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TIP669: Quietly Compounding at 20%+ Per Year w/ Derek Pilecki

Oct 18, 2024

Derek Pilecki, managing member and portfolio manager at Gator Capital Management, shares his journey in launching a financials-focused fund just before the Lehman Brothers collapse. He discusses achieving an astounding 21% annual return while navigating the 2008 crisis, including strategies like aggressive trading and focusing on undervalued stocks. Derek reveals why he's bullish on financial companies, highlights a remarkable 186% return in 2009, and discusses his top position in First Citizens Bancshares amidst current market conditions.

01:08:02

Episode guests

Derek Pilecki

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Episode notes

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Quick takeaways

Derek Pilecki launched Gator Capital Management just before the 2008 financial crisis, showcasing resilience and adaptability during tumultuous market conditions.

His remarkable 186% return in 2009 stemmed from strategic investments in undervalued financial stocks during their market rebound.

Derek identifies opportunities within the financial sector by focusing on mispriced stocks, emphasizing thorough analysis and a contrarian investment approach.

Deep dives

Derek Pilecki's Resilience in Crisis

Derek Pilecki launched Gator Capital Management just before the financial crisis of 2008, experiencing a turbulent beginning as his fund dropped 29% within the first three months. Facing daunting challenges, including the rapid collapse of Lehman Brothers, he focused on recovery by actively trading and pursuing short-term gains. His strategy paid off during an otherwise challenging October, where he managed to reverse his losses, finishing the year down only 15%. This experience not only proved to be a test of his resilience but also equipped him with crucial insights into risk management and capital preservation in volatile market conditions.

Intro

3min

Survival and Strategy in Crisis

12min

Exceptional Investment Strategies and Sponsorship Highlights

3min

Navigating Financial Turbulence: 2008-2009 Insights

17min

Banking on Stability: Strategic Acquisitions and Growth

10min

Banking Sector Insights Post-Crisis

18min

On today’s episode, Clay is joined by Derek Pilecki.

Derek is a managing member and portfolio manager at Gator Capital Management, which manages Financials sector long/short portfolios for private partnerships and mutual funds. Since its inception in July 2008, Gator Capital has compounded capital at 21.0% per annum versus 11.8% for the S&P 500 over the same time period.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

01:48 - Derek’s experience of launching a financials-focused fund 10 weeks before the collapse of Lehman Brothers.

12:13 - Derek’s advice to aspiring hedge fund managers.

14:30 - How Derek achieved a return of 186% in 2009.

14:30 - What led Derek to purchase General Growth Properties, whose stock increased by 20x in less than one year.

23:25 - Why Warren Buffett likes financial companies, especially the big banks.

27:38 - Why Derek puts his focus on financial companies.

33:36 - How banks can create a sustainable competitive advantage in their market.

36:08 - Why First Citizens Bancshares is Derek’s top position in his fund.

46:44 - An update on the current market conditions for banks.

50:21 - How a high inflation environment would impact banks.

52:53 - Why Derek is long Robinhood.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Derek’s fund: Gator Capital.
Derek’s letters.
Related Episode: Listen to TIP634: Value Investing Fundametals w/ John Huber, or watch the video.
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