YouSaid · the spoken record

Ryan Batchelor

lines on the record: 64
first: 2021-09-16
most recent: 2021-09-16
sittings or episodes: 1
sources: podcast

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“I love that, and I'm going to embrace that as well because I think there's an awful lot of truth to living your life like that. You know at our firm, we have two core values that you've mentioned in this podcast, fun and gratitude. And if you live your life with those in your mindset, it's a much happier way to live. And ultimately, it's about caring for people in a very genuine way.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“What's happened? I bought this house and the owner mentioned that there's a natural gas well on the property. And by the way, there's a hundred barrel container. It generates oil. You'll get 100 barrels of oil every three to four months that you can sell for somewhere between six to ten thousand dollars. So my friend, who is absolutely the most generous person I've ever met, he's going to have two-thirds to three-quarters of his mortgage paid for from this oil well that he had no idea existed when he bought the property. It's a great example. It's a law of attraction. I don't know why it works, but I do believe it works and I wish I had learned it earlier in life.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“It actually relates to something I see in your culture at WCM. It's what I call an abundance mentality. And the best way to describe that is when you give freely, you end up receiving more. It's a paradox, a little bit counterintuitive. One of my favorite books is called The Go Giver, and I can't remember for the life of me who wrote it at this point. It's a parable, basically talks about the idea of the more you give the more you receive. And that's not why you give, but it's a natural consequence of being abundant. I've been surrounded throughout my life people who live by this law of abundance, and also the law of scarcity, which means I need to hoard what I have because it could go away. What I found is the abundant life leads to abundance in the scarcity life, leads to scarcity. I wish I had learned that earlier. I'll give you a perfect example. My best friend lives in rural Ohio. He is absolutely lives the abundance mentality. He recently bought a house, he called me just this last weekend and said, Oh, you'll never believe.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“This is a great question. My mom actually passed away just a couple of years ago. She was the daughter of a dairy farmer, no indoor plumbing growing up, so she knew and she was born in nineteen thirty seven, so a child of the Depression. She knew tough times. My dad was a successful businessman. We were relatively affluent growing up. But you would have never known it. My mother had a keen eye for bargains. So she taught me an eye for the bargain and independent thinking. Those two things came directly from my mother, and it actually isn't until the last five or so years that I've recognized that, but Paul, there were times we would be in a grocery store, and she would buy a horn of cheese that was moldy, and she could cut off the mold on the cheddar cheese to get at 75% off retail price. She had an eye for the bargain.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Same story in the markets. Don't be stubborn. I'm a high conviction value manager. And the line between conviction and stubbornness can be relatively thin. I guess convictions when it goes right and stubbornness is when it goes wrong. Exactly. But ultimately, when things go wrong, admit it and move on. Move on quickly.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because of my recommendation. Apparently, I have some persuasive ability in those meetings. Turns out there was some management improprieties. There were some aspects of this asset that I had never seen before. The danger is not knowing what you don't know. As a young and experienced analyst and the stock was not a good stock. A lot of people lost money in that. And I took that very, very hard, took it very personally. To this day, it's one of the more painful experiences to think about and talk about. So what did I learn from it? Number one, when your key thesis points break, you move away from the stock. You don't dig in your hills. I didn't do very much of that, but a little. There was a little bit of pressure. Everyone's invested in this. It's a hit to my ego. It's a hit to my analytical abilities. Maybe my reputation will take a hit. I learned a lot from this because I think it's the”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Going to go back to the Morningstar. I kind of alluded to this talking about my Morningstar experience. As a young analyst, first job out of business school, made a lot of friends at Morningstar. I was very passionate but inexperienced in stock picking. There was a small bank in Puerto Rico that actually had an accounting issue that was very similar to the accounting issue that I talked about Spiegel. So I believed I had some specialized expertise in this company and thought I had found a bargain stock. So publicly and privately I was saying this is a great buy and most of my friends at Morningstar were buying this for their personal accounts.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Small teams win. The evidence is overwhelming that small teams win. Good, healthy, small teams with a couple of passionate investors always win the investment game. If it was otherwise, then all the big shops with all the analysts all over the world would have the best performance, but you don't see Corley. I almost think you see an inverse correlation between number of analysts in a firm and performance. So again, you think about the great investors that you mentioned and you've mentioned throughout the podcast, they're all small teams. And so again, I think it's a terrific story and a consistent story. Why don't we wrap up here with a few personal questions? These are my favorites always because I love to know more about somebody behind the investment process and philosophy. And I'm going to ask you a couple. What is the biggest mistake you made and what'd you learn from it?”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“You love coming to work every day because it's what gets you going. You get in the flow. I can tell you there's many days I look down, it's three o'clock and I haven't eaten lunch because I'm excited about something I'm researching. That's when I'm in my area of genius, and that's what we strive to do at Clifford Capitol. We're a small boutique, but we're striving to find everyone's genius and then giving them the freedom to work in that area of genius. And we do think it will be a competitive advantage for a long time as we maintain that culture, and we are very, very purposeful about maintaining the culture. In fact, we're looking to hire analysts as we speak, and cultural fit in the right temperament matter more than the skill set. The skill set, that's plain stakes, but the temperament and having the right cultural fit is everything at Clifford Capital Partners.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Officer came out to our firm and we determined that the number one principle surrounding Clifford Capitol is what we call the freedom to succeed. We want individuals at our company to be working as much as they can in their area of genius.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thing that stuck out the most is camaraderie at the time Moneyball was a new movie, obviously a very popular book that I'm sure we've all read, but he had booked out an entire theater for his firm to go watch Moneyball as a team. He mentioned to make things not so serious all the time, managing money is a stressful job, as we can all attest. Sometimes the market's moving against you, that's not fun. In the short term, but managing money should be fun learning about companies. What makes them tick? Learning about moats, finding these businesses that are deeply undervalued and hated by the stock market, sticking your neck out. That's all exciting. It's fun. It's stuff that we love to do. And Seth Claran's advice was don't forget to have fun while you're doing this. It's a very serious job, but don't forget to have fun, and that really stuck out. For us, Rick Hicks came out, your chief culture.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Seth Claran. He's a fairly private individual. You won't see him in the news very often. He did write a book, Margin of Safety, which retails for thousands on eBay. If you try to find a copy, very much a sage, wonderful individual. The entire nine minutes and 59 seconds I talked about culture. I said, how did you create a culture that transcends what you personally do, Seth Claran? How could you, clearly he has some investment skill to do what he's done? But that's not enough. And at Clifford Capital we recognize that Ryan Bachelor, yes, I am the head portfolio manager. I'm responsible for the track record, but over the long term, it needs to be more. We need to build a firm that has the right culture, the right temperament, the right skill set to continue doing what we're doing for a really long time. And I spent all my time with”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And Wayne happened to be at an investment conference and sat next to Seth Clarman at dinner one night and mentioned, hey, mister Clarman, Ryan would love to talk to you. Would you be willing to talk to Ryan for a little while? And this is like my chance to talk to an investing legend, right? One of the people I've really been excited to read about and follow for decades. And Seth, his assistant called and said, Mr. Clarman's going to give you 10 minutes, Ryan, at X time. Please call in at X time and you've got 10 minutes. And by the way, it went about nine minutes and 59 seconds. It was exactly 10 minutes.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“More to the world than just investing. A close second is Seth Clarman, a little less well known, phenomenal hedge fund manager. Since the mid eighties at one point he was compounding net of fees over thirty percent or something like 25% annually for 20 plus years. When you compound that high of a rate as a hedge fund, you're doing something right.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I appreciate that, Paul. I know when Wayne and I first visited your offices here in Laguna, afterwards we were both kind of breathless when we left. We were filled with all kinds of gratitude and energy because the culture was tangible. It was really impressive, and going back to why we start your own business I had a great job at Wells Cap. Frankly, it was a great job, enjoyed it, loved it, loved stock picking. Why start our own business? And a lot of the reason is culture. We could build our own firm based on our own principles, our own values, and manage money the way we believe will ultimately help our clients the most. Probably the best way to answer this question is my all time favorite investor is Sir John Templeton, both because of his investment acumen and because of the type of individual he was phenomenal man, just a great man who knew there was”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, one of the reasons that we took an equity stake in Clifford is we saw a culture at Clifford that was very similar to the culture we have at WCM, which we put as our main competitive advantage. And that culture is one that first and foremost cares about its people. So maybe talk a little bit about your culture at Clifford, what your core values are, and what you believe in terms of a structure and organization and how that you think will dovetail into better results for the client.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was a very temporary hit and a great time to be purchasing a business. So that's a good example of a core value. Core value and deep value, again, we would consider 30% weighting and deep value to be normal. Anything over 30%, we'd call an overweight. Anything under 30, obviously an underweight simply based on opportunity. And I'll tell you, Paul, that in the last year and a half or so, we've been overweight the deep value sleeve. We found some tremendous bargains, especially most deep value companies tend to be smaller capitalization. There are large cap deep value opportunities, but those have been increasingly rare in today's environment. So we're as small as we've ever been in our all cap. Our small cap strategy today is extremely attractive in our opinion, and we're finding a lot of great ideas in the small cap space.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of Amex, we believed it was a business decision out of strength. Costco had grown, obviously could demand better terms, and Amex said we won't play with those terms. They walked away from the business. Amex has a fantastic business model. They keep all the economics of their cards, which is rare, and also inflation protection, which is a big deal in today's environment, wasn't a big deal when we purchased it, but we were getting inflation protection for free, because essentially American Express's revenue, they get a percentage of every charge. So if those charges go up 20%, Amex's revenue goes up 20%, natural inflation hedge. And ultimately, our number one key thesis point. We believe the Costco loss would unlock a lot of capital that they could use to repurchase their shares. What that means, EPS grows faster than expected or declines less than expected”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have pre identified a list of what we want to own. About one hundred thirty five companies for our all cap strategy, about a hundred small caps that we believe are the best. And when a company on our core value watch lists falls to a price that we believe is attractive, we review all of our assumptions, ensure that the company's competitive advantages are still intact, and then we can add a company to the portfolio. So a little different than the deep value side. We already know what we want to own on the core value side. That list is fairly static. We're always looking for new great companies, but they don't grow on trees. So maybe a handful will be added or subtracted from that list at any given time. But that core value list, that's where we select 50 to 75% of our portfolios from. And again, in a contrarian way. So you can think as an example, American Express, when they lost the Costco account. Several years ago, people were worried maybe Amex is losing its competitive edge. Its brand power is not strong enough to keep Costco. We add a differentiating viewpoint.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Worth and in the worst case scenario we could come up with how much lower could the stock go. We applied a price to sales multiple of the lowest going concern retailers in the market to Hollister alone, ignoring Abercrombie and Fitch, the namesake brand, and thought that the stock could only drop maybe about twenty percent more. So more than one hundred percent upside versus twenty percent downside gives us a five to one reward to risk ratio, which highlights how we think about the world. Great balance sheet, key thesis points, very out of favor. At that point, really it came down to number one, do the key thesis points work? Will they continue to work? And do you have the guts to buy whenever everyone else is selling the stock? That's our deep value process in action. So talked a lot about deep value. The core value side is, again, the larger part of our portfolios, 50 to 75%.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a big deal. The company would begin growing again. And then the nerd in me, because I'm an accountant, I saw the balance sheet was very strong, net cash, no debt to worry about, but something that really stood out was their free cash flow was significantly higher than their earnings. And when we looked into the reasons for that, as an accountant, I got really excited. I got a little giddy the day I found that because I realized that that could be reversed within the next couple of years. So earnings would grow faster than free cash flow and free cash flow is very solid. So again, a couple of catalysts and then the valuation, again, because of Amazon.com's influence on the brick and mortar retailers, Abercrombie and Fitch was trading in our opinion, well below what even Hollister was worth. So we valued the company and said in rough terms, business is trading at half of what Hollister is.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the stock went down more than 25% each time and traded more than a third of its shares outstanding each time. When we see that type of behavior, which is not normal, it's pretty likely investors are acting on something other than analysis. As we dug into Abercrombie, we noticed similar to GameStop, they had been shutting down their stores, especially their core Abercrombie and Fitch stores. They had quietly shut down 25% of those stores. Hollister, their other brand, which was their larger brand, was doing very well, and they had quietly also built up an e commerce presence. twenty five percent of their sales were through e commerce. As we looked at that company, we believed that the inflection point where the company had been declining in revenue e commerce sales would overtake the decline in brick and mortar sales within eighteen to twenty four months.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thanks, Paul. One of the other things I'll mention just in our deep value process just to explain a little more. It tends to be the harder to explain how we find ideas in deep value because there's so many ways we can find an undervalued company. It could be a factor that the market's focused on or a theme. In 2017, for example, when Amazon.com's influence was at its peak, A death of the mall ETF came out. And some of the retailers we followed fell into that ETF. The ETF was shorting these retail stocks. And again, herd behavior moving towards them. Great example, Abercrombie and Fitch in 2017 was trading at such a low price it was in the death of the Mall ETF, their results had been struggling for years, but as we dug deeper, three consecutive quarterly earnings results leading into twenty seventeen. Company missed expectations.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“The speculative excess that's happened around GameStop. And in fact, the way we look at any deep value and in GameStop in particular, when we were buying it, almost everything had to go wrong to lose money in GameStop. That's a lot different than today where almost everything will have to go right to make money. Sounds subtle, but there's a huge difference there, and that's the philosophy of our deep value. We have identified catalysts, we've identified a really inexpensive company, and almost everything would have to go wrong for us to lose money. That's the philosophy around that. So GameStop was a great example of our deep value process in action.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just in 2019 2020. So we believe this was a cyclical downturn for GameStop. And yes, there are secular pressures, but the valuation, the cash flows, the balance sheet were all excellent. And these two catalysts, the gaming cycle coming up in a couple of years, and shutting down their stores were both enough in our opinion, to move the company from single digit stock price to mid teens to twenty dollars a share, which is what we believe was a conservative fair value of the company. So as a great example, we were buying it when it was dirt cheap, trading very out of favor. Almost nobody liked the stock. We saw catalysts on the horizon. Those catalysts worked. We sold the stock before the Reddit Army got hold of it. We think that actually shows our discipline. It's funny. We joke around a lot about the money we left on the table, but we would never have participated.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“That about 20 to 25% of their stores could be shut down and it would be cash flow positive to the overall company. It would cost them nothing. That was a really important key thesis point management had expressed the desire to do this, even though these were profitable businesses. The handwriting was on the wall. These businesses were going to start to lose money and they had too many stores. So they were going to start shutting them down. That was a big positive in our opinion. The second key thesis point was the console cycle. So Sony and Nintendo had pre-announced, hey, we're coming out with new gaming consoles two years from now. Normally they mention this with about six months to go for obvious reasons. If you're a gamer, you're not going to go buy the old PlayStation if there is a new one coming out in the next two years. So it was a particularly steep gaming cycle for GameStop, this last cycle that ended.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Several have struggled mightily, several have gone under, others have adapted quite well. But anything Amazon dot com touches has led to some investment opportunity for us in various areas. I mean, I can think of examples like Fast and Fasteners. They make literal nuts and bolts. Great little business. Historically great company. Amazon's actually a customer as well as a competitor of Fastenal. We owned it for a while, made some good money in it when the Amazon influence was at its peak. But GameStop is one of these examples of a company where we had a different view than the overall market. So our research, a couple of key thesis points we had identified through our research. Number one and most importantly, the majority of their store leases were very short-term in nature and zero cost to exit. So at the time we initiated our position in GameStop, we believe”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I'll cut to the end first that we sold GameStop in 2020. So prior to the excitement with the Reddit Army, my children have been ribbing me ever since. In fact, it'll come January. They're like, Dad, didn't you own GameStop? I was like, yeah, I sold it, guys. But it's actually a really good example of our investment process. And because you asked specifically about GameStop, I'll talk about our deep value process. So the deep value side, again, very opportunistic. We are constantly scouring the market for areas that are out of favor. One of the ways we look at this is to look at areas that are extremely in favor. So for instance, Amazon.com has had a clear influence on retail across the world, really, but across the country big time. Brick and mortar retailers.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's true in today's environment. We think a one year holding period is long. We're looking three to five years into the future, even for our deep value companies. And these are opportunistic. We sell them when they reach fair value. And we're indifferent. It may happen in six months, may happen in three to four years. Either way, we think we can earn a good return. But our turnover historically has been quite low three to five year investment timeframe and about 30% average turnover, even a little bit lower than that for the first decade plus. Those are the differentiators. And we think that it's a great formula for generating alpha over the long term.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“We think there's an edge to being contrarian. And the second point relating to temperament is patience. Even in my investment time frame, I've been doing this about twenty years now. The time horizon of the typical investor has gotten shorter and shorter. We literally heard a sell site or a trader. I can't remember this point. It was said, oh yeah, this investor, they're a very long-term investor. They have about a one-year holding period on average.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Hazard that a contrarian has to live with. Maybe it's something in my personality type that I'm okay looking dumb occasionally, but that psychological difficulty is why we think value investing has persisted, why it's been a persistent way to generate alpha over the long term. So maybe computers are a threat there too because they don't have feelings. But as long as humans are involved in investing,”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Performance. We think that's absolutely critical to our process. In a high conviction way. And the other thing a computer can't do is tell me how much of my portfolio should be in any individual opportunity. When does it make sense to overweight or underweight a stock? So we think that those three things are kind of the process related things that we believe are a competitive edge. And then there's two others that we believe relate more to our temperament as a firm and as a portfolio manager is one being contrarian. It's hard to be a contrarian. It's one thing, like I mentioned, it's warmer in the herd. And in particular, when things go wrong and you're one of many in a herd, you shrug your shoulders, shucks. Things went bad, but at least I'm in good company. When you're a contrarian, things go wrong, you look like an idiot. And that's an occupation.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I couldn't agree more, Paul. One of the things we learned about active management, we actually, as I think about it, I view the computer as one of our biggest competitors. One thing a computer's not very good at is identifying which opportunities better than another, which catalysts are more important than another, kind of going back to my KPMG experience, I think a core competitive advantage of Clifford Capital of my personal investment style is identifying those things that really matter the most. It's usually only a handful of things that make the difference between a great investment and a so investment. The ability to identify those, focus on those, helps us ignore the noise in the marketplace, and focus on each company at what they can actually control. They can improve their fundamentals. They can improve their financial statements. They can improve their balance sheets, which leads to better stock price.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's a great point because one of the arguments I make on why value has struggled over the last 10 or 15 or 20 years is that computers can really arbitrage away a lot of your advantages if all you're looking at are the numbers. So you've got to look at something very different because the numbers can be arbitraged away. There's nothing special about that. And that's one of the lessons, I think, that I've learned over the last 30 years is the competitive advantage of just crunching numbers doesn't exist anymore. Maybe 30 or 40 years ago it did, but not today. So that idea of looking around catalysts for change, I think, which is a more artsy subjective side, is, I think, exciting. And one of the reasons you add so much excess return.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because finding cheap stocks a computer can do. It's very easy to see statistically inexpensive companies, and that's not enough, in our opinion. We're looking for companies that have key catalysts that will propel their futures over and above what the market expects.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“on the deep value side. And that's the second competitive edge, if you will, or differentiator of our strategy is when the opportunities arise. So we have a mix. We think the mix is relatively unique. Most managers focus on one or the other, either wide mode or deep value. It's pretty rare to see the combo. But we have the ability to purposefully increase that deep value sleeve weighting when it makes sense to do that from a stock-by-stock basis. We've actually done an analysis of this. Over the first 11 years, almost 11 years of our all-cap strategy, it's added an incremental 50 percentage points to the total return, the ability to opportunistically overweight that deep value sleeve. And then the third point is key thesis points. For every individual stock that we research, the entire aim of our bottom-up research is to identify fundamental catalysts, long-term catalysts that will improve the prospects of the businesses we invest in. This is really important.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“They have a wonderful offense, but offense isn't always there. There's some knights your offense just isn't going to be clicking. The defense keeps them in the game. So when I look at our core value deep value split, deep value is our offense. The reason we buy a deep value stock is we see a tremendous bargain. Our highest return stream, sense inception, and looking forward, we would expect to be from the deep value sleeve. It's been that way in the past. We expect it to be that way in the future. That's the only reason we would buy a deep value stock is we see tremendous upside versus limited downside. But the offense isn't always there, so the core value keeps us in the game. You can think 2020 was a great microcosm of this when the market rolled over hard during the beginning stage of the pandemic, our core value sleeve held up. It kept us in the game. And then we found some tremendous bargain.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“But they're both alpha rich areas of the market, in our opinion. When you combine them at a discount. Using an analogy, I'm a lifelong Phoenix Suns fan. I grew up in the Phoenix area. One of the reasons they're a good team this year is they have a great defense.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Up focus is higher active share. Our all cap is our flagship. It's been around for about 11 years now. Russell 3000 values our benchmark. It's not a particularly great benchmark. There really isn't one for an all-cap manager. We're aware of our benchmark, but we're not driven by benchmarks. Those are the nuts and bolts, but I'll tell you what I think actually differentiates us. There's a few things. We've identified five things that we believe are our differentiators or our edge, if you will. The first is a blend of core value and deep value. So wide, high quality, competitively advantaged businesses, and then deep value opportunistic investments. So the core value side is the majority of our portfolio, 50 to 75%. Deep value is just based on opportunities. We think of these, and they're very different types of return streams.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a journey, and we're thankful for all the lessons we've learned from this journey. Ultimately, why did I start my own firm? We firmly believe that managing money the way we do will help our investors over time. A concentrated portfolio, 25 to 35 names in our stock portfolios, every name is going to make a difference. We have a margin of safety type of value philosophy. These aren't differentiators. These are just the nuts and bolts of how we do what we do. Bottom-up research. Every name, we have deep knowledge of, trying to find ideas that the market is temporarily discounting for a variety of reasons, but we have the ability to go in a very bottom-up focus. In a market that's increasingly top-down, we focus on individual stocks. The end result of that concentration bottom”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Midcap product, but it was time to start Clifford Capital. So in 2010, Wayne and I, we linked arms and jumped and started Clifford Capital Partners in April of 2010, started managing money in August of 2010. And here we are 11 years later still kicking.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“At least three times more potential upside towards a fair value estimate than potential downside, meaning how much could a stock drop. This is a little bit different, but essentially we came up with a draconian scenario of let's say things get worse, stock remains out of favor, how much lower could it go from our buy price. As long as we saw three times more potential upside to a reasonable fair value than downside using that type of a draconian estimate, we felt really good about the odds being in our favor. So that's something I learned a ton from Bob. He was a great trader, great investor. And then in 2010, Wells was going through some transactions, and it was a great time to start Clifford Capital Partners. I was the last remaining senior analyst on that team after the financial crisis. We actually did quite well. We exited the financial crisis as a five-star fund in our flagship.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, coming in at 07. And then, of course, we know what happened after that, and my job was to pick through the rubble and find the best ideas I could in the financials and in some other areas of that wonderful experience. Bob, wonderful investor, especially a deep value investor. One of the things I learned and honed during my time at Wells Capitol was the idea of having the odds severely in your favor before you make an investment in a deep value company. So oftentimes I think deep value investors get in trouble of just buying cheap stocks. Stocks are often cheap for a reason. So Bob wanted to know, find some catalysts for these companies. What's going to cause them from going from deeply undervalued towards a fair value estimate within a reasonable timeframe? And importantly, another aspect of his investing was a three to one reward to risk ratio.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a wonderful call. It wasn't a slam dunk. He was based in the Milwaukee area. I was in Chicago. My family and I were well established had children in school and some special programs that we didn't want to leave. But he found a way several months later through a man named Dick Weiss, who's a fantastic investor, opened up his office in Chicago so I could work remotely with Bob Customer's team. Small team We managed small cab, mid cap, and large cap assets, but I was one of only two senior analysts on the team when I was hired. And essentially my job in two thousand seven I was brought in to cover financial services and also being a generalist, which fits to this day. In 2007, obviously an interesting time to join the buy side. Bob had identified that there was some excesses in the market, especially in financials, zero financials.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Morning Star for me was learning a process around competitive advantage, around identifying wide moat businesses. And that's a big part of what we have at Clifford Capital Partners is identifying how companies have dug a moat, the source of that moat, and its sustainability over time. So the number one thing from Morningstar, my practical experience, was just that, learning how to dig into Wide Mote businesses. So in 2007, the first time Morningstar had actually done a pre-IPO”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Morningstar was a fantastic job. When I joined in two thousand four, they had been on a hiring spree, Elliot Spitzer had a Had punished some of the Wall Street banks. There was a need for independent investment research and they were hiring analysts. Their philosophy and my philosophy were a really, really good fit. It was there that I met Mike Trigg. Mike was a super sharp analyst, loved spending time with him. I was an aside. Every Friday we had what we called stock junkie Fridays. I can't remember the exact name that we called that group, but a select group of analysts every Friday would have lunch and we'd pitch our favorite ideas. And Morningstar encouraged individual investing, so I continued to manage the Clifford money during my time at Morningstar and learned a ton. This is my first job in the investment world. I obviously had some chance to make some investment mistakes during that time, but great experience being around passionate stock people. Absolutely loved it. And the best part about”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Business school in 2003, when I was looking for a job, it was tough to find a job on the buy side. I mentioned to many professors. BYU was not necessarily known as an investment program, but I was going to bloody my hands, bloody knuckles, knocking on doors, trying to find a job in the investment world. Thankfully, a perfect fit came with Morningstar. I know you're familiar with Morningstar. Absolutely.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“that are trading at a deep discount and deep value. How could we combine those two approaches into one portfolio? And that leads me right into the last year of business school. I started developing a strategy that did combine these two approaches. So around that time, Wayne's uncle Clifford, and yes, that is the beginning of the firm name. Clifford passed away and left a small inheritance that I started managing for Wayne, and I combined these two approaches, high quality wide moat, core value businesses with opportunistic deep value stocks. So we actually started this back in the end of 2003 is when I first started managing that. So 17 and a half years later, here we are and so far so good. So just jumping from business school, I knew I needed some practical experience. And I talked about in business.”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Studies that buying low valuation stocks is a fruitful exercise over the long term, but it's psychologically tough. It's hard to buy these companies. It's hard to be a contrarian when companies are hated. They aren't popular. And usually when a deep value stock's at its best buy point, it's been a laggard. No one gets real excited about bragging about this laggard. Hey, I'm really excited about Abercrombie and Fitch Day. It's been down 50% over the last year. It's just not the type of thing you're talking about at cocktail parties, especially when these companies are in the throes of their woes, if you will. But we think both types of investments very intriguing to me personally, and they're both alpha-rich areas of the market. So we contemplated, and I was thinking a lot about how could we combine these two approaches for this investment firm that we want to start? The idea of a core value, what we call core values, why?”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source
“Towards a contrarian approach as I studied the investment philosophies and how the great ones did their investing, I really linked onto two different types of investments. One was the idea of buying wide moat businesses, companies with competitive advantages, a sustainable competitive advantages. They earn high returns on capital for a long time. They tend to be worth more every year intrinsically, so they're compounding machines. I love that idea. And if you could buy them at a discount, all the better. Fits in with our more contrarian style. The second type of company was more of a traditional deep value stock, company that's severely out of favor with the stock market and has fallen to an unrealistically low stock price. So these are often statistically inexpensive, trading at low valuation multiples, but that's not enough for what we do at Clifford Capital. A lot of academic”
2021-09-16 · Capital Allocators · Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11) · IDENTIFIED FROM THE TRANSCRIPT · source