Robert Leitz – I was interviewed by Lukas Neely, author of Value Investing: A Value Investor’s Journey Through The Unknown ” for his monthly publication Investor Vantage (Investment Ideas for Intelligent Investors).
Robert Leitz explains his philosophy to value investing, how he starts his day with a “strong” cup of coffee, how it’s his setup, not habits or rituals, that set him apart, and why he likes the business of Euler Hermes so much.
Robert Leitz founded Iolite Partners in 2012. At Iolite, Robert manages concentrated portfolios of global value investments in hope of generating absolute returns greater than the market. His value based approach to investing has allowed him to generate superior returns to investors over the years, with the portfolio returning annualized net returns of 15%+ since inception. After earnings his master’s degree at Columbia University in New York, he spent time as an investment analyst at Goldman Sachs’ European Special Situation Group and was a founding member at TPG Credit (a multi-billion credit opportunities hedge fund in partnership with private equity firm TPG). Robert doesn’t normally discuss current holdings. However, he shares his insights Robert Leitz on Euler Hermes as a business he likes but does not own yet.
How did investing start for you? And how has your view of investing evolved (if at all)? Robert Leitz: It all started in 1995 when I was still at high school. The local public savings bank (Sparkasse) had organized a stock market game where students could virtually buy and sell stocks. Inspired by a newspaper article, I bought Nokia, doubled my money within 8 weeks, and won a prize for the third best performing portfolio of my home town. This led me to buy real shares with my (modest) savings.
I made quick gains that I kept reinvesting and even applied leverage as the stocks only seemed to know one direction – until I lost most of my capital in the 2000/2001 crash of the dot-com bubble. Humbled by that experience, I stayed out of the markets for a while, believing that investing was just another form of gambling. Five years later, I started my professional career as a restructuring consultant and travelled through Europe assisting distressed companies and their stakeholders in operational and financial restructurings. While the role was interesting and varied, I concluded I was a better analyst than I was a salesperson.
Working with banks and hedge funds had rekindled my desire to participate in the capital markets and I became quite keen to join the buyside. I was soon given the chance to work with Goldman Sachs’ Special Situations Group, a proprietary trading desk that invests the firm’s own money across the capital structure. My experience there led me to become a founding member of TPG Credit (now Castlelake), a multi-billion credit hedge fund.
In both buyside positions, I enjoyed working on complex tasks such as debt-control transactions with highly intelligent and driven people. I was fortunate to work with teams focusing on fundamental value analysis, an approach that intuitively made a lot of sense to me once I saw it being applied in the right way. In my roles, I had to look at collateral values, insolvency law and how to value whole businesses as well as the various pieces of the capital structure. I typically spent most of my days digging through the small print of bond prospectuses to assess risks and valuetriggers.
In hindsight, I couldn’t have asked for better training. Once I found an investing style that made sense to me, I started looking to learn from people who had great track records pursuing a similar, value-oriented approach. I was seeking role models that had seen the tide come and go and that excelled irrespective of the latest market fads. It won’t come as a surprise that I started my quest for wisdom by reading up on Warren Buffett. Subsequently, I went on to study other value investors such as Charlie Munger, Benjamin Graham, Walter Schloss, Joel Greenblatt, Seth Klarman, Bill Ackman, David Einhorn and Guy Spier.
My studies focused on two questions: what did these investors see when they made an investment, and what did they see when they exited their investments? Over time, I started to see patterns, developed my own preferences and also developed a mental framework to guide me. In addition, I realized that outstanding performance is also heavily dependent on the right setup (environment and incentives). My studies eventually led me to start my own business. Initially, I was just managing my own money and that of family and friends.
Over time, my client base expanded to include friends of friends, wealthy individuals, entrepreneurs, institutional investors and foundations. My goal is simple: to build a great track record over a period of 40 years. My client accounts are modeled after my own account and my fee structure only rewards me if I make money in the long run. I am a one man show – that means I do all the research myself and carry the full responsibility for all investment decisions. This setup enables
me to do what I think is best without having to face institutional restrictions that bog down so many of my peers. What does your day look like (from beginning to end)?
RL: I have a strong coffee and then start a daylong journey of reading. I read up on existing portfolio positions, browse the media for inspiration, and study countless annual and quarterly reports to improve my understanding of industries and businesses. In between, a couple of hours are dedicated to administrative work, preparing conference presentations, and meeting with existing and prospective clients