Wednesday, February 14, 2007

Back From Boston

GMO Investment Strategy Competition

I flew up to present to GMO on spinoffs, a very Greenblatt-inspired idea. I'll try to find a way to post a copy of my presentation slides, but the meat of my strategy is as follows:

  1. Spinoffs / parent companies tend to improve operation metrics.
  2. This causes spinoffs to outperform the market in the 1-3 year time window.
  3. Mass institutional selling in the short-term can create attractive entry prices.
I was a little intimidated that my strategy wasn't as quant-driven or financially sophisticated as some of the others. However, at Goizueta we are taught the power of stories, a sentiment often echoed by Bill Miller of Legg Mason fame. With the help of classmates and professors, I was able to form a cohesive and logical argument that the judges liked.

We were also treated to lunch with Jeremy Grantham. I was incredibly impressed by the breadth of his macroscopic thought, in contrast to my bottom-up stock picker's perspective. He quizzed us on a variety of topics I had never even thought of considering, such as the reasons why timber outperformed other commodities, and which discount rates would be appropriate in cost/benefit analysis of environmental action.

Unfortunately, I wasn't able to secure an internship through this process. But hopefully this success can serve as a positive signal to other prospective firms. Several classmates were confused that I was still quibbling over $100 price differences in airline tickets, and that I had no plans to spend my prize money. What can I say, I'm a value guy through and through.

Tuesday, February 6, 2007

Quick update

I've trimmed a decent portion of my FootStar position. 60% in less than a year is pretty nice. I've started building a position in Aldila (ALDA). This piqued my interest after it showed up on the Magic Formula search for microcaps. I was able to purchase in the low 16's, with a sizable discount to my IV calculation of $30. Will elaborate some more soon.

I've been on short hiatus in preparation for my trip to Boston tomorrow. I have been preparing for this for the past few weeks, at the expense of everything else in my life. I will be giving a presentation on spinoffs as part of an investment strategy competition hosted by a large firm there ($140 B under management). If this works out, then I'll be set for the summer. Otherwise, I'll have to keep looking. Does anyone out there want to give me an internship?