YouSaid · the spoken record

Kyle Mowery

lines on the record: 101
first: 2024-02-19
most recent: 2024-02-19
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

“Monger. These are all things that are pretty accessible for sure if you're trying to learn about. Oh, yeah, Graham, yeah, security analysis. But, you know, security analysis is pretty old. It's old. It's like talking about like railroad bonds and stuff. So it's like, okay, railroads are great, but I think people largely understand railroads now. I mean, anyway.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So our business, our funds are private, but info at grizzly rock capital. If you're an accredited investor, we can add you to our distribution list and or you can see our materials or direct any question on anything. You can speak with me, Kyle at Grizzlyrock Capital.com. In terms of books, I know that Seth Clarman is less popular than he might have been 20 or 30 years ago, but I think the book Margin is safety concise with respect to the type of work that many of us in the value community aspire to do on a daily basis. And so I think that is a quick read if you can, you know, I think it's coming back into print. It's been pretty expensive, but many libraries have it or whatnot. So margin of safety is good. And most of the stuff by Greenblatt, Buffalo.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“More and more people have a higher and higher quality of life each year. And so I, you know, before I was a fund manager, I was a capitalist first because I understood it's by far the best way for societies and economies to let individuals flourish economically speaking. So yeah, it's a wonderful bump to our domestic capitalistic society and hopefully the inflation that it's designed to reduce, which it will not, it will cause inflation, but hopefully it won't be too bad.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Well, there is certainly a domestic focus to that policy, but I think regardless of whether the administration or Congress is red or blue, there's been a focus on nearshoring and onshoring. And I think that's a global trend, not just in the U.S., but it is certainly in the US. onshoring and near shoring is incredibly inflationary. So I think that's one of the reasons we're a little skeptical that we've seen the worst of the inflation numbers, or at least that we're at 2% in perpetuity from here on out. But yeah, I mean, the IRA has put a lot of people to work. It's put a lot of capital to work in the United States at attractive ROICs. And the government is trying to incentivize certain policy outcomes, but capitalism is this wonderful mechanism by which”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“And it uses the existing infrastructure, any plane on the planet can run on the fuel because it's chemically identical to fossil-based jet A. So it's not a full scale perfect solution of zero carbon, but it's certainly a step in the right direction in terms of decarbonizing air transportation. And it's something that we believe governments want. We believe large corporations want and ultimately consumers want. With the caveat that it is more expensive to produce and we think CaliMet and some of the other early producers are going to make super normal returns over the next, say, five years in that industry. So that's why we're paying attention.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, this sustainable aviation fuel that is produced by Calumet has about a 7070% reduction of carbon compared to fossil-based JA. So it's meaningful.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“This conversion from MLP to a C Corp done to be in the index in the Russell 2000 index by the spring. So there's a lot of change going on there. And that's one that it's a bit of a hedge fund hotel, quite frankly. We were not the first one to spot it, but it was something we invested in last summer and think has a lot of potential, but it's a bit of a cottage industry, sustainable aviation field. But I think you're going to hear a lot more about it over the next five to ten years.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“We have an investment in calumet specialty products. That's a business that is currently North America's largest volume producer of sustainable aviation fuel. This is a quintessential small cap in that it is currently an MLP. They are converting to a C Corp. They're spinning out their growth business, which is their renewable fuel business. They produce renewable diesel and sustainable aviation fuel in Montana at this converted Canadian heavy crude refinery. So super cool, super wonderful unit economics, you know, $1.50 to $1.75 EBITDA per gallon on this facility. There's rumors that Department of Energy is going to loan them some money to expand a facility. This is all public market information, right? So we're, you know, they could get this.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“12 months ago, a lot of people thought there was a recession. We were kind of scratching our head saying, I don't know, the commentary and the numbers are pretty good. And now everyone's sure that there's no recession. And we're saying, well, probably, but, you know, everybody seems like they're on one side of the boat here. At least that's what implied by prices of the stocks are. And you got a wild election in the US. You got geopolitical unrest. You got onshoring and nearshoring and supply chains, you know, and you got inflation, which seems out of control, but that could pick up and any one of those for an unknown reason could cause instability in the market. So for us, I mean, we're always trying to look for the clouds appearing on the horizon because that's our job. But the sky is pretty blue right now in the US, quite frankly.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“I mean, our conversations with European CEOs are very, very negative. And then Asia is pretty mixed. But US, look, best house on the block for sure in terms of people are working. People are saving enough. I mean, credit card debt is high, but so is net savings, right? A lot of people banked a lot of money during COVID. But there's bifurcations, right? I mean, like anything, the lower income consumer is very dependent on not only the price of credit, price of money, but also the labor market, right? And if job losses tick up for whatever reason, that segment of the consumer is going to get hit hard, same as always, right? And that's, you know, we'll see.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“The US economy, I mean, US economy is pretty strong, consumers are pretty strong, balance sheets are reasonable. The European economy is in shambles.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Got it. And is there anything right now that you are seeing in individual companies like, hmm, all these steel companies that were doubling their earnings in 2022, indicating a robust economy, that's kind of slowing down a lot. Like, I'm just making that up. But anything, are you seeing that gives you to be optimistic or pessimistic on the US economy?”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Large cap It's a great question. I think a lot of people before the GFC who try to run money the way that we try and run money would have pooped macro and said, no, I'm a stock picker and macro is less important for me. I think the GFC was a rude awakening to many of us that macro absolutely matters. So it matters, but as a long short investor, it probably matters less because our net exposure to anyone, you know, sector, industry, whatnot is less. So it matters, but it's not our calling card, our calling card is focusing on single names and picking them and getting them right.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, that's fair, but you know, many of these companies do have street coverage. I've probably been somewhat pejorative on the street. I think by and large, the market is largely efficient. Most of those 1,100 companies in the Russell 2,000 minus the domain specific ones are relatively priced reasonably, right? I'm looking for a handful of stocks long and a handful of stocks short, right? It's for me, 15 to 20 long, double that on the short side. So you don't need the whole market to be wrong. You just need a few rifle shot companies or industries where you feel like you have a variant perception where the numbers are just, you think you're going to be right and you have the research back it up. And if you are, you're going to be happy. And if you're wrong, they're not going to be happy. And then, you know, that's the game we play.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Well, we try. I mean, we're trying to fish within the rest of 2000. I mean, certainly there'll be a few things that are above and below the average cap weight, but that's the job, right? I mean, Look, there's a lot of funds out there, and we specifically for our clients do small caps, right? And so that's where we fit in their asset allocation and we try and do that to the best of our abilities every day.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“To kind of project that linearly in a way that we don't happen to think it's true over the next, say, a year to a year and a half-ish, right? So without picking on any specific company or what I'm just kind of giving you, framing out how we might think about something to short.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Virgin opinion, and it's just based on studying not only the new amount of RVs piling up, but also there's a lot of RVs that are gently used that are good options if folks want to get into that market. So there's more people, you know, kind of looking to get out of their RV than into an RV these days as opposed to where we were three, four years ago with COVID. And so the street is just a bit glib in how they're modeling the business and modeling it a lot less cyclical than we believe it to be. Look, I live in Chicago. A lot of that industry is in Elkhart, Indiana. That's a couple hour drive from me. There's a lot of really good people there, but they happen to work in a cyclical industry, right? That's not as secular as Wall Street seems to believe it to be. And it's very easy to get lulled to sleep with. If the numbers have been good for a while, it's very easy to just, it's human nature.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's really about what is implied by the price and why is it wrong. I will give you an industry that we're currently short and why and why we are short it. So the recreational vehicle market, the RV market is incredibly cyclical, right? You can just go back and you study their cycles, significant downturn in any consumer recession. COVID was a huge boom for that industry, right? The one thing you could do in COVID was you go outdoors and not be near anybody, right? So the RV market had a huge boom, right? Well, the street largely has the numbers going out next few years to be continuing to be reasonable. And the profits which were extremely high during COVID for most of these businesses are still projected to be relatively robust.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“So, more often than not, are you short of company because, oh, this has a PE of 15 and I'm along very similar stock that has a PE of 5? Or is it has a PE of seven, but the quality of that price to earnings of their earnings multiple is very, very low. And basically this company has a lot of issues. So are they valuation shorts, which people say, don't do valuation shorts on an outright basis, that may be correct, but if you're short, you know. An expensive company with a small sizing relative to a high quality, very cheap company that you've underwritten and done a lot of work with, maybe that maybe that has a better track record.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Profile that we have. The process is very similar understanding the business product services and then ultimately why the street numbers are wrong or what's implied by the price is just erroneous in terms of the free cash flow that the business will ultimately generate.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“and or just bare markets, right? And that way we can kind of keep going forward rather than taking three steps forward, two steps back. You know what I mean? And so for us, we're going and we're making a bet on specific companies, but we don't talk to management of those companies or we try to not talk to management because management is not there to talk to us, right? We do talk to management of our longs for sure. We try to develop thesis or understanding of where the business is and what our variant view is, put it on, be willing to trade it. Most of them don't go to zero. Some do. That's always kind of nice. But most of them don't go to zero. And so we're willing to trade it. And, you know, have that staying power over time. But as a business and for our clients, right, to feel confident in the type of return.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Look, Wall Street is a very unique place. Much of Wall Street is value creative in terms of it's a way to raise capital for new products, services. It's a way for entrepreneurs to diversify after building a wonderful business, but because fortunes can be made relatively easily, you know, attracts a lot of people who are incredibly smart and incredibly silver tongued, shall we say. And so that's where, you know, short sellers have a place to play, in our opinion. But we try to go about it in an ethical manner. We're not out to put anyone in jail or, you know, get paid by the whistleblower rewards. All we're trying to do is say, this stock's overvalued. And shorting. At its core does for us is let us sit out market drawdowns and left tail events”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, activist short selling is a really interesting way to make money, right? It kind of didn't exist, you know, till really, you know, muddy waters These guys kind of made it a thing. I think short sellers do a lot of good. There's a lot of ways to Companies not to be up and up. There's a lot of corporate malfeasance that kind of slides, and if they can get, if management can get the board to go along with it or everyone's sort of complicit, then the investment banks just want to do deals and then around and around you go, you get some shady business activities in the public market for sure, right? Especially those with narrative.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yet certainly similar in terms of focusing on how to get paid. Street numbers are too high. We think the numbers are coming down. That could be for a lot of different reasons. We are not activist short sellers, so we don't write online. That's actually a couple former employees have gone on and chosen that career path, which is entertaining for me to read.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Going to be sized in a way that they can maximize return given your, you know, whatever the profile of the fund is on risk return. But there's a lot of other businesses that aren't punch cards that if you're doing this sort of fundamental work, they're still going to be very asymmetric in your favor. And so, yeah, maybe it takes two or three napkins rather than one. But if you can do them right and balance the different drivers to them, I still think it could be profitable over time.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“I'm a professional investor, but that's like the average MBA player comparing themselves to Michael Jordan. Yeah. Right, you just don't want to do it because the skills are like I would never compare myself to Buffett because, well, our clients are pretty happy and the returns are solid. Buffet is unique individual. I think what he's saying is it's simple once you understand the business that implicit in that statement is he understands the industry. He understands the unit economics on every product or service rendered, right? And then he understands why it's cheap. And so, yeah, we do, yes, it all gets boiled down to something that you can put on a napkin, but there's a lot of work in developing that conviction first. And also for those of us that run funds, you probably have to make more than one investment every three to four years. That's just the way the business works. And so there's a lot of, yes, sure, everyone talks about, you know, punch card 20 names in a lifetime. Yeah, those are.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“You say, okay, well, that cannot be good long term, right? Or most likely not. So it's a time intensive process. It's not glorious going and talking to a bunch of farmers in towns that you may or may not have ever heard of, but is a great way to understand the people and the culture of the business in a way that, you know, punching Ebada, CapEx, and free cash flow into Excel just, it's not going to get you there.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Is going or how to improve their customer offerings and product mix, then that's how you get value traps. So I think for us, it's about not only studying the companies and the SEC filings, but also understanding the culture, understanding the industry structure, who's dynamic in the industry. You know, go to trade shows, walk trade show floors, buy a ticket. It doesn't have to be a Wall Street event. Go do it. We've been to tons of events where we're the only investors there. Literally, the only investors, you know, talk to people on LinkedIn. For us, we're professionals. We do use expert networks, right? We run an extensive compliance on that sort of information. But then talk to these people. Maybe they used to work there. Maybe they worked there for 15 years and they left. And you find out, you talk to a few people who left because they hate the new management team.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“I think for a lot of us who work at a desk and I do most days work at a desk, a lot of us have Excel open. And it's very easy to punch in numbers and then forget how those numbers are actually being generated. And I think people and culture are two of the things that the average value investor could be benefited by thinking about more. So if you have exceptional people and or great culture, those numbers over time are going to reflect that. But many of these cheap businesses have been around for a while or maybe they came out of a product cycle earnings went really high and they got as one of my old high school coaches used to say, fat dumb and happy, right? If you got a bunch of employees who are fat dumb and happy and they're not focused on where the industry”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Or whatnot, you really want to be focused on who's developing the new mouse trap in terms of good unit economics, good customer service. And that's why I brought up ACV auctions. You know, that's a technology business. That's a small cap business. I think, you know, it's not a huge market, right? There's only so many cars that are going to flow through that market in every in a year. And that's just that is what it is. And so it'll never be a company as large as something that'll be in the MAG 7, but it'll be a wonderful product for its customers and a wildly profitable business for its owners for a very long time in our estimation. So that's the type of Pin out in small caps. Well, all caps.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I look, I think the markets are broadly efficient, certainly up market cap, broadly efficient means that a lot of those things trading at low PEs are in fact value traps. Value traps are called that because they're cheap, they seem cheap, but then they just stay cheap. And it's very annoying to be in them. We have been in them before. We will undoubtedly be in them again in small caps. But I don't know IBM specifically, but there are some of these big companies have a lot of entropy and when the world changes rapidly, it's really hard for these companies to adjust to products, their services. There are a lot of people at companies like IBM who have been doing the same thing for 25 years. And so I think a lot of times, especially in markets that have quicker product cycles,”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“And what do you think about large cap value? I mean, a lot of people going on TV talking about, let's say the perfect example, IBM, it's cheap. I mean, Warren Buffett has invested in this company. So it's definitely, you know, I mean, it's got a great track record, but it's, I believe, a low growth company. And the quality of the earnings are not what some of it's like what NVIDIA's are. Those types of companies, do you think that the value to growth factor in the large caps is accurately reflected in the difference in valuations? And it's like, yeah. This company has a 30 price earnings, and this has a 14, and there's a reason why”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Returns down is like what your job is. So it's not an academic exercise of what's the cheapest asset class. It's how do you actually generate return? And so yes, at some point, I would like to think that the value factor comes back, but unfortunately I'm not here to call the bottom the value factor. It may continue to antagonize us for a bit longer.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Well, I've been running this fund over 12 years and value has only been a tailwind in a couple of them. I think there are structural issues with the value factor as it's discussed price to book certainly one of them. But I think everything in the markets are cyclical, right? I would like to think that value factor works over the next decade. I just don't I can't, it's not an investable thesis in my opinion to say, you know, everyone wants to call the bottom in every asset class, but certainly value growth, right? I mean, you look at there's so many charts and it's like, oh, value is the cheapest to growth. It's been in 20 years then the next year. It's the cheapest in 21. You know what I mean? And then, okay, but that doesn't actually put returns on the page. And if you're a professional investor or just investing for yourself, putting”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, maybe you would have it. It was 330 million instead of 330 billion. But we go back to the conversation about you said the value factor, are you short-term bullish or bearish on the value factor?”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“I hundred percent agree with you. I mean, look at there's two components to that. There's where the earnings are going and then the multiple that one puts on them. And when you have something like NVIDIA, people who are long it were talking about disruption and these, you know, these chips were going to become ubiquitous. And here's why. And they were right. They were absolutely right on the unit economics regardless of the size of the company. It was a unit economics or really in market understanding and understanding of where that market was going. I don't steady that company. It's too large for me, but that's just our mandate.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“But how do you think about a passive? Do you think it distorts the market? I mean, some people use that phrase, but like I'm looking at, you know, NVIDIA and it's tripled its earnings and, you know, it's earning like on trilling 12 months close to $20 billion when it was at the low valuation of $300 billion market cap in October of 2022. It had a forward price earnings ratio of 20. So the reason NVIDIA has gone up so much is not passive has definitely something to do with it in terms of the overall flows, but it's because of the fundamental situation. I feel like sometimes people overrate passive in terms of explaining why the MAG7 have gone up.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Well, most, I would say, I don't know if it's most, but it's every company that we invest in, there's a path to getting paid, right? We think the numbers are going up great. We think that they are going to be doing something positive with that money that could be share repurchase or dividends, that could be ROIC projects that are 40%. Most companies don't have a cost of capital of 40%. So if you have a way to de-bottleneck your facilities or grow new product, product category at 40% ROIC, go and do it. And then that raises your secular earnings power that much, right? Most of the time, especially in small caps, there's not as deep small fundamental research from the sell side. And so if we can see that and we can understand where those numbers are going out one to three years, then we can position ourselves for success if our base case comes.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“You invest in companies that specifically are going to return capital to shareholders. So mostly via buyback. So would you say most of the firms you invest in that kind of story where you're looking for them? They're either doing bad lucks or that you're looking for them to start doing that?”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Sir, yeah, I'm just saying. Yeah, the capital is flowing back. They're generating good earnings and then it's actually not being used to grow the business. And if it is, it's at extremely high ROIC numbers, way higher than the cost of capital, the business.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, great question. So passive has just certainly increased things. The big get bigger. It's also been a time in which network effect businesses have kind of been on the rise. And I think disassociating those two are really hard, right? Not only, you know, you can understand where the numbers are for, say, the Mag7 versus where the multiple is. And they've both gone up. For asset classes that aren't having as much passive flows, small caps included the investors have to be very precise with how are you going to get paid. It doesn't work for me to buy a stock and then the rest of the folks see it, you know, six months later, price closes to value. I sell it and move on, rinse and repeat. That worked for a long time. That no longer works. So how does one focus on names that are going undergoing inflection in numbers and that are returning cash to shareholders?”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“No, we're generalists. I mean, we have to be able to understand the business and the product and the service. So, you know, we're not going to be able to get a beat on the next oncology drug, right? But in terms of consumer, you know, materials, industrials, some financial services, some technology, right? Like I can understand that auto auction market, that's with enough research, that's something I can understand why an auto dealer will sell a car to whom and at what price and understand the unit economics of that industry. So if we can understand the industry, we'll roll up our sleeves and dive in.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“You but at some point, value will work again, and in that environment are the folks that work in the cottage industry of small caps like me, hopefully we'll be there and pick up some of that tailwind.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“I was graduating from college, the trailing returns to small and particularly small value dwarfed all other asset classes in the public markets. It's just, you know, we live in such a wonderful country with respect to economic freedom and capitalism as this machine that continues to march forward and develop products and services that make everyone's life better. But small, it's just where these cycles are, right? I mean, some of the quants, like Toby Carlyle is pretty good about explaining these cycles like 15, 17 year type things. Like, value will absolutely work again one day and video will probably not add $600 billion of market gap in six weeks into perpetuity, right? That's where the returns have been the last, you know, 10, 15 years. But at some point, I don't have like a time stamp.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, look, it works for us, right? And our part of the ecosystem, which is de minimis relative to some of the larger asset classes that get a lot of play on Bloomberg or CNBC, right? Financial television, financial media, right? But there's a cottage industry of many, many smart folks who are out here trying to generate return and generate value. And I think at one point, like when I started my career 20 years ago, small caps were all their age. I mean, that may or may not happen again, but if so, I'd be very, very happy.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Mid and large cap R sector specialists, and I think there's a lot of value there. I just postulate that small cap is such a unique market with its own conferences, its own suite of companies that functionally is a specialist. We're specialists in small cap. Other than talking about Mag7 at a high level, I couldn't give you a single number on those companies. I don't study those companies, right? I'm studying companies that you and most folks even who read the Wall Street Journal every day probably haven't even heard of.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, we don't do a lot of financial services. It's really hard to get a fundamental edge in financial services. Many banks are a black box. Certainly management quality and history, board quality, et cetera, can be really valuable there. But I happen to think banking and financial services is one of the best areas for sector specialists, right? I mean, allocators largely most of our investors are family offices and institutional investors. They're very smart, right? A lot of people, a lot of people have issues with allocators sort of beyond the scope of this conversation unless you want to go down that path. But allocators are very smart. They've focused on using domain specific expertise, certainly in healthcare, things like pharma, biotech. That's a great area. Consumer long short, you know, there's a lot of the larger funds working.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“Try to stick to things we've been public on in 2019 at I Live in Chicago at Chicago's version of IRISOM, which is called Invest for Kids, wonderful charity. All the money goes to underprivileged youth in the Chicagoland area. Great, great effort. I pitched darling ingredients. And darling ingredients is a producer of renewable diesel. And at the time, their facilities were functionally just ramping. The unit economics were exceptionally accretive. They're exceptionally profitable, but the renewable diesel market was a newer market. It wasn't well understood by the investing public. I think when I gave that presentation publicly, stock was at 19. Two years later, I think that stock was at, I don't know, 75, right? And so we were ripe for the right reason based on the unit economic work. That was enjoyable, especially because it was for charity.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“and which furnaces shut off when the price drops below X right understanding that industry structure allows you to be confident in your mid cycle return number on Ebitian free cash flow. And then from there, if you're write on volume, then you're going to get paid, right? And so the focus is on volume rather than price.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT
“This thing. I think when you get into like deep value, like Moniche Pebra always talks about like how to buy like a one-time earnings, one-time ZPS business, you can do that the easiest way to do it is by something that's cyclical, but be right in the cycle, right? And the guys, I'll give you an example that I was not involved in, you know, uranium. Uranium bolts have been incredibly accurate, but then I'll give you another the downside where I was also not involved. You know, the lithium folks, if you did anything in lithium the last year, you've gotten your head sliced off because of the price of lithium. So that game can be played well. There's many prolific on FinTwit, Finx, whatever it's called now. They're very vocal on price of commodities. And it's wildly entertaining to read.”
2024-02-19 · Forward Guidance · Secrets of Small Cap Value Investing | Kyle Mowery · IDENTIFIED FROM THE TRANSCRIPT