Our approach at the Superinvestor Bulletin is to scour the portfolios of the best investors in the world looking for great investment ideas.
With that in mind, we are embarking on an interview series with the next generation of investors. We are looking to find the Superinvestors of tomorrow.
We would like to present the first part of our lengthy Q&A with Meson Capital’s Ryan Morris.
Superinvestor Bulletin – How did you get started in the business?
Ryan Morris Meson Capital – I founded Meson Capital in February 2009 after receiving my Master’s degree in Engineering from Cornell. I had previously successfully co-founded and run a software company called VideoNote.
I half-joke that nobody would hire me after graduating because I am Canadian and the work visa burden that I carry makes it very easy to move onto the next candidate. So I’ve always needed to be an entrepreneur. By combining some business success with a frugal lifestyle, I have been able to avoid getting a real W-2 job since college.
The backstory of how I got into investing as a passion goes back to when I was 11 years old and learned about nuclear fusion and its ability to solve the world’s energy problems. Trying to learn how to finance such a grand project led me to stumble across Warren Buffett’s shareholder letters and I became “inoculated” as they say in value investing.
Superinvestor Bulletin – Have you tried to emulate the style/method of any particular successful investor?
Ryan Morris Meson Capital – Warren Buffett was the original spark and his principles still hold true although the world of investing has changed dramatically during the 60+ years he has invested.
Most people don’t realize he actually made much of his money in the early partnership days as an activist going after small overcapitalized companies. Small investors who try to invest in similar stocks to Buffett today have a huge competitive disadvantage as they lack low cost insurance leverage that he has.
I am a student of many successful investors with different styles from venture capitalists to quants. I am not trying to emulate anyone per se, as I believe I have a fairly unique background and perspective to bring to investing as someone who is simultaneously an activist investor and a computer programmer.
Some of the investors that I have learned a great deal about investing from have been Richard Fullerton, Mario Gabelli, Marc Andreessen, and Joel Greenblatt. I would say to give context to everything I say in this interview – I think of “investing” as necessarily having a 3+ year horizon, everything else is trading… which is not a game I really have an interest in.
Superinvestor Bulletin – How would you describe your investing approach?
Ryan Morris Meson Capital – Deriving from first principles.
The summary is I am a focused business-building activist investor for my longs and then hedge market risk and generate returns by shorting a larger number of lower quality companies. I rarely take any position unless I would be okay with the stock market closing down for 3 years.
The number one question I ask in any decision I make is “What is my competitive edge in this investment?” First principles mean that you build up from the most fundamental truths you can rather than reasoning by analogy or copying another investor’s style because it worked for them. Supply and demand are the most fundamental truths for economics.
For instance – why be an activist? It is very labor intensive to serve on boards and hire people and sometimes have to do proxy fights but it is easy to articulate the competitive advantage. Nobody else is willing to do the work.
Why be a business-building activist vs. what most do and push for buybacks/sales/spin-offs or other de-capitalizing moves? Well those are easy to push for, to actually invest in R&D and build a company is harder, and in the environment today, it can be financed cheaply. Unlike venture capital, by starting with a foundation of a company that has been around for decades, you eliminate much of the existential risk and have much more data to base decisions on.
Why short? Even though the index rises over time, most companies actually go down, the winners like Amazon (NASDAQ:AMZN) drive 10 others out of business over time (or maybe 500 in Amazon’s case!). So shorting is actually easier than people realize if you do it thoughtfully. The trouble is that portfolio management is much harder and you need to be more diversified so you can tolerate squeezes – that’s where good systems are important.
To put a point on it: I invest in stocks with a lot of raw business material (i.e. cheap valuation vs. revenues or assets) and good management (that may be put in place by us) and short companies with little competitive edge and weak, unadaptable management.
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