Graham & Doddsville Winter 2016 Newsletter

We are pleased to bring you the 26th edition of Graham & Doddsville. This student-led investment publication of Columbia Business School (CBS) is cosponsored by the Heilbrunn Center for Graham & Dodd Investing and the Columbia Student Investment Management Association (CSIMA).

In this issue, we were fortunate to speak with three investors and the founder of the popular blog Farnam Street.

Craig Effron of Scoggin Capital Management discusses the evolution of his firm and his investment approach from commodities to the stock market. Craig offers insights into his risk management mentality, challenges facing the investment management community, and creative ways to express investment theses while managing against downside risk. He shares recent case studies in the event-driven space and opportunities he currently see in distressed credits in Puerto Rico and energy.

Jeff Gramm ’03 of Bandera Partners discusses his book on activism “Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism” and walks through current ideas including Famous Dave’s (DAVE) and Star Gas Partners (SGU).

Shane Parrish discusses the origination of Farnam Street and his focus on becoming a better learner, as epitomized by Warren Buffett and Charlie Munger. Shane explains how these learnings apply to becoming a better investor and shares his hopes for Farnam Street and its readership.

Jonathan Salinas ’08 of Plymouth Lane Capital discusses his experiences with varied investment approaches and mentors and how his background leading up to founding Plymouth Lane has contributed to the firm’s world view and how he seeks to invest. Jonathan also shares current ideas DHX Media (DHXM) and Sequential Brands Group (SQBG).

This issue also highlights photos from the 25th Annual Graham & Dodd Breakfast, held on October 9th, 2015 at the Pierre Hotel in New York. This event brings together alumni, students, scholars, and practitioners for a forum on current insights and approaches to investing. This year’s breakfast featured a conversation with Philippe Laffont of Coatue Management moderated by Professor Bruce Greenwald of Columbia Business School.

Lastly, we are proud to bring you pitches from current students at CBS. We feature finalists from the Darden at Virginia Investing Competition, Columbia Business School’s inaugural CSIMA Stock Pitch Challenge, and Alpha Challenge at UNC Kenan-Flagler.

The three finalist ideas from our classmates include: Marc Grow ’17, Benjamin Ostrow ’17, and Evan Zehnal ’17 — Dexcom Inc. (DXCM) Short; Nielsen Fields ’17, Joanna Vu ’17, and Adam Xiao ’17 — Quest Diagnostics (DGX) Short; and Justin Hong ’17, Zachary Rieger ’17, and Cristóbal Silva ’17 — XPO Logistics (XPO) Long.

As always, we thank our interviewees for contributing their time and insights not only to us, but to the investment community as a whole, and we thank you for reading.

Graham & Doddsville – Craig Effron: Investment Approach From Commodities To The Stock Market

Graham & Doddsville Winter 2016 Newsletter: Dexcom Inc. (DXCM), Quest Diagnostics (DGX) Short  Ideas And MoreCraig Effron is the co-portfolio manager of Scoggin Capital Management, which he founded with partner Curtis Schenker in 1988. With approximately $1.75 billion in assets under management, Scoggin is a global, opportunistic, multi-strategy event-driven fund. Scoggin focuses on identifying fundamental long/short investments through three primary strategies including event driven equities with a catalyst, special situations, and distressed credit. Mr. Effron began his career as a floor trader on the New York Mercantile Exchange and New York Commodity Exchange. Mr. Effron received a BS in Economics from the Wharton School of Business of the University of Pennsylvania.

Graham & Doddsville (G&D): Could you tell us about your background and how you came to investing?

Craig Effron (CE): It’s important, because I am not the traditional hedge fund story. I didn’t work two years in investment banking and then go to Harvard Business School. I went to Wharton for undergrad. I did not get into NYU Law, but I got into Duke. I went down to Duke for a weekend with my parents and everybody there was 6’4” and blonde. I said, “I’m not going to do very well here. Socially, I cannot go here.” My parents said, “I tell you what, take a year off, defer, and then reapply to NYU a year later and hopefully get in.”

During that year, I met up with two buddies for a card game at Penn. They were playing for stakes that I had never even known existed. I said, “What do you guys do for a living?” One said, “We trade commodities. On the floor, we buy and sell gold and silver. It’s really fun and you should come check it out.”

I had been working at EF Hutton, which was big in everything, but they went bankrupt in the ’80s. I had gotten a job there right after school and worked there for a few months. But, then I played in this card game and, afterward, went down to the floor with my friends. I thought, “Wow, this looks like a lot of fun.” Somehow, I convinced my parents to lend me forty thousand dollars to try my hand at trading commodities. I said that if I didn’t do well, I would go to law school a year later. I did well. I learned a lot about life and about commodities and trading. And I was fairly good at it.

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