Podcast Review | Applying a Fundamental and Value-Oriented Approach to Investing
July 26, 2019
By Ben Rundle | Portfolio Manager at NAOS Asset Management
David Abrams started his career working for value investing legend Seth Klarman at Baupost. His fund Abrams Capital has returned 15% p.a. since 1999 and has $9bn in AUM.
In this podcast he shares a huge amount of information into what he believes are the characteristics that make up a good business. In particular, we highlight the following passage of thought.
“When looking at a business we want to understand the fundamental economics of that business. It’s easy to tell what’s happening today in a business but what separates a great investor is having insight into what the business will look like in a few years from today. To understand the dynamics around what is going on. A lot of it has to do with who has the power in the relationships, what the product alternatives are, the value of the business to both the customers and the employees so we want to try and understand that, rather than just take historical numbers and projecting them out two years. Taking that one step further, everyone is looking for businesses with pricing power, as are we. That’s great, but to say that a business has pricing power and leave it there is an incomplete line of thinking because no one has unlimited pricing power. Then the question is what can help you or what can hurt you. To understand those things at a deeper level is really crucial.”
We think David is an investor who is ahead of his class in terms of thinking about portfolio construction and his lessons are of huge value to serious investors.