyfund.com/ for details.   In this episode Jason discusses his history as an entrepreneur, which took a hit in the Great Financial Crisis.  That event caused Jason to think about whether it was possible to hedge entrepreneurial risk.  After years of thought, the Cockroach Portfolio was born. The goal of the Cockroach Portfolio is to keep wealth in all market conditions.   This conversation goes all over the place.  We hope you enjoy.    ~4:05 - Trading VIX ~9:00 - Jason's history as a real estate entrepreneur ~10:00 - How often "black swans" occur ~16:50 - Jason describes thinking about hedging macro/entrepreneurial risk ~18:00 - Shannon's Demon - see also https://quant.stackexchange.com/questions/38473/intuitive-explanation-for-shannons-demon ~22:30 - How would Buffett behave if he were starting today? ~23:35 - The $SHIT ETF ~29:17 - What it's like to lose everything ~32:00 - Keeping wealth vs. making wealth ~37:50 - The Hypomanic's Edge ~41:00 - How Jason and Taylor "solved" the problem they wanted to solve ~48:07 - Be so good they can't ignore you ~49:20 - Selecting the right partners ~55:00 - Building the Cockroach Portfolio the right way ~1:04:00 - Playing better games than stock picking; compounding capital without tax ~1:09:00 - What lies do we tell ourselves? ~1:13:00 - Laying asymmetric bets ~1:17:00 - Mental health and whether substances risk mental health ~1:18:00 - General mental health discussion and habits to keep healthy ~1:29:00 - General podcast and Pirates Of Finance Discussion; see https://www.youtube.com/channel/UCsfk98XxbnjTCLkROQZ5zWg/featured ~1:37:00 - Back to Mutiny Fund and how it's structured ~1:40:00 - Avoiding big drawdowns        

Jason Wild is the founder and President of JWAM, an SEC-registered investment adviser with over $1.7 billion under management. Jason found investing during his last year of pharmacy school.  Taking Peter Lynch seriously, he invested every other paycheck in pharmaceutical ideas he thought were undervalued.  His theses were correct far more often than they weren't and he made himself almost a half million dollars in the market.  After proving his competence, he started a fund with a mere $80,000.  Today, that fund manages over $1.7Bn.     Jason's initial strategy focused on specialty pharmaceuticals.  His knowledge base enabled him to assess asset bases and M&A quickly (and correctly).  After pitching a company on an M&A opportunity, and getting nothing in return, Jason decided to take matters into his own hands.  He decided to purchase Arbor Pharmaceuticals for $2.5mm dollars and built the company via M&A. After 3 years, KKR bought a portion of Arbor; valuing the enterprise at $1.1Bn.     Today, Jason is Chairman and Interim CEO of TerrAscend Corporation, a cannabis company with multi state operations in the US.  His official Bio is as follows:  

"Jason Wild is the founder and President of JWAM, an SEC-registered investment adviser with over $1.7 billion under management. After starting his first fund in 1998 with only $80,000 AUM, Jason achieved early success by leveraging his background as a pharmacist to find undervalued specialty pharmaceutical companies and by managing the firm’s investments for long-term growth. After building a strong track record as a stock picker, Jason expanded his investment universe and applied his experience and extensive healthcare network to private market opportunities. He has since established himself as a highly respected investor and sought-after partner for both public and private companies."

  This was an awesome conversation to have.  Highlights are as follows:   ~1:00-6:00 - Early career highlights ~6:00- Finding cannabis as a potential investment opportunity ~9:50 - Applying the same learnings from pharmaceuticals to cannabis and getting control of TerrAscend ~13:50 - When the US cannabis thesis got derisked ~16:44 - Applying for licences in New Jersey and what that means ~18:50 - Buying Ilera ~23:30 - Discussion on incentives for East Coast regulators and how they may think about supply/demand balances ~26:30 - The strategy of density vs spreading out the retail footprint ~28:58 - Homegrown cannabis as an alternative ~31:00 - Federalization/interstate commerce and what that may do to the thesis.  ~34:49 - The social justice impact of legalization ~37:13 - Consistency in edibles and what is difficult about getting those products consistent ~44:00 - Whether the illicit market will keep its customers ~49:00 - What Jason is doing with Chris Webber to help minorities profit in the cannabis industry ~55:00 - Why issuing equity right now was the right choice for TerrAscend

Arnold Van Den Berg is one of the most unique investors alive today.  He is Jewish and was born in Amsterdam, Holland, in 1939.  As a toddler, he and his family were forced to hide in a small closet when the Nazis searched his street.  His mother was concerned that Arnold and his brother, then 5 years old, would not be able to keep quiet during the searches. Consequently, she arranged for Arnold and his brother to be smuggled out of Amsterdam.   While Arnold was successfully smuggled out of Amsterdam, his mother never received a phone call confirming his safety.  She grew worried and eventually set out to find a phone to confirm Arnold's safety.  Arnold's dad went with her.   On the way to the phone booth Arnold's mother and father duked into a store to avoid an air raid.  The store owner alerted the Nazis and both of Arnolds parents were sent to Auschwitz.  They both survived.     This episode is about investing.  But, it is more about life than anything.  BIll has been fortunate to get to know Arnold over this process.  They have talked on the phone for ~10 hours and will do so until Arnold tires of Bill!     Arnold is a testament to what humans can do.  He and his immediate family survived the most hellish conditions on Earth.  Yet, he holds no resentments.  In fact, he discusses his experiences as something he's almost grateful for because they enabled him to become the person he is now.     In conclusion, no detailed show notes on this one.  As a listener, you are encouraged to listen to this entire interview and determine what is helpful for you.  Arnold is someone to celebrate and his story should never be forgotten.  We hope we add something important to your Memorial Day with this episode.     Thank you to all that serve and help ensure the freedomes we enjoy today.  Best wishes.  Much love. 

David Barr (@PenderDave on Twitter) is the President and Portfolio Manager at Pender Fund Capital Management.  He focuses primarily on Canadian small cap equities, but is not limited to that subset of investments.  Bill met Dave at an MOI Global event in 2019 and was very excited for Dave to join The Business Brew because Dave truly loves stock picking.   Dave is extremely well respected, high integrity, and looks at the world through a unique lens.  While some people see small cap investing as riskier, Dave sees it as an opportunity.  Perhaps it's because of his background in venture capital ("VC").  Perhaps it's because he does better "work" than others.     Whatever the reason, The Business Brew is grateful for his time and hope we introduce an investor that warrants respect.    Topics discussed include: ~2:50 - Bill and Dave discuss MOI Global as a community ~4:30 - Dave discusses small cap investing ~7:40 - "Microcap draws people who are business analysts" ~8:35 - How venture capital influenced Dave ~10:00 - Why redemptions disproportionately influenced small caps in 2018 ~13:00 - How Dave thinks about marrying VC thinking with equity investing ~15:50 - How journaling helped Dave remember what COVID was really like ~20:00 - Avoiding envy in a social media world ~22:00 - Dave's experience getting "active" (read: constructive) with his holdings ~28:00 - What the Canadian Venture Exchange is and why companies are going public now ~35:00 - How Canada can lead in the financial trends and a discussion on how bubbles form ~45:00 - Dave's thoughts on balancing a portfolio of "compounders" and rerating investments ~49:00 - Are public markets really "long term?" ~53:00 - Is it possible to fully appreciate the right tail of outcomes? ~1:00:00 - Companies are people organizations now; reflexivity matters ~1:04:00 - Follow @PenderFelix! ~1:09:00 - Why Dave is respected by colleagues and how he's been able to achieve success ~1:15:00 - What to learn from Buffett ~1:20:00 - Founder/CEO turnover in smaller cap companies as a risk factor ~1:34:00 - Some SPAC talk

This episode features Francisco Olivera (@FrancoOlivera on Twitter) and Alex Morris (@TSOH_Investing on Twitter).  Francisco and Alex are Bill's "mastermind" group.  The three of them talk daily and discuss ideas.  Scroll down to see topics and time stamps.    This episode was recorded in early May.  The AT&T and Discovery deal changes some of the discussion.  Nevertheless, the thought process is what's more important than the event outcome.  Alex and Francisco will return in Season 2 to discuss more media.  We are certain of that.   Please also note that Alex sold Qurate Retail Group after this episode was recorded.     Unfortunately, Bill's mic is a little distorted in this episode, but the conversation was so good that Bill didn't want to scrap it.  The three gentlemen hope you all enjoy the conversation.     Sign up for Alex's Substack at https://thescienceofhitting.substack.com/   Check out Francisco's most recent "pitch" for Roblox at https://www.dropbox.com/s/qg827ammn51axwg/Roblox%20Investment%20Memo_vF.pdf?dl=0 and you can see him on Andrew Walker's podcast at https://www.youtube.com/watch?v=Np3AQjNV4OY    Time stamps as follows: ~2:00 - starting a Substack and thinking through the frequency of client communication ~8:00 - Francisco's research process and why he's Bill's Abominable NO-man. ~12:00 - Position sizing ~17:00 - Buffett on Verizon  ~19:00 - Takes on Berkshire annual meeting ~35:00 - What a "bull market" may do to how we all frame investments (note Alex's YOLO hedge idea at ~39 minutes) ~44:00 - How we think about cash/macro; leads into big tech talk ~50:00 - How our investing philosophy has changed. ~53:00 - Comcast discussion ~58:00 - AT&T discussion (changed with deal) ~1:03:00 - Disney discussion ~1:09:00 - Alex presents a counter to some of the Never Sell narrative and points out that great companies go through tough periods ~1:14:00 - Microsoft talk  ~1:19:00 - Difference between multiples and market caps ~1:21:00 - Back to position sizing ~1:30:00 - GEICO vs Progressive ~1:35:00 - Back to Substack, then Alex describes his Substack offering at ~1:39:00 ~1:48:00 Qurate Retail Group ~1:50:00 - Alex and Francisco's bet for Apple to buy Disney ~1:55:00 - Twitter talk ~2:00:00 - Podcast strategy ~2:20:00 - State of Pay TV          

Brian Feroldi (@brianferoldi on Twitter) joined The Business Brew to discuss his investment philosophy.  Brian is doing some very cool things to spread the message of personal finance and intelligent investing.  Matt Cochrane (@matt_cochrane on Twitter) and Austin Lieberman (@libermanaustin on Twitter) vouch for him as a person.  That means something to Bill.      As for the discussion, Bill enjoyed speaking to Brian very much.  Brian is process driven, open minded, and implements a different style from Bill's.  Thus, he's exactly the type of guest Bill looks to speak to.     Bill's takeaways from this conversation are as follows:   Brian is smart, writes everything down, has an intelligent mental model of how the world works, is trying his best to do something positive for the finance industry, and has a passion for learning. He looks for businesses with huge potential and market caps that are capable of growing for a long time.  He articulates some of the concepts behind David Gardner's "Rule Breaker" philosophy very well in this episode.    Studying the philosophy that underlies Brian's strategy has been a great experience for Bill.  The strategy is very different from Warren Buffett's, but it has created impressive outcomes for those that follow it.  While Buffett takes large swings, Brian's strategy involves owning many companies and allowing the stocks to grow into concentrated bets. As he says, "make your biggest holdings earn their spot."   We hope you enjoy this conversation.  If you do then please subscribe to Brian's Substack https://brianferoldi.substack.com/ and YouTube channel at https://www.youtube.com/channel/UCs60_Z83HU76uygzHRQl0kA. 

ALSO, PLEASE GIVE US A 5 STAR RATING IN THE APP STORE IF YOU LIKE WHAT WE ARE DOING.     Thank you for listening!

Title - Austin Lieberman - Squash The Beef   Description - Austin Lieberman stops by The Business Brew for a special “squash the beef” episode. Austin and Bill are mortal enemies stemming from a classic “value vs growth” bet. Please see this GoFundMe link for details https://www.gofundme.com/f/fintwit-war-value-vs-growth?utm_campaign=p_cp_url&utm_medium=os&utm_source=customer.    While Austin and Bill are not actually mortal enemies, they did disagree on their investment philosophy. Austin is more focused on faster growing companies than Bill has traditionally focused on.  Their style differences caused them to talk past each other. One day Austin told Bill that the problem with “value investors” is they think there’s only one way to invest.  Bill realized Austin had a point, which upset Bill (mostly because he hates being wrong).    That conversation sent Bill on a path to study other styles. For that, he is grateful to Austin. More importantly, Bill is also grateful to Austin’s military service. Austin served as a Tactical Air Control Party (TACP) Officer in the Air Force.  He talks about how that influenced him as a person and as an investor in this episode. 

This conversation is light hearted, good natured, and a fun way for two people from opposite ends of the investing spectrum to come together to talk investments.    We hope you enjoy and are entertained. 

George Livadas stopped by The Business Brew to discuss his background, investing framework, and investment strategy.  George is the founder and CIO of Upslope Capital Management.  Bill really likes how George looks at the world.  You can find George's work at https://www.upslopecapital.com/.   George's portfolio tends to be focused on industries he covered in the past.  Bill was curious to discuss how George thinks of his gross exposure (long exposure minus short exposure) and whether shorting has been, and will be, a good idea in the future.  A reason for Bill's interest in long/short strategies is thinking about whether long/short strategies are a better method of diversification relative to the traditional 60/40 stock/bond allocation.   In this conversation George talks about his investment theories, position sizing, how he sees risk/reward, and much more.  The Business Brew is happy to feature him this week.     You can follow Upslope Capital on Twitter at @UpslopeCapital.