MI378: The Aggressive Conservative Investor: Lessons From Martin Whitman w/ Shawn O'Malley
The Intrinsic Value Podcast - The Investor’s Podcast Network
Beyond Earnings: A Better Investment Philosophy
This chapter explores the concept of valuing companies through their financial stability and balance sheets, moving past traditional earnings reports. It critiques common investment metrics and emphasizes a comprehensive understanding of debts, liabilities, and asset productivity for long-term wealth creation.
In today’s episode, Shawn O’Malley (@Shawn_OMalley_) explores the highs and lows of famed investor Martin Whitman’s career. Whitman is the founder of Third Avenue Management, which, at its peak in 2006, managed 26 billion dollars across a handful of funds. For nearly two decades, Whitman outperformed market benchmarks with average annual returns of 12 percent.
Whitman’s approach to investing is unique, and in this episode, you’ll learn about why the balance sheet is just as important or more important than the income statement, how Whitman got his reputation for being a “vulture” investor, how Whitman was able to profit from companies going through bankruptcy, the legal differences between being a bondholder and stockholder, what Whitman looks for in the companies he owns long-term, and takeaways from Whitman’s legacy, plus so much more!
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IN THIS EPISODE, YOU’LL LEARN
00:00 - Intro
07:13 - Why investors should focus on creditworthiness
08:20 - Why the balance sheet is just as important or more important than the income statement
11:35 - How Whitman’s legacy was tarnished by the 2008 Financial Crisis
15:05 - How to assess earnings power using assets
28:58 - What strategies Whitman used to beat the market averages
35:09 - How different markets have varying degrees of efficiency
37:42 - What issues Whitman has with current accounting standards
43:16 - The case for thinking more like a creditor in stock investing
And much, much more!
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
BOOKS AND RESOURCES
- Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
- Request a free copy of Whitman’s book, Dear Fellow Shareholders, on this page.
- Whitman’s book Distress Investing.
- Case studies on legend investors from past episodes: Howard Marks, Bill Ackman, Bill Miller, George Soros.
- William Thorndike Jr.'s book, The Outsiders.
- Hunter Hopcroft’s blog post on Martin Whitman — check out Hunter on Twitter.
- Check out the books mentioned in the podcast here.
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