In this interview with Raging Capital, Jeff Gramm explains why experienced value investors tend to prioritize good governance and high-quality investments over time. He recommends exploring a wide range of investment opportunities rather than specializing in one niche. While some believe that value investing might be declining Gramm maintains that it still yields good returns, emphasizing the importance of thorough research and extra effort in finding overlooked opportunities, like the example of Ambac.
Here’s an excerpt from the interview:
I think most value investors, the longer that they do it, they become a little bit more allergic to bad governance, a little bit more allergic to low quality. I think you tend to veer more towards higher quality and growth. One thing that
I’ve learned is to always try to exploit a wide universe of ideas. We try to do lots of different stuff. We do special situations, we will do litigation.
We try not to be too focused on any one niche, which is interesting because in the capital allocation world, people really want you to have a specialized niche.
If I came to you and said, “I only do franchise restaurants, I’m long/short. That’s my focus and I know it inside and out.” That’s a great pitch for raising capital, but it’s not a great pitch for deploying capital and generating great returns.
Host: That’s really interesting. Is value investing cyclical, or is it a dying art?
There are still people out there generating good returns. I still think it works. We’ve had a pretty good run. A lot of my peers have had good runs.
I think, in the end, there’s always opportunity out there by doing just a little bit of extra work and a little bit of extra research. I don’t think it requires rocket science.
When you talk about a situation like Ambac, it’s not super complicated and there are a host of reasons that people aren’t looking at it.
You can read an entire transcript from the interview here:
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