I’m often asked how I come up with trading ideas. My usual response is that I do a lot of reading, talking to other traders, and thinking.
I don’t have a single funnel for sourcing trades. This is partly because we’re interested in all types of trades (ie, value, classic macro, special situation etc…) and don’t limit ourselves to a particular approach. What were concerned with, is asymmetry… the greater the convexity the better.
Since I can’t give you my network of traders and HF managers I talk shop with, I thought I’d do the next best thing and share with you my go-to reading list of quarterly fund letters, sites, and blogs that I read regularly for idea generation. There’s a lot of fund managers out there, and most aren’t worth their salt. The selection below includes the few I believe have the most talent.
You’ll notice this list is skewed heavily to small-cap value managers. The reason is that these are the ideas that I’m most interested in from others. I don’t read a lot of other macro work because that’s the world I live in. And many of these value fund managers can devote a lot more time to investigating a single company, than I ever could. We always do our own due diligence, of course. But when you have a stable of great value fund managers doing the initial filtering for you, it’s a big help.
Like Picasso said, “Good investors borrow, great investors steal”… or something along those lines.
Here are my quarterly must-reads. The few reports that I never miss and from which I have stolen many great ideas from. Also, reading these letters is like receiving a masters in value investing. Some great nuggets in all of them (links to report sections included on all names).
- Greenhaven Road Capital: This is a small-cap value fund run by Scott Miller. Miller is kind of an unknown. He keeps his AUM small and maintains a low profile. But the guy knows how to value a business and his reports always make for a great read.
- OakTree Capital – Howard Marks’ Memos: Marks is an investing legend and there’s not much else to add to that. You won’t find stock ideas in his memos but you’re almost certain to learn something.
- Greenwood Investors: This fund is run by Steven Wood who’s also a relatively new up and comer. He’s got a similar style to Scott Miller and is a good resource for contrarian value plays.
- Cable Car Capital: Is run by Jacob Ma-Weaver who’s a sharp value oriented investor. He always presents unique and interesting investing ideas in his letters. He also occasionally posts some great stuff on his blog.
- Arkto Investors: Is run by Peter Rabover and focuses on value and special situations. Another great resource for the undiscovered stocks. His letters are hosted on Harvest, so you’ll have to create an account if you don’t have one already (it’s free).
- Miller Value Funds: Run by Bill Miller, who’s another investing legend, though his record was tarnished in the GFC when his fund took a serious beating. But he’s back, with his own fund, and he’s putting up good numbers again. I really enjoy his thinking and writing and posts/letters found on the site are a great source of idea generation.
- Horizon Kinetics: Horizon is a larger shop that specializes in bottom up fundamental research. Their quarterly letters are always an insightful and fun read.
- Peters MacGregor Capital Management: Is another large shop, but with a global focus. It’s a great resource for stock/market idea gen outside of U.S. markets. They also regularly share decent video presentations where they talk over an investment their in.
- Laughing Water Capital: Run by Matt Sweeney, LWC is a long-term value oriented shop.
- Saber Capital Management: A value focused fund by John Hubner. Quarterly letters always include some great thoughts on investing theory/wisdom, along with some great investment ideas.
So these are the quarterly letters that I make sure to at least skim through each quarter if not read in their entirety. For idea generation I also find sites like Value Investors Club, MOI Global, and SumZero useful. VIC and SZ are free as long as you submit an approved idea.
Some other sites that are worth checking out are The Patient Investor’s Blog (Longcast Advisers), Wiedower Capital is pretty good, and so are Dane Capital and Breach Inlet Capital on Seeking Alpha.
Shoot me a message at [email protected] if you’ve got a letter/resource you use that I didn’t mention here.
Article by Macro Ops
