Dan Loeb, Dan Krueger - Interview notes


Tuesday, February 28, 2012 by

CSIMA Conference : Value Investing Conference at Columbia (Feb 2012)

Rare interview with Daniel Krueger & Daniel Loeb

  • Daniel Loeb

    • Started fund in 1995. Currently employs 65 people.
    • Core american value are entrepreneurial, competitiveness and individual freedom.
    • It's all about getting the right people.
    • 50-100 bps as hedging budget is typical.
    • Likes sinky feet companies i.e. when a company is proposed and your immediate reaction is its a stinky company. That is where some of the best ideas are found.
    • Our framework is relatively constant, but process has evolved.
    • Wisdom
      • Recommends book Checklist Manifesto (link)
      • Recommended book Art of Learning (link) Note - I read the book based on his reco. It's an amazing book.
      • If you are reading research reports all the time, you will fail.
      • Investing is for all rounded people. (Note - Daniel is an incredibly smart and a very well rounded person. He is an avid adventurist and well known for doing different things)
      • His advise - Go out and see the world. You should be able to switch off from time to time.
      • Recommends looking at Santa Fe institute (link), if you want to understand the underlying modalities of decision making.
    • Daniel Krueger
      • In Europe, the combination of austerity and de-leveraging presents a perfect storm.
      • High yield implied 7% default rate.
      • Deleveraging by the financial institutions in Europe can present interesting opportunities. There will be a lot of forced sellers.
      • In distressed, you dont want to be all-in all the time. I would rather pay little bit more for a good business, than get a crappy business.
      • In distressed credit, it is all about understanding asymetric bets.
      • Emphasized the importance of process over outcome. Process is extremely important, because it is used over and over again.
      • Measure and judge your process.
      • Good outcome and bad process is particularly very dangerous.
    • Even in declining industries, look for companies with low capex, low R&D and history of no crazy acquisitions.
    • In distressed investing, it is extremely important to be a person of good integrity, because the same people will be working with you over and over again.
    • Price is a short term opinion of the people in the market.
    • Investing is like a jig-saw puzzle where the pieces are not supposed to fit perfectly.
    • It's very easy to re-regurgitate other's opinion (I think he meant particular the research of the sell side analysts). People can talk from the hip. Doing primary research is extremely important.

    Agenda : Distressed Investing
    Panel : Dan Loeb (Third Point Capital),  Bruce Barkowitz (Fairholme Funds), Daniel Krueger (Owl Creek)

    Note - My big thank you to Columbia Business School. The comments made by speaker are off the record. I tremendously benefited from this event. This event is very unique in terms of the highest quality of speakers that it attracts while charging a negligible fee to the attendees. This conference is perhaps one of the best learning forum for students interested in value investing. The purpose of this post is to share the knowledge and increase the awareness about this great annual event organized by CISMA (Columbia Investment Student Management Association). I hope this post will encourage more and more students and practitioners to benefit from this great annual conference. The accuracy and accurate attribution to the speaker is not a guarantee.

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