Dan Rasmussen - Private Equity Returns in Public Markets - [Invest Like the Best, EP.78]
Invest Like the Best with Patrick O'Shaughnessy
Reassessing Porter's Five Forces for Investors
Dan critiques Porter's Five Forces, reviewing empirical evidence that industry structure and market share poorly predict firm profitability.
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
The Gospel According to Michael Porter
Books Referenced
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
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
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
1:05:20 – 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
1:11:24 – 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
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