I believe Harris Kupperman (runs Praetorian Capital) and Chris MacIntosh (runs Glenorchy Capital) both have interesting value investing strategies.
They both have similar strategies in that both are focused on investing in out-of-favor sectors—with good future fundamentals for a bull market—whose assets are dirt cheap relative to intrinsic value.
They both take as little risk as possible to get the biggest upside possible (asymmetry).
They understand that they will be wrong on many of the bets they make, so for every $1 they risk, they need to make sure they are targeting 5–10x+ potential upside. This way, their winners will more than make up for their losers.
For Harris Kupperman (aka “Kuppy”) specifically…
From what I know, he usually has ~5 core holdings (a holding can be a sectoral play with a basket of companies in them) in his entire book, so he doesn’t dilute his winners.
He’s not a traditional value investor in that he doesn’t just invest in cheap assets because he knows that in today’s market, valuation cannot be the primary factor in a decision.
No one really cares if an asset is cheap, as cheap stocks keep declining. You need to find the trend inflection first, then determine if your entry price makes sense.
Therefore, he typically buys cheap assets that have already inflected. Yes, you might not catch the bottom of the bull cycle, but there will still be plenty of meat on the bone.
An example (as of when I’m writing) is tankers…
And now look at the Max chart (not even a blip on the radar)…
Kuppy understands that today’s market is different.
You have a lot more time to learn the industry and choose the right stocks. You can literally wait to buy until AFTER the trend has changed and we’ve inflected into a bull market in the industry.
Even then, you may have a few months before the machines realize it and the share price responds. The key is making absolutely sure that you’re in a trend that is robust—one that will carry for a few years. Then let the computers do their thing.
Now, I will talk about Chris’s thinking for how he runs his deep value hedge fund…
Again, their strategies are similar (buy out-of-favor sectors that only have to get from horrible to less bad), but Chris doesn’t mind being early for a year or two.
In addition, Chris typically makes A TON of asymmetric bets (maybe like 10–20—just rough numbers), as opposed to Kuppy’s 5.
Chris typically weighs each sectoral play as a 5% or 10% position size, whereas Kuppy is 25% or 33%, I don’t remember.
By doing so, Chris may dilute his winners, but he is also a lot more diversified, which means his losers wouldn’t hurt his portfolio as much as Kuppy’s do.
Chris retired in his late-20s, having made his fortune in asymmetric bets like the New Zealand real estate (64x), last uranium bull market (10x), Bitcoin (20x), and shipping (27x).
Happy investing!