Is the Warrantee Sizable?

Not satisfied with the lack of value most student-run investment clubs offered to students, Tom Russo designed a better way.

Through the 5x5x5 Russo Student Investment Fund, he set out to prove the teaching value of a long-term fund rather than the conventional short-term activity that the existing systems favored.

Each year, students submit their ideas for new investments with five ideas ultimately being selected and held in their entirety for five years. At the end of those five years, the inflation-adjusted original amount is invested back into the fund and any other gains are used to support scholarships for traditionally under-represented members of the class.

Today I’m joined by Tom Russo himself to discuss this year’s picks for the 5x5x5 fund with three of the students who pitched them. I continue to be impressed with the sophistication of the insights made by the students and the professional discussions that arise for each pitch.

In this episode, Tom, Rainbow, Andreas, Ryan, and I discuss why they were initially attracted to the companies they pitched, the competitive advantages and under-appreciated opportunities that exist, key factors that appealed to each of them for their selected companies, and so much more!

Key Topics:

• The problem with most student-run investment clubs (1:18)
• How the 5x5x5 Russo Student Investment Fund started (2:22)
• Goals of the program (4:04)
• Performance of the Fund’s international holdings (7:01)
• How personal experience drew Rainbow’s interest in Atlassian (9:45)
• Atlassian’s self-reinforcing competitive advantage (10:45)
• What makes Atlassian an extraordinary investment (12:10)
• Managing the risk of industry consolidation (15:59)
• Rainbow’s initial research focus on Atlassian partners (18:05)
• Understanding the magnitude of investment and return on investment (19:32)
• The types of companies we like to invest in (22:54)
• What initially attracted Andreas to Vestas Wind Systems (24:36)
• Key facts about Vestas (25:39)
• The main elements that make Vestas an attractive investment (27:41)
• How Vestas’ margins are impacted by the effects of Wright’s Law (30:54)
• Why Andreas isn’t concerned about the intermittent nature of wind power (33:06)
• Mitigating the core risks associated with Vestas (35:03)
• Understanding the real return on capital committed (36:47)
• Why Ryan became interested in Gruma (39:49)
• Key facts about Gruma (40:34)
• The investment opportunity Ryan sees in Gruma (43:44)
• Ryan’s confidence in the founding family and management (47:01)
• The value of the Gruma brand and steady leadership (48:34)
• Underappreciated insights into Gruma (50:36)
• How Gruma handles distribution (53:40)
• Ryan’s assessment of Gruma’s Europe business (55:01)
• And much more!

Mentioned in this Episode:

• 5x5x5 Student Investment Fund
  • Rainbow Chik’s Write-Up of Atlassian
  • Andreas Helland’s Write-Up of Vestas Wind Systems
  • Ryan Albert’s Write-Up of Gruma, S.A.B. de C.V.

Thanks for Listening!

Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.

Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!