Tobias Carlisle – Assets are Valuable, but Cash Flow Is King

Dec 17, 2019

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Tobias Carlisle is the founder of The Acquirer’s Multiple. He's also the founder of the Acquirers Funds. He is best known as the author of the number one new release in Amazon, Business and Finance, The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market.

He has also authored several Amazon best-sellers - Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, and Concentrated Investing: Strategies of the World's Greatest Concentrated Value Investors.

Tobias has extensive experience in investment management, business valuation of public companies, corporate governance, and corporate law. Before founding the forerunner to acquirers fund 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 UK, China, Australia, Singapore, Bermuda, Papa New Guinea, New Zealand, and Guam. He is a graduate of the University of Queensland in Australia with degrees in Law and Business.

Currently, Tobias is a portfolio manager of the Acquirers Fund, which is an ETF listed on the New York Stock Exchange.

“You can have a good thesis, but you have to be very careful about the cash flow.”

Tobias Carlisle

Worst investment ever

Started out investing in asset-heavy business

When the BP oil spill happened, many oil and gas companies got in a lot of trouble. One of which was the Seahawk Drilling. As soon as the drilling stops, they didn’t get a lot of cash flow but they were very asset-heavy.

So, when they were trading at around $0.10, Tobias took the offer to invest in those jackup rigs as he was promised that there has never been an opportunity like that. To capitalize and become one of the big drillers in the area through these undervalued assets was exactly what Tobias was looking for.

You can have a good thesis but be very careful about the cash flow

Tobias learned that when companies are losing money, that’s the time to buy, and when they are making a lot of money, it’s the best opportunity to sell. However, he missed the important factor and that was cash flow.

The issue with Seahawk drilling was they ran out of cash, so they kept on selling these undervalued jackup rigs. They ended up in bankruptcy because they were taken advantage of instead of the other way around. Tobias was down 80% or 90% on his investment.

Lessons learned

Look at the company in its totality

When you are buying, you think like an acquirer, think like a buyout firm and think like an activist. When you do that, you are not only buying the equity, the market capitalization, but you think about the debt and other debt-like security.

Valuation will help you beat the market

One of the hardest decisions is deciding whether to exit or add to a position when a stock goes down. A big part of becoming comfortable with the position is doing the valuation.

Andrew’s takeaways

Assets are valuable, but cash is king

There's a lot of people that are asset rich and cash poor. And the problem with that is that when you can't meet your bills, because the cash flow is not there, the consequences are massive.

When you buy something, you’re buying everything

It is important when you’re buying that you look at it from an acquirer’s perspective, which means you think about the debt, and you think about that preferred shares.

Actionable advice

The most important thing is not so much stock selection but portfolio management. This means, provided that you don't put too much into any given position; you can't lose everything. So, you only need to be sufficiently diversified.

No. 1 goal for the next 12 months

Tobias wants the ETF he runs in The Acquirers Fund to outperform the market.

Parting words

“I am very familiar with losers because I have them all the time; you shouldn't be worried about them. It's a good way to learn.”