During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Stock Market Operators. Here’s an excerpt from the episode:
Q3 2020 hedge fund letters, conferences and more
Stock Market Operators
Bill: I don’t know. Something that you said that when we talked that, you wanted to be more of like an industrialist investor and not as much of a market prognosticator or operator type. I do think that some of the Sun Tzu type messages, I think that there’s room to understand the structural reasons that people are either not buying or willing to buy the shares in the company that you are analyzing as an industrialist, and that would probably be the closest to what– I think, theoretically, I like being purely industrialist guy, but I do think that there’s a lot of value in being able to identify who are the sellers right now.
Some of my best buys have been really in the middle of a lot of price action downward, or– I mean, before an announcement of a transaction or something like that, or with Qurate as one was coming up. So, I just think that there’s the marrying of the two concepts makes sense, because when some of the small-cap advantage is some of these bigger funds can’t buy it.
That to me is saying, “Okay, well, if I’m an industrialist, and I like this, and I think it can grow into when these bigger funds can start to buy it, maybe I’m going to have to be prepared to hold it at a valuation that I wouldn’t otherwise be willing to buy it because there’s this giant sucking sound of people buying.”
There are real reasons that funds won’t buy stuff for non-industrialist reasons, and as the market cap or the turnover increases, they’ll enter it. I just think being aware of that is interesting. I don’t think it’s the basis of making an investment decision. I think that knowing from an industrialist standpoint, I’m comfortable with this. Then, by the way, I may get this kicker or something like that is an interesting way to think about it.
That’s probably the closest– because I’ve been thinking about what you said a lot. I think that– like Buffett’s got this real rare ability to read both the market and the business. I don’t think that he’s making market calls. That’s not what I think he’s doing right. I do think he has one of the better senses of when something is truly bombed out versus when it’s like just trading in this value trappy type range. I’m not sure that it’s purely because of an industrialist mindset or purely because of another, but I do know that if he believes in the business, he’s not going to let some market structure BS be the reason he doesn’t buy.
The other thing that’s cool is when you’re him, you can create the market structure change. That’s the thing that’s crazy.
Jake: [crosstalk] [chuckles]
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Article by The Acquirer’s Multiple
