YouSaid · the spoken record

Brett Barakett

lines on the record: 94
first: 2024-05-20
most recent: 2024-05-20
sittings or episodes: 1
sources: podcast

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“So I would repeat the same thing with the life partner one. The one I'm going to say is way too easy. It's a marathon, not a sprint. And that applies in so many aspects. So when I was younger, I was always in a rush. The world did not move fast enough. And that's okay. You know, I'm happy with how things turned out. But you got to have balance and just don't do things that are going to damage you. And I would say about your life, your personal life, about your physical body, and about investing. You could take that one big bet. I can put all chips on red. Even I had great information that I'm going to be right, but you never know. We got to invest in Apple in January of 04. It was our largest position for years. In October of 2008, the stock fell fifty percent and stayed there for six months. If you had had all your money in Apple, I don't know that you could have survived that. There was a great article written years ago about Amazon that if you had bought in day one, you would have made a ton of money.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“You pick poorly, man. That ain't fun. You pick well. And you and I probably have a lot of friends that we can see it. Did you pick well or did you get lucky? I know some people who met their wives when they were 19, 20 years old and they're still together and best decision they ever made. Were they smart in doing that? I don't know, but they got it right.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“All the time they challenge me, they get up in my grill. I'm better because of them. If they weren't here, I wouldn't be as good, and I hope, I hope they would say the same thing about me. The other bucket, which we've talked about, is a string of guys that have had great success in the investment business who also have to be good friends. The list is so long, and I've just been so fortunate to, you know, I've had these people in my life. That's why I would say.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it would be impossible to say just two. So I'll give you sort of hierarchy. Absolutely number one is my wife Megan. I am very fortunate that I met Megan. I look back. We may have talked about the movie Slumdog Millionaire. Certain things just happen in life and you're like, okay, why did that happen? And it's a whole other long story about how I met Megan and how she came into my life and my children's life. But I just am very fortunate. Number two is both my brothers, Peter and Tim. I mean, I had a gift that they were my siblings as opposed to somebody else. They're both just very smart, industrious, but they just have good judgment. They know how to put the puck in the net. And I was lucky. And then number three is Charlie Ellis. I can't even begin to explain how lucky I was. We could have a whole separate podcast just raving about Charlie. Number four, my partners that work here. I learned from them.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are certain things that I'm like, that's just not relevant. We'll interview somebody and what do you think of that? And at some point they'll say, and the chart looks really good, or they'll say the peg ratio is X. And I'm like, peg ratio. Really? But that's okay. It doesn't drive me nuts, but I'm just like, yeah, that's not that relevant to me. Or when someone says, well, we think they're going to beat the quarter by a penny.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“I love everybody. And at this point, people do what they do, and I just smile. Somebody drives too slow, they cut me off at this stage of my life. I just smile. They're like, okay, the guy's in a rush. Somebody gives me a finger for cutting me off. I'm like, okay, he doesn't know me. I think at this stage of my life, I look back at my own life and my pet peeve is probably my own thing, which is in my youth, I probably wasted too much time. Not that I was in a rush, but wasting time on things that didn't matter time and energy. If I had to pick one, it would probably be that. It's just, I don't want to spend time on things that don't matter.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Did a bunch of research, my brother Tim, was one of the first people to mention it to me. And then I spent a lot of time studying a guy named Caldwell Esselston, a Yale guy, doctor, Olympical medalist in rowing. He was the head of heart surgery at Cleveland Clinic. So there's been a bunch of stuff out there that he has said. And then there's other people who followed Dr. Michael Greger and others. For me, that's worked. That's how I got there. It was a health choice.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Other than Look, I'm vegan. I'm like 99% vegan. I might have an egg once in a while or a piece of fish once in a while. I just feel better that way. It's not for everybody. It works for me.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like spending time with my wife Megan. I like spending time with my kids. I like solving investment puzzles. And I like playing in the odd game of hockey”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no, I'm here to help you. What do you need? I'm like, all right, what do you want? You want me to write a check to something? I don't understand. I'm just like, no, no, no, no. I'm here to help you. I'm like, look, I don't need to pay you for that. She goes, no, no, I'm paid for by the government. I'm here to help you build your business. She says, if you need office space, you call me. If you need employees, you call me. If you need access to the universities, you call me. Whatever you need, I'm here for you. Here's my mobile number. Oh, and the mayor of West Palm Beach wants to meet you tomorrow for a cup of coffee. I mean, it was astounding. I am so impressed by how things run down here. Look, not everything's perfect. Sometimes the bridges go up. It gets hot in the summer. Florida has been significant upside surprise.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not just about investing, it's about what's going on down here. It's been a massive upside surprise. Why, one, the dynamism that's down here. So in the financial services industry, I'm amazed at how many people that are in the industry are down here and you feed off each other. And within that, I read an interesting statistic a few weeks ago that made sense to me, but I didn't think of it this way. Two-thirds of the people living in Florida are from somewhere else. The Floridians, in air quotes, are in the minority. Hence the reason there's so much dynamism here. Number two is this place just works well. The airports, the trains, the highways, things definitely work down here. And my last one, I remember when I first started opening down here, I get a call. Hi, I'm Kelly Smallridge. I work at the Palm Beach Business Development Council. I'm like, okay, how can I help you?”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“It wasn't that they couldn't continue on the path. They just chose that there were other things that were interesting to them. I think, though, the answer to the question you're asking is around balance. And I think that this applies not just to our industry, but to life. And too many people overdo things. You just got to stay balanced and you got to decide what's important to you. And that's how I choose to live my life.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everybody gets to live their life. This is what I enjoy doing. Not a Maslow's hierarchy of needs, but like what makes me happy? Well, number one, spending time with my wife Megan makes me really happy. Spending time with my children makes me really happy, whether it's coaching their hockey teams or something like that or taking my son to the park goes down the slide. That brings me joy. So spending time with my family is the thing I enjoy most. And then the next level would be looking at puzzles, like investments. I just enjoy that. For somebody else, they'd be like, God, what a boring guy. Well, that's your choice. Some people like going to new restaurants and they like travel in the world to try new things and they like going to rock concerts. That's your choice. So live your best life as you choose. This is how I choose.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was at the Harvard Business School that him and two other guys funded. It's called the LME, the LeBaron MacArthur Ellis Fellowship. It was the largest pool of capital to people who needed money to go to school. But over time, I think over the last 30 or 40 years, it's been the number one contributor to helping people pay for the school. And so I met Charlie that way. And at first, you know, I met him to thank him for the money. And then, I don't know, a year or two later, I said, hey, I reached out to him, hey, use some advice. I asked him a few questions and he was really nice about it and gave me really good advice. Called him again another year or two later and they said, oh, why don't we meet for breakfast? Why don't we meet for a coffee? Bit by bit. I mean, he's just such an incredible human being. I've learned so much from Charlie about not just investing, but about life and how to conduct yourself, how to be a person of integrity, and how to look out for other people. Phenomenal.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Different ways in today's world of learning, but one of the oldest ways of learning is just talking to your peers. Michael Porter has this statement that he made years ago where he says people ask the question, why is it that most of the worlds are making up high-end leather handbags come from these three towns in the French-Italian Alps? Well, he calls it circles of excellence. People talk. Well, how did you do that? Why that? And so I've just been very fortunate. I know a lot of friends who are just phenomenal investors. And so I've learned from them. But I've also been lucky that my mentor, I met this guy, Charlie Ellis, who I know you know because he's been on your podcast more than once. And from your time at Yale Investment Office, Charlie is just unbelievable. I can't be more like Charlie because I'm not smart enough. But if I can be more like Charlie in life, that would be my goal. He's just so thoughtful, so smart, so articulate, and just a nice guy. And I was fortunate to meet him because I received this fellowship.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“From people who look like us start as long, short funds, this kind of stuff. I think you'll see a lot more. I don't know why you wouldn't. Because for your own money, it makes too much sense.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it seems to be a fairly new thing, even though ETFs have been around for a long time. I think what happened was Vanguard was the brains behind creating this structure and not an ETF expert. But my understanding is the government sued Vanguard saying, hey, wait a minute, you're doing something wrong here. And Vanguard won the case, I think, three or four years ago. In 2023, $600 billion, big number, flowed out of mutual funds and almost $600 billions flowed into ETFs. But there's not a lot of active ETFs. And so, yeah, now when I talk to people about it who are in the industry, they kind of squint at me. First, they're glassy eyed because they think I'm selling them something. I'm like, look, I don't care whether you ever buy it or not. But number two is I'll never know. So like it doesn't matter. When they finally focus in on it, really smart people, they go, huh, that's really smart. And I'm like, okay, great. And so I think there is a lot more conversation around active ETFs.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“No discount to NAV. So unlike a closed end fund where you go buy that closed end fund, now you want to sell it. You got to find someone who wants to buy it. ETFs don't work that way. There's this creation redemption structure where if we own these 40 stocks and you buy a share of TOGA, you're going to get prorata, these pieces of 40 stocks. And you can hold that for a year, 10 years, 50 years. And then when you go sell it, then they decompose it and hand you back your money. So it's brilliant. So we thought it was brilliant for my personal money and also brilliant for the underlying investor. It's different than our other strategies, but we thought it was a brilliant product. And so that's why we launched it.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“ETFs trade 930 to 4 every day. Perfectly transparent. You got to post all the positions at night. Ease of use, but you're also not waiting around for a K1. It's anonymous. A lot of personal friends and stuff. People in the industry have money in our strategies. But here, I won't know if they invest, but even better, I won't know when they redeem, right? So it makes it really good. And the last part, and this is really important.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Your PA. Why? Let's say you bought Microsoft in your PA and over time it doubled. Well, you may want to sell it. Well, now you sell it. You owe capital gains tax. And I should have known this. I actually didn't fully understand it. The brilliance of the ETF structure led by Vanguard is create a structure that we can own Microsoft, we don't, but we can own Microsoft and Toga. It can double. We could sell Microsoft. And the owners of Toga won't pay the capital gains tax until they sell their share of Toga. That's brilliant. So I was like, huh, well, that's better than my PA. I want to put my money in Toga. And so that's how the idea started. But then, as I thought more about it, I was like, but why would anyone else be interested in it? Well, other people, I'm sure, like the tax efficiency of the ETF structure. But then, you know, I was thinking, well, it's perfectly liquid. So when you invest with a manager, you've got to fill out a sub doc and got to give 30 or 60 days notice when you want your money back. Here, it trades like a...”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“My North Star, since I started the business, has always been What do I want to do with my money? So the day I started on july first, two thousand one is what I want to do with my money. What I've learned across all these decades is the markets are generally efficient. And every now and then something happens either in the markets or on a stock specific basis and there's a dislocation. And at that moment the thing that's guided me is what do I want to do with my money? So along the way, I've always had money in our different products. But to some degree, there's tax friction. Somebody subscribes, somebody redeems, a PM trims 50 basis points, another PM adds 50 basis points. So it's like a little friction. And you think about that compared to your personal account. A lot of people have PAs and they buy stocks there. And so we developed TOGA because what I realized, and with the help of one of my partners, is that the ETF structure is massively tax efficient. So it's even better.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the business, you started as a hedge fund, had this long only strategy. I know recently you've launched this toga an active ETF, and would love to hear about that product Why did you go into this new vehicle for you guys?”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're doing it the way that we enjoy. I mean, it depends what your goal is in life. But I think that we've created a culture. By culture, I don't mean like, oh, we're all like buddies and we sing songs on Tuesday nights. I mean like a culture where we don't lie, cheat or steal. We think we do really good work, where we treat other people with respect. Another lesson I learned from Procter& Gamble, you're going to get judged here on two things. One, on your commercial performance and two, how you develop people. You cannot get promoted here unless you can show that you're developing people because we want to develop talent internally and that's worked out really well for us over time. And I think that people want to work in an organization like that ultimately there's always somebody who can offer you more money. Anybody has a job anywhere in America. Somebody can come along and offer you more than you're making now. But will you be happier? We want to make sure that once you find a place that you're happy”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“In addition to that alignment with compensation, what have you done in managing the scheme of talent so that the senior people have stayed for so long? Because you're in the situation where you've had a long run, but you're not necessarily the biggest fun with the most economics to pay out.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“will do better economically over time if we don't have people having a click on the switch because somebody exits a firm and they're getting X percent of the economics and then there's a bleed out for a number of years or you know three or five years where they get some portion of those economics you have enough of that and then the people who are staying the ones who are the performers are like okay well why should I hang around I'm not going to get paid for three years so we've eliminated that”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“I looked at other models, I looked at how other funds managed it, and everybody's got their way. That works for them. But I just kept thinking for me, I wanted everyone focused on the main outcome, which is the client, the investor who entrusts us with their money, the outcome for that entity should be our number one focus. And so how do you align incentives around that? And two, that's just a culture I'd rather work in. And then three is I observe that a lot of funds had this thing where they'd have a partnership agreement and so-and-so would have this type of economics, a percentage of the profitability or something like that. But I always like, but what if that person quits or what if they get fired? Or better yet, what if they don't quit or don't get fired, but they come in late, they leave early, they take a long lunch. Where's the incentive mechanism on that? And I realized explaining internally and debating it at length with people is that the people who perform, the people who are truly driven.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the years with the senior team that's been with you for a long time for most of this run, where did you come to in terms of the balance of the compensation that's based on how the firm's doing as a whole and the compensation based on the relative performance of the individual?”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because of how we compensate people, their incentive so that if you have a better idea than I do, you can have more capital. As I said earlier, our best ideas should be obvious and compelling to all. So if someone else at the table is like, yeah, you know, my stuff's good, but it's not great. But man, your stuff is really good. Everybody at the firm gets paid first on how we perform for our clients. And secondly, on the relative contribution to that performance. But the first part is so important because everybody's aligned to have the best outcome for the firm or for the clients first. Without that, you end up a mercenary type organization where people are trying to box out, oh no, I'm covering that stock or that's my name or they don't want to share information. We don't want that. And that's not a culture I would want to work in anyway.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, you got the entire world to look, that changes your lens, it changes what you're looking for in a really healthy way.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we think about industry sectors because there is expertise. We don't have a healthcare area. You would imagine if you want to look at healthcare companies knowing the healthcare space would be pretty good. Obviously knowing the retail space. We have very broad brushes. So retail consumer, we have what I call TMTI, Tech Media Telecom Internet. We have like software, industrials, these types of things. And I think it's really important to have really broad spaces. So for example, I suppose at a very large investment organization, you would get a job there, Ted, and they'd say, Ted, you're the US restaurant analyst. Well, guess what? You're going to find five restaurants that you think are great investments. This is the way things go. Here, we don't want you to do that. We want to say, Ted, you're the global consumer and retail analyst. As I said earlier, we own 25, maybe 30 stocks, and our holding period is usually two to three years on a name. And so we need you to come up with one, maybe two great ideas each year.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's people out there, they lever their money, they do certain things, so we need to make sure that we have a client base who deeply understands what we do and is deeply aligned with it. They'll understand that we will have drawdowns, that things will bounce around. We might not generate alpha for a period of time years, but over time we usually find our way there. We've never had gates on our strategies. We don't need them because we're super liquid. For the right partner, they like that idea. And then last and finally is what I call risk of ourselves. We run a business. We have a management company. We have employees. And so we need to make sure just like we look at our investments, what cash do we hold on our balance sheet? How long can we pay the bills in a worst case scenario? What kind of leases do we sign? What kind of lease terms, counterparty terms, employee contracts? All these things are important, but that's a level of risk. So what we call the five levels of risk, that's how we think about risk.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Guy named Ken Grant, who used to be the head of RISC at SAC, used to be the head of risk at Tudor Corp. And he's an advisor to us. He sits in on all our risk meetings. And so that's where you look at the risk factors. Volvar, beta, IVAR, all these things. We think we have an excellent risk engine of how you're putting these pieces together, making sure there's correlation stuff. The other three are ones that people don't talk enough about. Number three is counterparty risk. We took our money away from Lehman Brothers in the summer of 2007. We measure the risk of our counterparties. Very simple. We look at the CDS of anybody who holds our clients' money. If the CDS goes above a certain level, we pull our money. There's no conversation. We do not get paid to take that risk. We need counterparties. It's part of our business, but I don't get paid to take counterparty risk. And so we will not take counterparty risk. We need to manage the operational risks of our business. Number four is what I call investor risk, who you're taking on is your client.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“With their own money and buy stock. I don't know. When we first got involved in a company called Sketchers, Beta was, I think, 1.3 or 1.4. But if you'd ignored the vault of the stock, you said, huh, 20, 25% of the market cap is net cash on the balance sheet. That's pretty good. Huh? 2025% of the stock is owned by insiders, by management. That's pretty good. Just those simple things. You'd say, that's not that risky. I feel pretty good about owning that. Maybe the stock might bounce around a lot, but point to point. It becomes this thing. I don't know a lot of people who measure the sharp ratio of their personal account. So level one is the fundamental risk. Level two is now you put together a bunch of individual stocks. That is important to look at the quantitative risk metrics. And I think that we have incredibly advanced risk engine that we developed over time, started in 06, but it really accelerated. We had a big drawdown in the fall of 2008. And so we developed this risk engine. We had a risk team. We ended up retaining a...”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“When we talk about managing risk, I want to make sure we're clear that we want to manage the risk of real capital loss, that we're going to lose real money as opposed to just managing the volatility. So the way I look at risk is it falls into five buckets. The first level is what I call the fundamental risk of the stock we're buying. So that does not include necessarily the beta of the stock. We'll look at the balance sheet. We'll look at insider ownership. We'll look at a bunch of factors that tells us how fundamentally risky is this. So for example, I think Cred Suisse before it went bankrupt had a beta of one. And I think Silicon Valley Bank had a beta of 1.2. So not that risky. They both went to zero. If you looked at the fundamental risk of credit suise, if you didn't look at the beta and you just looked at the fundamental risk, you'd be like, huh, a lot of leverage. That's a pretty risky business. Maybe Insiders owned a bit of stock. I don't know, but it was probably all options. Did anyone actually go?”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“manager seats, they're managing positions for the entire portfolio. These are not carve outs. It's, hey, you're going to take a 2% to 4% position for the firm and you're going to decide when to do that and you're going to put the order in and then you're going to manage it. What we've always done is another pro-thing is you can't evaluate what you don't measure, therefore measure everything. And how we measure it is it was your idea you were the trader. You were the one who decided us to buy it. It's one thing that you were the analyst on it, but someone else in the organization said, oh yeah, that's a great idea. We're going to buy it because you didn't want to buy it. You get partial credit for that. But where we put a lot of value is you did great analytical work and you executed the trade and ultimately exited the trade. I hate to say trade because these are investments, but you decide at some point to get out of it or not. We owned one stock. Great company in Germany called Aventum. They're a ticketing company. So think Ticketmaster Run in Europe.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is so critical to How we've had success, but also how we've had success retaining talent is if you have somebody who you've developed over time, ultimately they want to make the decision. What I found is people who are talented don't want to keep going to the, quote, head person and saying, hey, I think we should buy. The person who spent 300 hours on it is saying, hey, this is really compelling. And the head guy's like, nah, I don't feel like buying that day. The person's eventually going to get frustrated and leave. I mentioned earlier Mark Bader, he was a Navy SEAL, he's a close friend, and he's one of my heroes. He had this thing, always go with local intel. Like, yes, always go with the person who's done all the work. Now you can disagree because you feel they miss something in the research or you want them to spend more time. So I have the ability to say, nah, can we hold off on that? Can we have another conversation about? But I see everything we do. I'm a large investor in the fund. And so I want to know what we're doing with my money. But the people who are in the portfolio.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, very simple. You sell when it hits your price target and nothing else has changed. It feels good when it goes up. I think it's going to go higher. Really? Your opinion or is that fact-based decision? You got to be fact-based. You got to stay rigid. So you said the stock was at 20 and you thought it was going to 40. And now it's at 40 and nothing in your model has changed. We're selling the stock 100%. The other reason you saw a stock is something in your thesis changed. You said you thought it was going from 20 to 40 and here are the inputs to the model were quantitative people. One of those inputs just changed because something changed. Sell the stock. And the best part is we don't need to abate it. Just sell it. And if tomorrow you want to buy back the entire position because you rethought about it, fine. We're highly liquid. And what we do, everything's infinitely liquid. We're not in privates.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Even really advertising or reporting it as a line item. We were like, oh my God, people are missing. Amazon's not going to be doing billions in advertising revenue. They're going to be doing tens of billions and ultimately over $100 billion a year. In ad revenue, why? This is why I learned at Procter& Gamble. Targeted marketing is the most valuable information. Back in the day when we were kids, Ted, Nielsen would say, oh, the CITES household, what are they watching on TV? What magazines are they getting at home? Okay, now we can figure out we can create sort of a scatter plot of what they're going to buy. When you know exactly what someone's buying, you're Amazon. You have all the information. We know you buy Colgate Ted. Well, now that information to an advertiser is infinitely more valuable than Scattershot because now they can target you. And as we all now know, the joke is, oh, my phone's listening to me because I talked about buying a new pair of hokas and, you know, next thing you know, I go on Instagram and there's an ad for hoka.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Amazon would route the order to Colgate, Colgate would ship you the toothpaste. We don't have any inventory. We don't have inventory risk, no shrinkage, no carrying cost. And then Colgate would pay us an exaggerated. I don't think it was Colgate, but other suppliers, and they would just pay you the 15% fee. Well, that's an infinite ROIC. They're just using our website. The other one that they had also done was Fulfill by Amazon. So meaning you would order the toothpaste and the toothpaste company kept their toothpaste in Amazon's warehouse and we would just send them the tube of toothpaste. But the inventory was not our problem. If it didn't sell, you're taking it back. And so when you look at the two additional ways they start selling to consumers, well, that just exploded the returns on capital in the business. And then the other factor, which we see now in a few businesses we're involved in is people are way underestimating the advertising potential of business. And we saw that in Amazon way back when, before Amazon was...”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“So you can have an analytical edge. You could also have a perspective edge. So a good example of this was back in the day, there was a perspective that Amazon was a good short because they generate any cash, the PE ratio, which we think is useless, was infinite. But there was a shift in their business model that was so obvious to us and we realized a well-known hedge fund investor wrote how it was a big short of his, Amazon. And I read the letter and I'm like, oh my God, we're not big enough on the long side. In Amazon, why? The individual is a very smart investor where I have massive respect for. They miss that Amazon was changing their business. So Amazon originally was basically, you would buy toothpaste from Amazon. Amazon had bought toothpaste from Proctor& Gamble. They held it in their warehouse and they shipped you a tube of toothpaste. But what they had shifted was fulfilled by Amazon and third party. So meaning that Ted Cites would order toothpaste from Amazon.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you think about in a market where, say, the tech sector, you've got the MAG 7, some of the stocks that have, some of the characteristics you talk about, great business model, great financial metrics are doing well, it's very hard to know anything different from anyone else about a Google, for example.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“So independent research about a third of the time were like, wow, we've got some really good stuff. Another third of time, we're like, man, we got some stuff. Might be good, better than nothing, but it's not heavy. And a third of times, like, we have no freaking idea. Like we're making it not a judgment call, but we really like the position. We think we've done good, normal fundamental analytical work, but we really don't have anything extra. And an easy example on this one would be like, okay, Ted, we're getting long Coca-Cola. All right, you and I can go to as many stores we want and count as many cans of Coca-Cola. It's not going to give us any advantage. There's no value in that.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“for we were right over time so what dictates whether something's two three four percent or maybe in a blue moon 5 percent is one obviously the liquidity of the stock two what do we think the risk reward is so the stock's at 20 and we think it can go to 40 and if we're wrong we think it goes to 18 or we think it goes to two so that ratio and then lastly what do we think we know relative to everybody else what independent work have we done that we think gives us an edge on every bill so roughly about a third of the time we do independent research that we think is really impressive it's like man we really know a lot more than other people and we've had conversations with investors come in they're like we just left so and so shop and their biggest short is your biggest long and i'd be like okay and we pull out our independent report and i'd say do they have this information and we'd go through page by page and they'd be like wow”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Buy some of that too. That's usually what we come to. And then in terms of sizing, the second part of your question, there's many paths to the waterfall. Some people love having really concentrated portfolios. I'm going to own five stocks. I'm like, well, good for you. And that works when it works. But when it doesn't work, I don't want my brain melting down. Other people like, you know, I want to own 50 or 75 or 100 stocks. I'm like, well, how much do you really know about 100 stocks or how much deep work are you doing on 100 stocks? So for me, 2025 names is probably about right. We can do a lot of research. So you say, well, we should have two to four percent positions. We don't really outsize massively anything. A big position for us might be five percent. Why? Because I want to make my money on my hit rate. I know a lot of people talk about slugging and knowing when to take the really big bet. But sometimes you're wrong. And sometimes it's not that you're wrong on the fundamentals. Sometimes the stock just goes in the opposite direction. I could give you lots of examples of that.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“We use a phrase here. We say it should be obvious and compelling to all. So meaning that we're not interested in good ideas. Like, hey, I think if this, this and this happens, we can make 15%. It's like, well, that's good. But we're long-term investors. And so we're looking for things that we think can double or more in three years or less. Okay. When you start saying, well, I need 20-25%. It's like, okay, what do you see that is different than what anyone else sees? And is that realistic? And by the time the research is done in our investment committees and the people I work with, my partners, we've been together for a very long period of time. And so we create a culture where we can openly debate and guys get angry sometimes. It's like any family. By the time somebody expresses something and everyone's, well, did you think of this? And what about that? And what research did you do on this piece? By the time it's done, most of the people in the room are kind of nodding their head going, yeah, that sounds pretty good. I'd like.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well there becomes judgment. As you know, thousands of people graduate from top schools every year and come into the money management industry. And there's very few who can generate alpha. So it's very, very difficult. And so, yeah, there is a degree of judgment. There is a degree of, I'll call it artistry. There was one senior person at endowment who shared with me, you can play the notes on the instrument, but I don't hear music. And that's a great line. And I think that's the same thing with investing. You can have all the tools and everybody knows how to build an Excel spreadsheet and do a DCF and overlay a Michael Porter analysis. And, okay, I'll get some data sciences work. But in the final analysis, it's the judgment. And it's not easy. It takes time to find out if you have it.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a very good question. It's a threshold. It has to be above something, and then everything else is just benefit. And then we focus on the other things. Because at the end of the day, whether it's the industry sector, the product, new product launches, there's some dynamic that we think is going to drive this forward that's most important to us. Without naming names, you can look back over the last 10, 20 years, 30 years. companies that had a step on the competition and gave it up because they just didn't execute We've made a few mistakes BlackBerry. By the way, have you seen the movie? Movie's hysterical. A little too close to him because we made a bunch of money in Blackberry and then we lost a bunch of money in Blackberry. We were early, one of my partners like this mobility thing is going to scale much faster than people think and the winners are going to be Apple and Google and Blackberry and the losers are going to be Nokia and Sony. So we had the longs and the shorts and at first we did well on all the pieces except Blackberry. And you look back and it's like.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have to admit I love COs or senior executives who know the granularity of their business because they love it. Jim Senegal, who used to be the CEO of Costco, you meet with that guy and you walk around a Costco with him? He is just locked in. He is taking notes. He's asking you questions. I can't remember what store it was. I shopped, I think it was in Long Island. I shopped at a Costco. And I mentioned to him that the carts, shopping carts, the wheels were busted on a bunch of them and that they didn't roll that well. I think a month later I was back at that Costco, all brand new shopping carts. Jim Senegal is so maniacal. Galantia, the CFO at Costco, who just retired. I mean, that guy knew his business backwards and forwards. It's always concerning to me when you talk to someone senior at a company and they don't know some degree of granularity.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are there any things that you saw from your operating experience back in the Procter and Reebok days that give you some lens into deciding if the management team are better or worse than somebody else might think?”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source
“You want to see talent? The same thing you would look for an invest manager. You want to see grit. You want to see that they're driven. There's a track record of success. There's lots of smart people. The prettiest guy in tryouts for the hockey team, that's one thing. But when the puck drops, you see who can actually put the puck in the net. And those are the guys you want. Some guys decompose when the game starts. And then obviously alignment of interest. How much stock do you own? I love sitting with management teams and we get in this conversation, but how much stock do you own? What do you think your stock is worth? Why? Well, here's what I think. Sometimes I think I'm crazy. And it's like, okay, let's debate it over time. But now we're aligned. That's how I do it.”
2024-05-20 · Capital Allocators · Brett Barakett - Digging for the Puck at Tremblant Capital (EP.386) · IDENTIFIED FROM THE TRANSCRIPT · source