Know When to Let Go

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Investment decisions should be based on three key scenarios: first, selling when a stock's price exceeds intrinsic value, indicating limited margin of safety; second, swapping investments when a new opportunity presents a more attractive risk-return profile, even if the current asset remains undervalued; and third, reevaluating positions when new information invalidates initial analysis, emphasizing the importance of overcoming emotional biases in decision-making. It's crucial to accept that recovering losses doesn't always necessitate reinvestment in the same asset.

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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