Modern Ben Graham Investing

During his recent interview on The Acquirers Podcast with Tobias, Dan Zwirn, CEO of Arena Investors LP discussed Modern Ben Graham Investing. Here’s an excerpt from the interview:

Tobias: Arena operates businesses as well, so how do you characterize Arena as an investor?

Dan: Well, we just characterize it as an investor. We are as comfortable as traders, as lenders, and investors, as well as operators and merchants. When you really look at who are the best true value investors, they are going back many, many decades. It’s people who are as comfortable with securities, as they are with operating. You look at today’s world, and you think about a Glencore or a Cargill, or you think about some of the large Hong’s in Hong Kong like Cheung Kong Holdings of Li Ka-shing and other folks like that, or you look at a Bola Ray or an Arno or folks in Europe, they’re trading, they’re buying and selling, and they’re owning and operating. It’s just another way to extract value.

In our case, we own 10 or 12 businesses now, where either opportunistically we had a chance to buy them at levels we’ve landed them and owned them for nothing. Or, in situations where we had to– we had a counterparty that couldn’t produce, couldn’t live up to its terms and so we ended up owning the enterprise. There’s opportunity there too. There’s another opportunity to allocate capital and look at the next marginal– at the margin, the next ROIC that makes sense, whether it’s buying another security doing another trade, or plowing capital into an enterprise that’s well managed, and well aligned with thoughtful skilled planning involved in terms of operating those enterprises.

When you see Buffett, or you see again, Li Ka-shing, or you see these folks, it’s all one thing. It’s the investment of that marginal dollar at its most optimized return per unit of risk. Being creative as an owner merchant can be helpful. Then also on the other side, being creative in terms of the capital you manage, which is a driver of the merger of the skills of managing obligations in insurance and investing. You see a lot of folks thinking about, like Buffett did decades ago, and like Henry Singleton and Teledyne did decades ago, maybe there’s pools of capital that I can use to do my merchanting and trading and investing that really optimize that kind of full capability, I have to optimize return.