Interview With Meson Capital’s Ryan Morris – Part 1


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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Berkshire’s Kraft Heinz Partnership With 3G Capital Couldn’t Be Going Better


Investors who closely follow the Berkshire Hathaway (NYSE:BRK.A) portfolio will know that there is a relatively new name that represents the largest portion of the portfolio.

The company is Kraft Heinz and Berkshire is one happy shareholder.

In 2015 Kraft Foods Group merged with H.J. Heinz in a deal that was put together by 3G Capital and Berkshire. Kraft shareholders (which included Berkshire) received 49 percent of the stock in the combined entity, plus a cash dividend of $16.50. Berkshire and 3G also invested $10 billion in the deal.

Kraft Heinz Co (NASDAQ:KHC) was created with Berkshire ending up with 325 million shares and almost 27% of the company.

Berkshire and 3G (a private-equity firm founded by Brazilian billionaire Jorge Paulo Lemann) had previously joined forces to buy Heinz in 2013.

In his 2015 letter to shareholders which was released in early 2016 Berkshire shareholder Warren Buffett had plenty to say about his expanded partnership with 3G:

“Our Heinz partnership with Jorge Paulo Lemann, Alex Behring and Bernardo Hees more than doubled its size last year by merging with Kraft. Before this transaction, we owned about 53% of Heinz at a cost of $4.25 billion. Now we own 325.4 million shares of Kraft Heinz (about 27%) that cost us $9.8 billion. The new company has annual sales of $27 billion and can supply you Heinz ketchup or mustard to go with your Oscar Mayer hot dogs that come from the Kraft side. Add a Coke, and you will be enjoying my favorite meal. (We will have the Oscar Mayer Wienermobile at the annual meeting – bring your kids.)

Jorge Paulo and his associates could not be better partners. We share with them a passion to buy, build and hold large businesses that satisfy basic needs and desires. We follow different paths, however, in pursuing this goal.

Their method, at which they have been extraordinarily successful, is to buy companies that offer an opportunity for eliminating many unnecessary costs and then – very promptly – to make the moves that will get the job done. Their actions significantly boost productivity, the all-important factor in America’s economic growth over the past 240 years. Without more output of desired goods and services per working hour – that’s the measure of productivity gains – an economy inevitably stagnates. At much of corporate America, truly major gains in productivity are possible, a fact offering opportunities to Jorge Paulo and his associates.

At Berkshire, we, too, crave efficiency and detest bureaucracy. To achieve our goals, however, we follow an approach emphasizing avoidance of bloat, buying businesses such as PCC that have long been run by cost-conscious and efficient managers. After the purchase, our role is simply to create an environment in which these CEOs – and their eventual successors, who typically are like-minded – can maximize both their managerial effectiveness and the pleasure they derive from their jobs. (With this hands-off style, I am heeding a well-known Mungerism: “If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.”)

We will continue to operate with extreme – indeed, almost unheard of – decentralization at Berkshire. But we will also look for opportunities to partner with Jorge Paulo, either as a financing partner, as was the case when his group purchased Tim Horton’s, or as a combined equity-and-financing partner, as at Heinz. We also may occasionally partner with others, as we have successfully done at Berkadia.”

Buffett prefers a much more friendly approach to buying businesses. He buys already efficient companies with great managers and lets them grow the business. 3G meanwhile buys inefficient businesses and takes the axe to them. Both results work, the 3G method involves firing a lot of people which is harder on the stomach.

The Early Results Are In – And They Are Fantastic

We are now just over a year into Kraft Heinz trading as a combined company. The share price has done very well especially year to date in 2016.

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A High-Beta Way To Follow Druckenmiller Into Gold


Earlier this year we got out in front of a pretty good move in gold (NYSEARCA:GLD) prices. Brexit has subsequently fanned the flames of the gold train that had already pulled out of the station.



We take no credit for the idea that the time for gold was at hand. Like all of our ideas we became interested in gold because we found that one of the Superinvestors that we follow had allocated a big portion of his fund to it.

And not just any investor, but arguably the best hedge fund manager of the past 40 years. For a 25-year period from 1986 through 2010, Stan Druckenmiller achieved an annualized rate of return of 30%. That is obscene.

More impressive, over that period of time Druckenmiller did not have a single down year. His track record truly is reason enough to follow this man’s investing advice.


Source: Bloomberg

Druckenmiller presented his bullish view on gold at the Ira Sohn investment conference back in May. In essence, what Druckenmiller said was that the party is over for both stocks and bonds and that investors needed to look elsewhere.


Source: Stan Druckenmiller Ira Sohn Presentation

His opinion is based on the fact that he just doesn’t think that the Central Bank induced bull markets can continue. The tank is empty, all the bullets have been shot.

– Interest rates are at all-time lows

– Those rates have been a wind at the sails of the stock market for 35 years with a non-top rate decline

– Stocks already have very high multiples on a historical basis

– Everyone and everything is leveraged to the neck

Druckenmiller believes that the Central Banks around the world are out of control. They have encouraged borrowing so aggressively that it has promoted reckless behavior. Instead of lowering the odds of a financial disaster occurring they have raised the chances.


Source: Stan Druckenmiller Ira Sohn Presentation

At the Ira Sohn Druckenmiller said that right now is just like the lead up to the 2008 financial crisis, except that the 2008 collapse would “pale in comparison” comparison to what will happen this time.

In case you were wondering, Druckenmiller did also warn us about that 2008 collapse in advance. All the more reason to listen to his advice today.

His advice on what to do to protect our portfolios and profit from what is coming is to allocate a significant portion of our portfolios to gold.

An ETF Designed To Provide Leverage To Rising Gold Prices

Now we aren’t gold bugs here at the Superinvestor Bulletin, but we do think that when Druckenmiller makes a call like this that it would be silly to not at least follow his lead and have some exposure.

He may not be correct, but given his track record odds are that he is.

We think that the Sprott Gold Miners ETF (NYSEARCA:SGDM) might be a sensible way to get quite a bit of upside to rising gold prices without having to expose a lot of capital.

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Look To The 1980s For The Key To 2016 Success – Stan Druckenmiller



  • The early 1980s were the start of tremendous bull runs for both stocks and Treasuries.
  • The investment conditions today are the exact opposite of the early 1980s, so why wouldn’t the best assets to own be the opposite as well.
  • The one asset that everyone wanted to own in the 1980s was the one that they shouldn’t have. Today, that asset is the one that Druckenmiller advocates.

Last month, the great investor Stan Druckenmiller gave a presentation that we think every serious investor should spend the time getting familiar with.

We would like to start with one paragraph from that speech because we believe it could be the most important thing that an investor will read this year. The paragraph contains all of 139 words and basically tells you exactly what to do for the next ten years.

When I started Duquesne in February of 1981, the risk free rate of return, 5-year treasuries, was 15%. Real rates were close to 5%.

We were setting up for one of the greatest bull markets in financial history as assets were priced incredibly cheaply to compete with risk free rates and Volcker’s brutal monetary squeeze forced much needed restructuring at the macro and micro level.

It is not a coincidence that strange bedfellows Tip O’Neill and Ronald Reagan produced the last major reforms in social security and taxes shortly thereafter. Moreover, the 15% hurdle rate forced corporations to invest their capital wisely and engage in their own structural reform.

If this led to one of the greatest investment environments ever, how can the mirror of it, which is where we are today, also be a great investment environment?

The bolding is ours and it is a question we think investors need to think long and hard about. Back in the early 1980s, all you had to do was buy the S&P 500 (NYSEARCA:SPY) and chill out for the next 35 years. Sure, there were some bumps along the way, but if you didn’t pay attention, you wouldn’t even have noticed.

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