Podcast #14: Value Investing with Tobias Carlisle
Advisor: Matthew Cochrane
Is value investing dead? New investors could be forgiven for thinking so. Over the past decade, the Russell 100 Growth ETF has appreciated 282%, nearly triple the returns of its counterpart, the Russell 1000 Value ETF. Whether this is due to perpetually low interest rates or the ongoing digital transformation in the both the consumer and corporate worlds or some combination of the two, investors seem to almost assume that growth will continue to outperform value going forward.
But has this always been the case? When looking at larger data sets than just the last ten years, investors see that trend reverse. Indeed, for the majority of times when data is available, value actually outperforms growth. Are we in a new paradigm where growth stocks will continue to dominate value stocks or will this trend reverse towards the mean?
In our fourteenth official podcast, 7investing lead advisor Matt Cochrane chats with Acquirers Funds founder and managing director Tobias Carlisle about the current state of value investing. The two discuss Toby’s investment philosophy, the stocks his fund is holding, a well-known company it’s shorting, and when to know it’s time to sell.
0:10 – Introduction: From Australia to LA, from law school to investing, Toby describes the journey that brought him to deep value investing.
8:25 – What is “net-net” and Benjamin Graham’s formula for value investing?
12:00 – Why has value investing underperformed growth over the last ten years? Why might this trend reverse?
17:10 – Thoughts on Warren Buffett’s famous quote: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
20:25 – Do Facebook (NASDAQ:FB) and Alphabet (NASDDAQ:GOOG)(NASDAQ:GOOGL) have durable economic moats?
24:10 – When do you sell a quality company?
29:55 – How Acquirers Funds seeks a margin of safety in three ways: 1) a discount to a conservative valuation; 2) a strong, liquid balance sheet; and 3) a robust business capable of generating free cash flows.
34:40 – What makes Best Buy an attractive investment?
37:30 – Workday, a human capital SaaS platform, is growing revenue by more than 20%, most of which is recurring, and has $2.6 billion of cash on its balance sheet. Why is Acquirers Funds short this company?
41:10 – Has Warren Buffett lost his touch? Is Berkshire Hathaway too large to realize market-beating returns? Is Berkshire still an attractive investment today?
46:20 – As a father, what advice does Toby have for other parents for teaching their kids about personal finance and investing?
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Companies mentioned in this podcast include Alphabet, Amazon, Berkshire Hathaway, Best Buy, Facebook, Microsoft, Shopify, Walmart, and Workday. The 7investing team may have active positions in one of more of these companies.
This podcast was originally recorded on June 12, 2020 and was first published on June 22, 2020.