Anticipate Change in a Stagnant Market

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The potential deployment of two and a half million new connections highlights significant strain on an aging electricity grid, especially as it resists traditional energy sources like coal, natural gas, and nuclear. This shift towards relying predominantly on wind energy is likely to create bottlenecks that could hinder the growth and production capabilities of companies in this sector. The situation parallels the market dynamics of 1999, suggesting a risk of substantial drop in market values reminiscent of the NASDAQ decline post-March 2000. Investors should heed the insight from Sir John Templeton about the necessity of adapting strategies in response to market conditions, despite a low likelihood of many recognizing and acting upon this need.

On today’s episode, Kyle Grieve chats with Scott Barbee about how he managed to maintain a deep value-based strategy while it’s gone out of fashion, the three buckets of risk Scott uses to assess businesses, what a genetic contrarian is and why it can be a powerful advantage, why fossil fuels aren’t going anywhere anytime soon and why opportunities exist in that industry, how he navigated a 72% drawdown during the GFC, and a whole lot more!

Scott is the founder of the Aegis Value Fund. Which was created in 1998. Prior to Aegis, Scott worked as an analyst covering oilfield services at Simmons & Company. He also had a stint as a deep value advisor for Donald Smith & Company. He received his MBA from the Wharton School and the University of Pennsylvania. He also holds a B.S in Engineering and a B.A in Economics.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:41 - Some of the key lessons he learned from investing legends like Bill Ackman, Bob Robotti, Peter Cundill, and Walter Schloss

08:17 - How Scott has managed to maintain a value-based strategy when many investors have bailed to chase more expensive stocks

12:00 - Scott's three buckets of investing risk

16:10 - A breakdown of the concept of a "genetic contrarian."

17:30 - Why risk management is key to investing in businesses with high levels of uncertainty and how to take advantage of it

24:27 - Scott's views on energy and how fossil fuels are unlikely to disappear anytime soon

33:36 - The potential downsides Scott sees in super high-quality businesses

34:41 - Why lower-quality businesses with volatile earnings look very attractive right now due to a widespread de-leveraging

43:55 - How Scott dealt with a 72% drawdown during the GFC

And so much more!

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

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