Value After Hours S06 E23: Matthew Sweeney on Laughing Water's boutique concentrated value strategy
Jun 5, 2024
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Matthew Sweeney from Laughing Water Capital discusses their boutique concentrated value strategy, challenges in value investing, importance of qualitative analysis, global value investing community, journey to value investing, fish behavior, fishbone diagram, fundamental investing complexities, bankruptcies in the restaurant industry.
Laughing Water Capital's concentrated value strategy focuses on cash flow generation and intelligent business projections.
Market participants must look beyond quantitative metrics to uncover undervalued opportunities in an evolving investing landscape.
Navigating macroeconomic factors like interest rate changes requires a patient focus on fundamental business value amidst market fluctuations.
Deep dives
Exploring Laughing Water Capital's Unique Investment Strategy
Laughing Water Capital, a small cap value specialist, implements a concentrated value strategy with around 15 stocks in its portfolio, focusing on a three to five-year view of businesses. Emphasizing the importance of cash flow generation and avoiding overpaying, the firm believes in the significance of intelligent business projections. By delving into the intricacies of business performance, Laughing Water Capital seeks to identify undervalued opportunities that may be overlooked by purely quantitative analyses.
Addressing the Evolution of Value Investing in a Quantitative Market
In the context of the evolving value investing landscape, concerns have emerged regarding the impact of quantitative approaches on traditional value strategies. With a significant portion of market participants relying on quantitative inputs for decision-making, the podcast discusses the implications of this trend. Highlighting the potential value in looking beyond quantitatively cheap metrics, the conversation delves into exploring businesses overlooked by purely numerical evaluations.
Analyzing Macro Trends and Market Volatility for Value Investors
The discussion shifts towards examining the influence of macroeconomic factors, such as fluctuating interest rates, on small cap businesses. Insight is shared on how investors navigate volatile market conditions, particularly regarding the impact of interest rate changes on business performance. The conversation emphasizes the need for a patient investment approach focused on fundamental business value amidst market fluctuations and short-term considerations.
Understanding Fishbone Diagrams
Fishbone diagrams, also known as Ishikawa diagrams, are a visual tool used to identify the root causes of a problem. In a fishbone diagram, the problem is depicted as the fish's head on the far right, with causes extending to the left as fish bones. These ribs represent the major causes, with sub-branches indicating more specific issues. By using fishbone diagrams in conjunction with methods like the five whys exercise, teams can pinpoint and address the root cause of problems in various industries.
Investing Strategy and Considerations
When it comes to investing, focusing on improving earnings power is emphasized as a key strategy for success. The importance of not overpaying and increasing earnings power for positive outcomes is highlighted. Investors facing challenges where well-performing, undervalued stocks may not reflect market success are advised to maintain patience. The discussion delves into considerations around holding onto stocks, understanding when to sell, and the impact of cash flow on investment decisions.
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.
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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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