The Meb Faber Show - Better Investing

In episode 159, we welcome our guest, Ashby Monk. The episode kicks off with a discussion about the concept of saving planet earth and the important role that asset owner investors, the largest institutions in the world such as sovereign wealth funds that total approximately $100 trillion, now have.Meb then asks Ashby to get into the models behind large institutional investors. Ashby discusses some history, and boils it down to what he thinks are the three functions that drive success: people, process, and information.The conversation then gets into Ashby’s thoughts about insourcing vs. outsourcing. Ashby explains that both paths are viable, and the importance of starting with a rigorous understanding of what it costs to run investments internally vs. externally. Ashby notes that he thinks the institutions pursuing the highest quality inputs in terms of people, process, and information should receive recognition, independent of the model they’re running.Meb asks about trends in the industry. On the good side, Ashby discusses the push on fees and costs, and the positive effect it has on institutional investors as a catalyst for innovation. Ashby then talks about how being green and good stewards of the environment has delivered outperformance.The conversation then shifts into Long Term Stock Exchange (LTSE) and its mission.As the chat winds down, Meb and Ashby discuss the app he co-founded, Long Game, and the mission to engage people in their financial decisions in an entirely different way.All this and more, including what Ashby is particularly excited about and his most memorable investment in episode 159. Learn more about your ad choices. Visit megaphone.fm/adchoices

 In episode 158, we welcome back our gest from episode #77, founder of the Acquirers Funds, Tobias Carlisle. Toby begins by providing some detail about his new fund, The Acquirers Fund, a long/short deep value U.S. equity fund. He then spends some time talking about the short side of the portfolio, getting into the thoughtful approach he takes in considering positions including sizing, valuation, balance sheet factors, and stock price factors. He explains that the broad opportunity set looks good for short positions right now.Meb and Toby shift to talking about the long period of underperformance for value investing. Toby hits on the fact that French/Fama data shows value has had its worst 10 year period ever based on the price/book ratio, and notes value has underperformed for an extended period based on other valuation metrics as well.Meb then asks Toby about his process. Toby gets into some detail about his valuation process, and why he favors it vs. other valuation approaches.As the conversation winds down, Toby chats about his own podcast, The Acquirers Podcast, some interesting guests he’s hosted recently, and what’s on the horizon for him and Acquirers Funds.All this and more in episode 158. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 157, we welcome back our guest from episode 83, Randy Swan. Randy and Meb kick off the conversation by getting into Randy’s new book, and what motivated him to write. Randy talks about having an opportunity to go back and write about how and why Swan operates the Defined Risk Strategy.In getting into the investing framework outlined in the book, Randy explains why he thinks investors face a “Dual dilemma,” forced to stick with conservative investments, or step out into riskier assets and sacrifice protection from their conservative investments. He goes on to state his thoughts on the evolution of democracy and the role debt has played in decision making in government and central banking.He then goes deeper into this dilemma by explaining the rationale behind his thinking about this problem, and his expectations for low returns in both equity and fixed income markets going forward.Meb asks Randy to discuss why it’s so important to focus on avoiding large losses and investor psychology. Randy follows up with thoughts on portfolio construction concepts he feels are important to add to the current thinking to seek return streams that are more in line with investor expectations.The conversation then shifts into the genesis behind Swan’s flagship, Defined Risk Strategy, the idea that correlation of returns is unreliable, especially in times of crisis, and the difficulty in defining risk in an investment portfolio. He then walks through the portfolio management process and covers some examples of the mechanics during bear markets.As the conversation begins to wind down, Meb asks in what periods this strategy is expected to shine vs. struggle. Randy walks through the desirable market conditions for Swan’s strategies.All this and more in episode 157. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 156 we welcome back our guest from episode #115, Steve Glickman. To get listeners up to speed, Steve starts with an overview of what Opportunity Zones are, some specifics about the design of the program, and some concepts behind how investors can actually put money to work in Opportunity Zones.Meb asks about additional insights since updated rules have been announced. Steve discusses clarity on items such as investing timelines on capital gains, and the length of time funds have to invest capital.When Meb asks about what kind of investments are available, Steve goes on to clarify that just about any asset class is available, but commercial real estate funds, energy, and infrastructure are areas he’s seeing utilized, among others.The conversation then gets deeper into what needs to happen with investments to qualify to meet the regulations, and what happens if companies no longer qualify under the rules. For real estate specifically, Steve describes the need for projects to fall under one of two categories, either 1) purchased for original use, or 2) must undergo substantial improvement. He then describes some of the rules surrounding other businesses, such as startups and existing businesses. Meb follows up with questions on qualifications of some specific examples from public stocks to REITs.On the back of details about investments, the pair get into the fund landscape, with Steve mentioning how much of the fund market will consist of professional money managers running funds in their respective industries.Steve then covers what he’s seen so far from the very early days of the program. He discusses much of what he’s seeing is in commercial real estate, but he’s seeing creative models of asset classes many people haven’t thought of yet. He then shares some thoughts about how some of the early rules may be revisited going forward, and some of the potential issues that could come up with the program.As the conversation winds down, Steve discusses his firm, and the things he’s working on.All this and more in episode 156. Learn more about your ad choices. Visit megaphone.fm/adchoices

For this special Friday episode, we welcome NYU professor and valuation expert, Aswath Damodaran. As it is Uber IPO day, Meb and Professor Damodaran start with a discussion about Uber and ride sharing valuations.Next, the two get into Professor Damodaran’s work and his framework for thinking about valuation. He covers the craft of valuation, and how his framework evolves over time. Professor Damodaran then shares details on what he thinks about Amazon and Apple, how he thinks about valuation in the context of each company, what he’s learned, and how his process has changed over time.Meb then asks Professor Damodaran about his thoughts on dividends and buybacks. Professor Damodaran starts with the corporate finance side of the discussion by describing buybacks and their role in the cash return to shareholders, the impacts buybacks have on corporations and investors, and the psychology behind the thinking about buybacks.The conversation then shifts to a chat about Professor Damodaran’s work on valuations, and his current take on global valuations and equity risk premiums. He gets into the equity risk premium in the U.S. during 2008 and 2009 and the information that can be gleaned from studying the history of equity risk premiums.As the conversation winds down, Meb asks professor Damodaran to talk about industries he feels are ripe for disruption. Professor Damodaran responds with some interesting insights into education, publishing, and banking.All this and more in episode 155. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 154 we welcome Frank Curzio.Frank begins with his origin story, learning to conduct financial research from his dad, working for Jim Cramer and the incredible industry and company access he had, and eventually launching Curzio Research.Meb jumps right into markets by asking Frank what opportunities he’s seeing right now. Frank mentions he’s not seeing a lot of opportunity but likes seeing the separation in company reporting right now, some stocks reporting poorly, some reporting well. Overall, with a decent economy, not much crazy bullishness, and with valuations where they are, he thinks a downturn of 10-15% might create a lot of opportunities.Frank then gets into tech. He discusses the idea that the leaders can continue to grind higher, and his thesis on why IBM’s Red Hat deal will be a gamechanger. He transitions into biotech and discusses his thoughts as well as some of the difficulties of investing successfully in the industry.Next, the conversation transitions into energy. Frank talks about natural resources, and some of the “on the ground” research he’s done, and the difference it makes in his understanding of the investments he’s making, as well as some specifics on energy, mining, and resources.The two then shift to talk about tokenization, and how Frank is tapping this innovative idea to raise capital for Curzio Research.All this and more in episode 154. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 153 we welcome Kim Shannon. Kim begins with a discussion of human nature and her value investing framework. She covers the importance of using discipline, the characteristics she and her team look for, the question of value’s efficacy, and the opportunity going forward for value to show its might.Meb then asks where she’s seeing value right now. Kim talks about Canada and it’s valuation relative to other markets, and that a number of investors are interested in the concept of concentrated investment portfolios. She then gets into potential overvaluation in pockets of the Canadian housing market.The conversation then shifts with Meb asking about Kim’s event in Omaha this year around the 2019 Berkshire Hathaway meeting, the Variant Perspectives Value Investing Conference, to raise awareness about the gender bias gap in the investment sector.All this and more in episode 153. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 152 we welcome Kevin Smith and Tavi Costa of Crescat Capital. Kevin kicks off the conversation with an overview of Crescat’s approach, the long-only strategy, long/short equity hedge fund, and Global Macro Fund.Tavi then gets into high equity market valuations, their macro model that has timed well in backtests with previous market peaks and troughs in the tech and housing bubbles, 15 countries with 30-year bond yields below the Fed Funds rate, and demand for U.S. Treasuries and the U.S. dollar. Kevin follows up with some comments on implementation and expressing these views in their portfolio, and why they continue to trust their process and remain net-short equities.Next, Tavi gets into Crescat’s thesis on China and the potential credit bubble, and the vulnerable Chinese currency as a result.Meb then asks about Crescat’s bullish thesis on precious metals. Kevin discusses that trade’s role in the portfolio, and its place as a theme in the global macro fund, which includes, a short equity theme, long precious metals theme, and a short Chinese Yuan theme.Meb asks the pair to get into some of their other themes that stand out as opportunities. Kevin links the Canadian housing bubble and Australian debt crisis themes to China and Chinese capital outflows. He also covers some longs as part of their cybersecurity theme such as Palo Alto Networks.Meb shifts by asking about what investors should takeaway from Crescat’s thinking, Kevin adds that people should think about more tactical asset allocation, become increasingly defensive, and consider some alternatives. Tavi adds that investors may want to consider cash, precious metals, and perhaps some Treasuries. As the conversation winds down, Meb asks about anything else they consider that isn’t covered widely in the media or by investment managers. Kevin discusses consumer confidence, and Tavi adds twin deficits and an alternative view of beta.All this and more in episode 152.  Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 151 we welcome Divya Narendra, CEO & Co-Founder of SumZero. Divya begins by talking about the beginnings of SumZero and finding its initial traction by Divya calling friends from other funds and politely asking them to submit research. From there, he asked those friends to provide any contacts they could, and the platform grew from there, including a cap-intro side of the business to expose analysts, PMs, and fund managers to potential investors.Divya then discusses addressing the shortcomings of sell side research with SumZero, in particular, the lack of vested interest and high conviction from the sell-side, and lack of coverage in unknown securities. All contributors are vetted, and their ideas go through Divya.Meb asks about how people use the site for generating ideas, which brings up some various processes like screens from people with a fundamental approach, to quants who are looking at items like who is getting the most views and best ratings. Divya even gets into some of the best ideas contests he has run, and even submitted a contest winner’s idea to Warren Buffett.The conversation then shifts to what Divya sees in the future for SumZero, from scaling cap-intro efforts, to a data feed that can serve quantitatively driven analysts, but ultimately looks to expand the scope of the SumZero community.Catch all this and more in episode 151, including Divya’s thoughts about the future of fundamental stock picking, robo advisors and the private wealth model, and more. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 150 we welcome Bill Smead. Bill begins with how he came to be a value investor, describing himself as someone who came from a family of educated gamblers, and as a boy, going to greyhound races, learning to put probabilities in his favor, and even developing a criteria system for selecting greyhounds.Next, Bill talks about his beginnings in the investment business, starting out in an era of high interest rates, and reading about Buffett, Lynch, and some of investing’s great minds. He describes his 8 criteria for selecting investments: 1) Does it meet an economic need 2) Does it have a long history of profitability 3) Does it have a wide moat 4) Does it generate high and consistent cash flow 5) Can the company be purchased at a discount 6) Business must be shareholder friendly 7) The company must have a strong balance sheet 8) The company must have strong insider ownership.Meb then asks Bill to elaborate on the investment landscape, and what he’s seeing in a specific pocket of the market. Bill discusses the parabolic move in e-commerce companies, and issues he sees in the strategies and valuations of companies like Amazon.As the conversation winds down, Bill lays out the thesis that the Millennials are in position to drive the economy in the future.All this and more in episode 150, including Bill’s most memorable investment. Learn more about your ad choices. Visit megaphone.fm/adchoices