Private Equity Returns in Public Markets - Dan Rasmussen on Invest Like the Best Podcast

Dan Rasmussen of Verdad Capital talked about private equity and private equity-like public market strategies on another podcast. This time he was on Patrick O’Shaughnessy's Invest Like the Best podcast. As always, a very thoughtful conversation, highly recommended.

"Dan identified several key drivers of private equity’s outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren.

We cover a ton of ground, discussing the prospective returns for equities, forecasting, and tons of investing strategies."

Podcast episode: Dan Rasmussen on Invest Like the Best Podcast - Private Equity Returns in Public Markets

Dan's recent article on the state of private equity: Private Equity: Overvalued and Overrated?

Rasmussen Private Equity - Valuation.jpg

Chuck Royce on WealthTrack

Legendary small-cap investor Chuck Royce appeared on Consuelo Mack's WealthTrack.

Stocks mentioned: Kirby (KEX), Clarkson (CKN LN), Lincoln Electric (LECO), and alternative asset managers (mentioned KKR, CG, and ARES).

Not a recommendation to buy or sell securities. Not a recommendation or solicitation for any fund or partnership. Please read our Disclaimer!

Dan Rasmussen: Private Equity: Overvalued and Overrated?

Dan Rasmussen of Verdad Capital published an article on Private Equity in American Affairs.

Full article: Private Equity: Overvalued and Overrated?

Dan also recently appeared on Meb Faber's podcast: Meb Faber: Episode #90: Dan Rasmussen


The Private Equity (buyout) space has become too crowded and competitive. Funds are overpaying and deals will likely underperform:

Rasmussen Private Equity - Valuation.jpg

Troubling for both Private Equity LPs and junk bond/leveraged loan investors:

Rasmussen Private Equity - Forecasting.jpg

Russell Clark of Horseman Capital Bearish Semiconductor Stocks

Russell Clark of Horseman Capital just shared two Market Views papers. His bearish view is in part based on the significant capex spend.

The other longer-term problem with the semiconductor industry is the significant increase in capital expenditure by current players and the significant investment being made by China in the semiconductor industry. Much of the Chinese semiconductor sector is government controlled or unlisted, but we can see from the sales of major semiconductor equipment manufacturers that there has been an industry wide increase in capital expenditure. 


Full pieces here:
Semi Bad
Korea, Semiconductors, And A Volatility Shock

China driving the supply of new capacity:

Horseman Semis Production 2-19-2018.jpg

James Montier: The Advent of a Cynical Bubble

James Montier of GMO just published a piece about what he calls the "cynical bubble".  Professional investors see the market as overvalued but have no choice but buy in. These "fully-invested bears" contribute to a "near rational" bubble (current good fundamentals extrapolated), something Montier calls a "greater fool market" in which the participants believe they can exit first when the market turns.

Full piece: The Advent of a Cynical Bubble

The "near rational" bubble:

Montier Feb 2018 - Near Rational Bubble.jpg


Professional investors think the market is overvalued:

Montier Feb 2018 - Valuation Sentiment.jpg

But they are also fully invested in the market:

Montier Feb 2018 - Positioning.jpg

Saber Capital 2017 Letter

Saber Capital's 2017 letter has been published. The letter discusses Apple (AAPL) and Tencent (TCEHY).


Full letter: Saber Capital 2017 Letter

There are no points for style in investing:

Saber Capital 2017 - No extra points.jpg

Lazard 2017 Activism Review

Lazard put together a comprehensive slide deck on activist hedge funds in 2017. The slide deck contains updates on the largest activist campaigns and a long list of all new campaigns started in 2017. It's notable how involved Elliott Management was in 2017.

Full slide deck: Lazard 2017 Activism Review


Europe is getting a lot more active:

Lazard Activism 2017 - Europe.jpg

The market share of passive index funds continues to increase:

Lazard Activism 2017 - Passive.jpg

BusinessWeek in 2004 on Eddie Lampert

Lampert BusinessWeek 2004.jpg

In 2004, Eddie Lampert had a stellar track record and took control of Kmart. 

Someone hosted the full article here:

BusinessWeek: The Next Warren Buffett?



Track record of successful investments:

Lampert Next Buffett - Track Record, Past Returns.jpg

A key difference in philosophy: the focus on business quality. Of course the original Berkshire Hathaway investment was a great example of buying a bad business at a cheap price.

Lampert Next Buffett - Difference.jpg
Lampert Next Buffett - Analyze.jpg

Lampert studied Warren Buffett:


At Goldman he was a rising star:

Lampert Next Buffett - Start at Goldman.jpg

RLT Capital 4Q 2017 Letter

Throwback to 1987: Wall Street Journal "Before the Fall - Crash of '87"

I've seen some people draw parallels to 1987: high valuations, rising rates, a new Fed chair, an euphoric rise in the market. Here is a little throwback from the Journal to the year 1987:


Before the Fall - Crash of '87

WSJ 12-11-87 Article - 1987.jpg

A new valuation paradigm: Private Equity and the rise of "private market value". EBITDA over earnings.

WSJ 12-11-87 Article - Euphoria.jpg

A change at the helm of the Fed.

WSJ 12-11-87 Article - Fed.jpg

Sentiment, right before the break:

WSJ 12-11-87 Article - Sentiment.jpg

Paul Tudor Jones Letter: Inflation Is About to Appear ‘With a Vengeance’

Per his latest letter, Paul Tudor Jones expects a return of inflation and perhaps a bear market caused by rising interest rates.

Bloomberg: Inflation Is About to Appear ‘With a Vengeance,’ Paul Tudor Jones Says

Paul Tudor Jones ““Cry ‘Havoc!’, and let slip the dogs of war”

Per Bloomberg:

“We are replaying an age-old storyline of financial bubbles that has been played many times before,” Jones, founder of Tudor Investment Corp., wrote in a Feb. 2 letter to clients. “This market’s current temperament feels so much like either Japan in 1989 or the U.S. in 1999. And the events that have transpired so far this January make me feel more convinced than ever of this repeating history.”

Jones, in the 10-page letter seen by Bloomberg, hinted at a parallel between Powell and former Bank of Japan Governor Yasushi Mieno, who took to the helm in December 1989 amid a boom driven by speculative investment in land and stocks. Within a week, he began raising interest rates.

Mieno “was ultimately blamed for pricking a bubble over which he had no control,” Jones said. “While the messenger always gets the blame, the real fault lies at the feet of the policymakers of the late 1980s who allowed systemic imbalances to build up in the Japanese stock and real estate markets.”

From ValueWalk, Paul Tudor Jones on his career:

Being first a commodities and then macro trader in the late 70s and early 80s was simply an incredible time to ply the craft. The opportunity set was so large as the marker was coming due for the previous misjudgments of errant central banking. Markets routinely doubled and then gave back the entire move within a space of a few years if not months! Bull markets turned into bear markets seemingly overnight in one asset class after another. My only regret was that one of the unintended consequences of coming of age in those volatile times was learning to never want to own anything for the long run. Classic investing had a negative sign associated with it. Bear markets were very rewarding since fear is a stronger emotion than hope and something can be torn down in fractions of the time it takes to build—whether that be a house, a reputation, or a bull market. Sometimes I almost wish I was a child of a different era as the ensuing 36-year bull market in equities was not something for which I was prepared or trained.




Laughing Water Capital 4Q 2017 Investor Letter

Laughing Water Capital's 4Q 2017 letter has been posted. The letter talks about several investments: ADES, GHL, TRC, and FC.

Full letter: Laughing Water Capital 4Q 2017 Investor Letter

More: Hedge Fund Fourth Quarter 2017 Investor Letters


Tejon Ranch, TRC:

Laughing Water 4Q17 TRC.jpg

Evermore Global Advisors 4Q 2017 Commentary

Evermore Global's Q4 letter talks about NLFSK.DK (a Danish spin-off), 6425 JP, KRA, ENZ, and FRO. 

The fund is now 70% invested in European special situations.

Full letter: Evermore Global Advisors 4Q 2017 Commentary

More Hedge Fund Fourth Quarter 2017 Investor Letters

On sentiment:

Evermore Global 4Q17 Sentiment.jpg

Evermore Global on industrial company NLFSK:

Evermore Global 4Q17 NLFSK DK.jpg

Activist Investing Annual Review 2018

Activist Insight and Schulte Roth& Zabel published their 2018 activist review. The report contains profiles of prominent activist and short activist funds.

Full report here:
Activist Investing Annual Review 2018


Elliott Management, the #1 activist fund in the report:

Activist Report 2017 - Elliott Management.jpg

Amber Capital - activist success in Southern Europe.

Maran Capital Management 4Q 2017 Letter

Maran Capital published its 4Q 2017 investor letter. The fund is focused on micro caps. In this letter, PM Dan Roller explains the napkin math for Scheid Vinehards (SVIN on the pink sheets) and teh cases for CLAR and ATTO.

Full letter here: Maran Capital Management 4Q 2017 Letter

The pitch for CLAR: Maran Capital CLAR pitch at MOI conference

More Hedge Fund Fourth Quarter 2017 Investor Letters

Not a recommendation to buy or sell securities. Not a recommendation or solicitation for any fund or partnership. Please read our Disclaimer!


MARAN 4Q17 Letter ATTO.jpg



Greenhaven Road Capital 4Q 2017 Investor Letter

Greenhaven Road's latest letter has been published. Scott Miller discusses his five largest holdings as well as three positions: YTRA, SVIN (pink sheets), and BXC.

Full letter here:

Greenhaven Road Capital 4Q 2017 Investor Letter


More Hedge Fund Fourth Quarter 2017 Investor Letters


Not a recommendation to buy or sell securities. Not a recommendation or solicitation for any fund or partnership. Please read our Disclaimer!

Platinum Asset Management Q4 2017 Letter

Australian asset manager Platinum Asset Management's Q4 2017 report is now available.

Full letter here:

Platinum Asset Management Q4 2017 Report

More Hedge Fund Fourth Quarter 2017 Investor Letters

Platinum's outlook:

Platinum AM 4Q2017 Outlook Asia.jpg


Platinum likes German industrial conglomerate Siemens:

Platinum AM 4Q2017 Siemens.jpg

Financial Engineers Killed the Art of Investing (Bienville Capital Profile)

Institutional Investor published a profile of Bienville Capital, a family office and opportunistic asset manager. Bienville invested in the Gulf Coast after the Deepwater Horizon spill, in Argentina, in Brazil, and, most recently, in Greece.

Full article here: Financial Engineers Killed the Art of Investing (Bienville Capital Profile)

Bienville's strategy:

Bienville II 2-4-2018 Strategy.jpg


The Gulf Coast fund:

Bienville II 2-4-2018 Gulf Coast.jpg

The opportunity in Greece:

Bienville II 2-4-2018 Greece.jpg

January Recap: Reading & Research

Some of my favorite reading of the past month:

Investor Letters

Artko Capital LP 4Q 2017 Partner Letter

Greenlight Capital 4Q 2017 Letter

Horizon Kinetics 4Q 2017 Letter
Horizon Kinetics 4Q 2017 Portfolio Update Deck
(Inflation protection, marine drilling & shipping, precious metals royalties, and, of course, Bitcoin; also AC, CVEO, TPL, IEP)

Bill Miller’s 4Q 2017 Market Letter
I believe that if rates rise in 2018, taking the 10-year treasury above 3%, that will propel stocks significantly higher, as money exits bond funds for only the second year in the past 10, and moves into stock funds as happened in 2013. Stocks that year were up 30%, mostly as result of that shift in fund flows.

Miller Value Opportunity Equity 4Q 2017 Letter

Third Avenue Small-Cap Value Fund 4Q 2017 Letter

Upslope Capital 4Q 2017 Update
(investors are "all-in", blockchain equities, CCK, BMS, SFER.IM, NXG.LN)

Wedgewood Q4 2017 - The Great Bull Market
(Market valuation and momentum charts, AAPL, CELG, KHC, PCLN, SLB/CLB, SCHW, V)


Learning from the best…

Michael Mauboussin: How Well Do You Compare?
Mauboussin on comparisons and analogies. Read the paragraphs on bias in comparable valuation analysis.

Russell Clark's Short Selling Strategy
Thoughts on short selling are rare, in this market especially. Enjoy.

Morgan Housel: The Thrill of Uncertainty
What keeps us glued to the money game?
“A high degree of uncertainty and unpredictability is markets’ price of admission, and it’s also the drug that keeps us hooked.”

AQR Interview with Ed Thorp
“I tell people that EMH is not true, but for you it probably is true. That is, most people don't have an edge. I think people should act as though it's true until they can demonstrate otherwise.”

Charlie Munger Conversation at University of Michigan
& Transcript of the Michigan Ross conversation


Graham & Doddsville Winter 2018
Leon Cooperman (ADT), David Poppe and John Harris of Ruane, Cunniff & Goldfarb (GOOG, CACC), C.T. Fitzpatrick of Vulcan Value (ORCL), and Seth Fischer of  Oasis Management (activism in Japan/China). Pitches: Staples 2025 bond, FLT, FDC


2018 outlook pieces:
Goldman Sachs Investment Management
KKR (I admit, I like their charts)
If you believe European rates are headed higher, take a look at ex. 107/p. 46.

Investment Outlook 2018 - The Best Papers (SavvyInvestor)

Jeremy Grantham on WealthTrack: Discussing the Melt-Up Possibility and Emerging Markets
Jeremy Grantham (GMO): Bracing Yourself for a Possible Near-Term Melt-Up


Kyle Bass on 2017 Capital Link Invest in Greece Forum
At minutes 4, 8, 25, 35, and 45 Kyle outlines his bullish thesis on Greece.

The case for buying Greek bank equities and why Greece is turning the corner

Retail: IHL: Debunking the Retail Apocalypse


Turnarounds: BCG: Lessons from Successful Turnarounds


Not a recommendation to buy or sell securities. Not a recommendation or solicitation for any fund or partnership. Obviously.