Cove Street Capital: Why Investors Should Never Overlook Proxy Filings [In-depth]

ValueWalk’s Raul Panganiban interviews Ben Claremon, Principal and Portfolio Manager at Cove Street Capital.

Q4 2019 hedge fund letters, conferences and more

Interview with Ben Claremon

 

Transcript

Hello podcast listeners. Today’s a very special episode with Ben Claremon, Principal and Portfolio Manager at Cove Street Capital. Before this, he worked on the long and short side as an equity analyst at Blue Ram Capital, and Right Wall capital in New York. He also worked with a family commercial real estate financing management business. He earned his MBA from UCLA and received his Bachelor of Science in economics from the University of Pennsylvania. In today’s episode, we discuss his approach to investing in the culture at Cove Street Capital. I want to welcome Ben to the show, and I want to welcome all our listeners to a very special episode.

Hello, podcast listeners. This podcast is sponsored by the Hidden Value Stocks newsletter, publish once a quarter. The Hidden Value Stocks newsletter contains at least two interviews with up and coming hedge fund managers and their top two favourite investment ideas. Each newsletter subscriber not only receives a detailed investment thesis on each idea, but we will also provide direct access to the funds profile as well as their quarterly updates. We are proud to report that the average annualised return of all 60 stocks profile in Hidden Value Stocks since inception is 27.9% within average holding period of 319 days. To download a 10 page teaser issue or sign up for a five day free trial, head over to HiddenValueStocks.com. Podcast listeners can get 35% off the annual subscription price with the discount code VIP19.

Welcome to value talk with Raul.

So before we start, I should Read at the request of our Chief Compliance Officer a little blurb. The information is podcast should not be considered as a recommendation to buy or sell any particular security and should not be considered as investment advice of any kind. You should not assume that the security discuss these will will be profitable. And with that we can move along.

All right, so just wanted to welcome our listeners to a very special episode. I have Ben Claremon, Principal and Portfolio Manager at Cove Street, then Welcome to the show.

Thanks so much for having me.

All right. Yeah. Let’s just begin with your background and what led you to the investing space?

Sure. I certainly took a circuitous route to the investing world. I grew up in Arizona, I went to school at the University of Pennsylvania business school there. My family’s in the commercial real estate business. So that was my path. I thought that you know, from a very young age, I was gonna be a real estate investor my family’s businesses located in New York. And I thought I live in New York City and, and kind of just to run the family’s business and grow the family’s business. And so that was my focus and undergrad was was was was on real estate. And about five years in I had a change of heart. Part of it was that you know, working for your families, always a whole host of presents a whole host of issues, you know, that that are good and bad at the same time. But really what it was is a friend of mine, who I am forever indebted to was working for a hedge fund, and he gave me a copy of Ben Graham’s book, the Intelligent Investor. And I read that and I said, this is it. This is my calling.

I was a value investor before I knew what a value investor was. And I said, I think I i think i can be really, I think I really enjoy the challenge and the you know, everything that goes into trying to make decisions under uncertainty trying to be very, you know, very somewhat efficient markets and just, you know, decided to try to get a job on the buy side. And with very little experience just in armed with a, you know, a fair amount of passion and a love for doing research, I was able to get a job on the buy side, timing was not so good in September 2007. As you recall, that was kind of the, you know, beginnings of the rumblings in the markets that led to the global financial crisis.

And so I spent the next you know, 18 months of my, the beginning of my career wading through very, very difficult waters. I mean, I think, you know, we were joking about it, you know, recently with my colleagues like that was a scarring experience, but it was also very instructive experience for a young investor. And I’m pretty risk averse in general. But you know, that remember that going through that process, especially given that I was heavily focused on financials both on the long short side, it was just an incredible learning experience and about the psychology of markets and the behaviour of people and the pendulum swinging between feed fear and greed. You know, a lot of that hopefully, you know, some of that experience will translate now as you know, the market is kind of swung very quickly from from greed to coronavirus based fear.

But, you know, that was a, it was an interesting time in markets. And, you know, I was the hedge fund I was working for wound down not because of performance or just because like it was impossible to raise money at that time. So I ended up going to business school at UCLA, which is where I started the blog then knock elated investor, which I didn’t think of, you know, some people will recognise that name. And I ended up back co St. We’ve been here almost nine years in June, in July. So I’ve you know, kind of moved from just being I want to have original analysts at Cove Street now principal and co Portfolio Manager on our small cap plus strategy.

So it’s been an incredible ride and and you know, I think people often ask me, like, you know, how do I get an investment industry you I love what you do. And I say like, you’re never gonna replicate my path, right real estate to a blog, to you know, my, this this short story is our founder, Jeff rajic, you know, found me based on the internet, found a new my had a friend who knew my blog and recommended me for the job. So, you know, you’re never going to replicate that specific path. But really, I mean, I think that the, the, what, what allowed me to be able to be in this privileged position was, you know, a lot of hard work, a love of investing. The idea, you know, really living the idea that you tap dance to work because you enjoy the process so much and then meet as many people as you possibly can, and networking and just being willing to do things for people without it without expecting anything in return, I think all of those things have been really helpful in my career.