Value After Hours S06 E21: Brian Bares on Moats, Analytical Edges, and the Importance of Growth
May 22, 2024
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Financial analyst Brian Bares discusses the transformation of Beers Capital Management, focusing on x-grade compounder businesses. They explore navigating market dynamics, analyzing growth prospects, and the importance of having an edge in investing. The conversation delves into Maslow's hierarchy, Blackfoot influence, assessing talent, technological disruption, and launching B-C-M Focus Funds.
Brian Beers emphasizes the need for a diversified investment approach spanning different market cap segments.
Information asymmetry poses challenges in finding true advantages in today's efficient markets, focusing on informational, analytical, and behavioral edges.
Managing portfolio volatility requires a focus on long-term philosophy, transparency, and conviction amid market uncertainties.
Deep dives
Brian Beers' Investment Strategy and Firm Evolution
Brian Beers discusses his investment approach, which started with a focus on micro-cap investments but evolved to include small, mid, and large caps. He explains his firm's strategies and how they span across different market cap segments. Beers highlights the evolution of market definitions for small, micro, and mid-large cap companies based on the Russell 2000 and Russell 1000 split. He also shares insights on the changing landscape of public markets, where the cost of being public has increased.
Evaluating Information Asymmetry and Behavioral Edge in Investing
Brian Beers delves into the concept of information asymmetry in investing, emphasizing the challenges in finding true informational advantages in today's efficient markets. He discusses the three pillars of investors' edge: information, analysis, and behavioral aspects. Beers shares examples of instances where informational advantages had a significant impact on investment decisions. He points out the complexities of market dynamics influenced by high-frequency trading and pod shops' activities.
Navigating Market Volatility and Institutional Shifts
Brian Beers reflects on managing portfolio volatility amid institutional shifts and market dynamics. He discusses the challenges of short-term volatility caused by intraday trading and institutional allocation strategies. Beers talks about the implications of concentrated portfolio management and patient investing when facing aggressive short-term market movements. He addresses the importance of philosophy, transparency, and conviction in long-term investment strategies amid market uncertainties.
Value Investing and Business Ownership
Value investing, particularly in the context of viewing stocks as business ownerships, requires navigating through significant volatility to achieve long-term goals. Evaluating businesses based on qualitative factors such as moat management and growth is emphasized. A thorough vetting process, including site visits and industry trade shows, aims to identify exceptional companies for the focus list. Interestingly, during the period from 2014 to 2021, the priciest stocks on the focus list outperformed the cheapest ones, emphasizing the importance of quality over pure valuation.
Maslow's Influence on Management and Human Psychology
The podcast delves into the influence of Abraham Maslow, a prominent psychologist, and his hierarchy of human needs. Maslow's hierarchy, with its focus on individual motivation, was shaped by his observations of the Blackfoot Indians and their communal approach to well-being. This contrast led Maslow to introduce the concept of self-transcendence, emphasizing a holistic interconnected view of humanity and societal well-being. His insights extended to the corporate world, advocating for a focus on factors beyond profit, such as employee satisfaction and community impact.
Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor. See our latest episodes at https://acquirersmultiple.com/podcast
We are live every Tuesday at 1.30pm E / 10.30am P.
About Jake
Jake's Twitter: https://twitter.com/farnamjake1
Jake's book: The Rebel Allocator https://amzn.to/2sgip3l
ABOUT THE PODCAST
Hi, I'm Tobias Carlisle. I launched The Acquirers Podcast to discuss the process of finding undervalued stocks, deep value investing, hedge funds, activism, buyouts, and special situations.
We uncover the tactics and strategies for finding good investments, managing risk, dealing with bad luck, and maximizing success.
SEE LATEST EPISODES
https://acquirersmultiple.com/podcast/
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FOLLOW TOBIAS
Website: https://acquirersmultiple.com/
Firm: https://acquirersfunds.com/
Twitter: https://twitter.com/Greenbackd
LinkedIn: https://www.linkedin.com/in/tobycarlisle
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ABOUT TOBIAS CARLISLE
Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®.
He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.
Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.
He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).
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