YouSaid · the spoken record

Jonathan Brolin

lines on the record: 75
first: 2021-10-07
most recent: 2021-10-07
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Either because of that nonlinearity or just because of the way they trade idiosyncratically. But you have to come to them at the right time also. If you come to them after there's been this capitulation, it's somewhat easier to get them to have the courage of their convictions to do the right thing. I mean, if everything keeps going up and to the right and everybody loves them, it's much harder to get them to make change. And really that wouldn't be a situation we'd be attracted to anyway because it's most likely the valuation wouldn't be that appealing. But if we can come to them at the right time and say one of the things that you would do today to really increase value three years from now, here are the things that we think you can do. Here's how we can help you get there. Here are other companies that we've worked with in similar situations where we've done these things. Here are other CEOs or chairmen or chairwomen you can speak to that we've worked with before who can talk about how we work with you. And it's certainly possible that someone tells us to take the next bus out of town if we give them that speech. But one of our...”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Shareholders that you used to have left. The reason that they invested in you because you were this high growth business are no longer relevant. Maybe you can reignite growth at some point, but let's look at who you are as compared to who you used to be. You're now a slower growing, less profitable, maybe unprofitable company because you're spending too much on operating costs. So what if you were to reorient the company over the next couple of years in this fashion? Maybe there's some more growth you can get out of this, but maybe it makes sense to rightsize the operating cost, become a more profitable, more cash generative business because there really is no market for a slow growing or declining unprofitable company. And so we try to build that long-term relationship with the company to be able to establish that we will be partners with them over the journey of going through this process. We recognize that it will probably not be a perfectly linear path. There will be opportunities for us to continue to add to our position along the way because there will probably be some volatility in that.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Teams, etc., but for the most part, we're not of the opinion that we always know better than management. Sometimes it's just, we actually might have a much longer time horizon than they initially do. So in the public markets, we might encounter a company that was pushed by its VC backers to grow at any cost. And as a result, they've built up this massive operating cost basis because they at one time were growing at $40, 50, sixty percent, and they staffed up accordingly. But now they're growing at six, eight, ten percent, and their operating costs are no longer in line with the growth rate of the company. And they're just much farther along on the S curve than they realize that they are. And sometimes they need to simply be reminded of that. And so the VCs blow out and they distribute their stock to their LPs who sell it, and you've got this cascading down of the stock price at the same time that the fundamentals seem to be deteriorating. And so we try to come into a situation like that and say,”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“There would be a way to interact positively, we are not confrontational activists. We do file 13Ds on companies, but we're not confrontational activists. We're looking for situations where we can interact positively with management teams and boards. Many confrontational activists will look for situations where management teams and boards don't own a lot of stock because they want to force change. They want to be able to control votes and run directors and proxy contests and those sorts of things. And that's people have made a fine living doing that, but that's just not our strategy. And I don't want to build those types of long-term negative relationships. We're trying to build long-term positive relationships. And we have companies in our portfolio that have been in here for eight plus years. We've got really good relationships with the management teams we invest in. There are times when we'll have, of course, we'll have disagreements and there will be times when we may push for changes behind the scenes with management.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Report externally. We'd help them with acquisitions. Whatever we could do to increase the value. And I've very much taken that perspective into account in how we can interact with companies today on the public side. Inclusive of that private equity experience was the awareness that we were able to run a really interesting portfolio with only eight companies on average. And you don't worry when you're in private equity about all the things that you don't own. You're going to make money or lose money based on the things that you are invested in. So everything else is a distraction. So all these other things that are going on with the meme stocks and all this other stuff, just a distraction and it's noise and we just focus on the things that we do own. We certainly pay attention to the industries that our companies are invested in. That goes back to private equity approach. Try to understand everything going on upstream and downstream in an industry, how value is likely to flow over the next couple of years. But it's a bottoms-up approach of finding individual companies and then trying to understand those industries well.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'll give you a little bit of history. So, I mentioned I work for a private equity firm after I worked to invest in banking. It was a really unique firm that was part of a public company. It was part of what was then the General Cinema Corporation. We had a small eight-person team that was investing in private companies. And there were a few things that came out of that that were really influential to what we do. One is, unlike most pre-MBA private equity jobs that are so focused on churning out book after book after book and model after model, this was much more focused on the post-investment side, what to do with a company after you invest. And so as a result, at a fairly young age, I was spending a lot of time working with management teams and boards, identifying long-term roadmaps for increasing value in the businesses, and we would do everything we could to try to help the companies from helping them find customers, new management team members, helping them with reporting, what are the right metrics to look at internally to manage the business, what are the right metrics.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ideas. We're not going to ideal lunches all the time. Our big idea is what are we going to have for lunch today? That's part of the process. You know, our next door neighbor here is a pizza hut franchisee. They're rolling in a different kind of dough. It's not the same thing as one of these hedge fund hotels in New York where everybody's jumping into the same idea at the same time. So it affords us the flexibility to do what we want to do without the pollution of other people's ideas. So it's all part of just reinforcing the processes you want to have.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I do have that. I resisted it for a long time, but it became a really important source of information, especially for charting and other purposes. And during the pandemic, when I was the only person here, it was a really good way to deal with what was going on and chart and monitor what was going on in the world. But there's no P&L information on our Bloomberg. I have charts up here of the 10-year and general market related information to see where there are stresses, and I can do research on our companies. It's a research tool. I want it to be a pull device where I go to it when I want something. I don't want stuff pushed at me all the time because, again, there are certain settings here where I can see cattle prices throughout the day, irrelevant. I don't want to see it. And so, anyway, we've tried to reinforce all of these processes through things like not having the data readily available that we don't want to influence us on a short-term basis. We're out in the suburbs. Why? A, it's close to my house, and I like that. But also, we don't get polluted by other people.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have that data point to look at. There's no screen around here where you could see how we're doing on a daily basis. I mean, I've been in other firms where they're tracking each strategy throughout the day. There's a running P&L of how each strategy is doing. And it's up on screens and people could see it. And you know people are looking at that and thinking, oh gosh, I'm trailing Schmidty. I got to go do something over the next hour and a half to try to change that. I mean, what terrible short-term thinking? So we don't have that. There's nothing on my desk right now where I can go and click on it and say, oh, this is our P&L today. I'm not going to make a good decision today based on whether we were up or down 80 basis points yesterday. It's irrelevant. So I don't want to look at that every day, so I don't. I don't want it to be a distraction, so it's not. I don't want my research team to be looking at the return on position since inception because it doesn't help us make a good incremental decision. I don't want to screen in the office that people can go walk by. There's no CNBC on here because it's unhelpful to our process.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“That we will not have a sheet like that. So when we sit down and we talk about a company, all we have spread out are data points about that company, financials, information, qualitative, and quantitative about that company. It's completely divorced from the portfolio management side so that we can have a real research-oriented discussion about that company. We never do any sort of research team portfolio discussion of this is, this size and this is this size. And then people start thinking, well, I did more work on this company and therefore I think it should be a bigger position in the portfolio because I spent more hours working on it than something else. Those things are ego driven and they have nothing to do with establishing what the risk reward is of a given position or what size it should be in the portfolio. So I've intentionally separated research from portfolio management. And so we just don't have those discussions. It's much easier not to fall into those traps of defending something that's down too much or being gunshy about being asked about it.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Easier or more obvious to try to question well, why is that the case? So when I've been at other firms and I've seen things that have caused problems, I've kept notes on those things and thought, well, those are things that if I run my own company someday, I'm not going to have those be part of our business. So I'll give you an example. A lot of times when investment committees sit down to discuss portfolios or ideas, they have a sheet, whether they call it the morning sheet or the top sheet or whatever the sheet is, and it has a list of positions and included amongst those columns that are on those sheets are the performance of individual positions by the day, the week, the month, whatever period you want to talk about. And inevitably, there's going to be something on there that's down 30%. And somebody over in the corner who really likes that idea and championed it is going to do one of two things. They're either going to get really tired of being asked about the thing that's down 30% all the time and they stop defending it or they get really defensive and they over defend it to the point where it blinds them to making good informed incremental decisions. So I've decided”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think part of that has to do with the fact that when things are going well, you don't naturally question why they're going well. You just assume that they're going well and you just continue going through it. When things aren't going well or you recognize that things are causing friction, it's much.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Learning by opposite example, I think, is just as valid a way of charting your own course as learning through positive example. And it is not at all unusual for people like yourself who take the big and bold, crazy leap to start your own business, to start your own fund tend to distill the opposite of what they have picked up at certain jobs.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Those are things that don't make any sense to me, and I'm just going to stay away from them: the Money Masters by John Train just reading interviews in all sorts of different forms. The old investor, dealers, digest, and all these other publications that used to publish manager interviews. I've been reading those since I was in high school. And I always found that to be a really rich source of informing and forming my investing style. Most of those meant I was fortunate to be able to meet Seth Carman later after I'd already started Edinburgh. Also a big baseball fan. And that was a huge honor for me. But to know that you can stick to the things that you think are the right things to do in the right ways to do them, there are times you have to weather different storms, whether it's performance related or otherwise, because of that, but that it is possible to stick to the things that you want to do and the way that you want to do them and still be able to have a firm and a set of partners that support that. And it's a beautiful virtuous circle when all that comes together.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not to sound ungracious to those who were kind enough to employ me, but most of the things that I learned at places I worked were things that I wanted to change, which is one of the reasons I really wanted to start my own firm because I was so committed to the investment process and the rigors and intellectual honesty of a real process being paramount. So most of my mentors in this business are people that I either never met or met much later in life when they didn't realize they were my mentor. So Seth Carman, in reading the things that he's written over the years, reading Margin of Safety in the early nineties had a very big impact on the way I thought about investing. You remember the New York Times used to have these interviews every Sunday in the business section with investment managers and just reading those over the years helped me realize which things I liked, which things I didn't like, which things made sense to the way I was thinking about the world, which things I read about made me think, well, actually, that's different than how I thought about it, but it might be better than how I thought about it, and I'm going to incorporate that new tool.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure, a little bit of background. I grew up in northern New Jersey. I went to Penn undergrad, started working in banking right out of college, did that for two years, worked for a private equity firm for three years up in Boston, came back to New York, went to business school at Columbia, switched to the public buy side in 2003, and have been on the public buy side now for 18 years and started my own firm 10 years ago. Mentor-wise,”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today's markets are certainly much more reminiscent of the activity level of basketball or football relative to baseball. So we're going to go back to that theme. So I'd like to talk a moment about some of your early mentors in school and early job experiences that have”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“To have to suffer through that on a regular basis every now and then we write about something else. I think there's a reason why so much great literature centers around baseball. So many of the great writers who wrote for The New Yorker many years ago wrote about baseball and there was something to it that lends itself to the market in our strategy and this is all going to tie into why in today's crazed world of what did I just read about in a 280 character tweet that I now have to go invest in that and watching something play out over a season of 162 games those two things don't necessarily go together. So I think there's something about the patience of it that also ties in to our strategy.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Affords you the opportunity to have a conversation with somebody that you go to go to a basketball game and it's just up and down the court very quickly and there's not a lot of time for reflection. There's a nice rhythm to baseball that allows for that reflection, but there's also a nice rhythm to the season to having so many data points over a longer period of time where you can really see process play out in a shorter time span, fewer occurrences, luck can play a much bigger role. With more occurrences, the constancy of process is much more important and there's something about that that gelled with me at a very early age and it ties in so well to investing in the fact that I'm fortunate enough to have this platform through my letters where I can talk about something that I love so much in baseball and something that I love so much in investing and tie them together is a real luxury and I know that and I know that it's an indulgence for me to be able to do that and it's a burden on all of my readers who don't care about baseball.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of all, I'm an enormous fan of the game I played growing up. I was a fan, I read about it, I watch it, I've coached it, I coached my son's team in over 400 games. It's a regular part of our daily lives. My son's a competitive player at the high school level now and in summer travel seasons. So it's a part of our life all the time. Many of my early dates with my then girlfriend, now wife were at baseball games. She's a converted Met fan. Come over to our Love of the Red Sox. So there's the aspect of the game in general that I just love, but it ties in so well to investing in so many ways, which is why I write about it all the time because football is such a quick hit sport, and that's more like a short-term trading kind of strategy, whereas baseball has so many more occurrences. There are so many days. There are so many innings, there are so many pitches, there's so much data to analyze that it lends itself to longer periods of reflection, going to a game.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really like to start out with your background and path to Eden Brook. You write great quarterly letters that are grounded in your tremendous love of baseball. So what is the role of baseball in your life and in work? And how does that all fit together for you”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have fairly chunky positions. So, a starting position would be about 2%. And then John is the kind of manager who will call to say the upside to intrinsic value is terrific. You should add more to the fund, or he's even called to say you should do a direct side car investment with your custodian. He's probably the single largest equity position due to growth. So I couldn't ask for anything more. I really think so highly of John, and I know he will be successful for the next 20 years just doing his thing.”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“Did you go about sizing the position, particularly relative to, say, another public equity manager or a private equity manager in your portfolio?”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“How did you go about managing around almost the known volatility that you could expect going in in a concentrated microcap strategy?”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source
“So once you got to know him over a couple of years and you were thinking you were ready to make an investment, how do you go about doing that confirmational due diligence on someone who, as we've talked about, is probably off the run, doesn't really network with a lot of the managers you might already have in your portfolio”
2021-10-07 · Capital Allocators · Jonathan Brolin – Edenbrook Capital (Manager Meetings, EP.14) · IDENTIFIED FROM THE TRANSCRIPT · source