In this part of our interview series with Cliff Sosin (CAS Investment Partners www.cliffordsosin.com) we have a chat about his portfolio and his investment in Carvana.
- At the beginning of this part Cliff Sosin gives us an overview of his portfolio and the companies he is invested in.
- At 01:45 we start to talk about Herbalife Nutrition Ltd (NYSE:HLF).
- At 04:30 Cliff explains us when he did invest in Herbalife
- At 10:15 we are talking about the impact of the investment in Herbalife for his fund.
- At 04:30 Cliff explains us when he did invest in Herbalife
- At 10:15 we are talking about the impact of the investment in Herbalife for his fund.
Q2 hedge fund letters, conference, scoops etc
Why he went long Herbalife? Cliff Sosin outlines his portfolio and explains his Herbalife thesis
Transcript
Cliff welcome back to the first part of our interview. Morris is also there. I enjoyed this part we want to get deeper into your portfolio and learn what companies you're investing in. You have currently six holdings and one short Is that right? Yep. Sure. What are the six holdings?
Similarities postion is Carvana, after that we have positions in World Acceptance, Herbalife, Ashtead Group, Credit Acceptance and the British retailer called B&M. So that's what the list is and Ashtead Group is send out rentals so they're predominantly the US construction and rental company. Carvana is large online news, new car dealership. Herbalife is a multi level marketer of health and weight loss products. B&M as a discount UK retailer, Credit Acceptance is a subprime auto lender. I believe I've covered them all but if I missed one let me know.
The retailer i think?
B&N the retail? Oh yeah they are a discount UK retailer.
Okay. You have strong U.S. focus or?
Yes yeah, it's much easier of those companies only B&M is basically is just outside of the US you know Credit Acceptance, World Acceptance, Carvana, for the most part Ashtead Group are all entirely U.S. focus. B&M is outside the U.S. Herbalife is a global company.
Some of these talks like especially Herbalife are quite controversial. Why did he invest in some kind of controversial stock?
Uh, well, I don't think Herbalife so controversial anymore. It was controversial for a time when an investor named Bill Ackman made the case in public that he thought that Herbalife was a was operating an illegal pyramid scheme. In general, the goal in investing is to find businesses that have a really bright future that you can get for a lot less than they're worth.
It turns out that other people have that goal to and so you're usually not able to get a great investment, unless there's something that is causing the person on the other side of the trade to sell it to you. So it's, you know, unlikely not impossible, but unlikely, generally that you're going to have really phenomenal investments without at least some amount of controversy at some level by someone about the value of the business.
In the case of sort of the public controversy that Herbalife had, and in particular, Ackman. You know, it was, in some sense, bad, but sometimes good. And what I mean by that is, the thing that was bad, was an acronym was lobbying regulators to shut the company down. And that was bad, because to the extent that he was successful, and he was able to create some sort of political outcome where, you know, the facts didn't prevail, which, you know, happens from time to time, that added some risk. The good news was that once he laid out his case, you could pretty easily invalidate it. Basically using evidence in fact, even just limiting yourself to his evidence, you could invalidate it.
But the other nice thing was you had this person who's very bright with a big team spending $50 million trying to develop the best, you know, red case Red Team case you could possibly have. So, the risk in investing some time is what you don't know right? You just don't know what you don't know. And having someone like Acklin, you know, trying to turn over every stone and highlight everything you thought was bad about company actually, in some sense de risked the investment because it reduced the probability that I would have missed something about the company that would be bad. So you know, all told, you know, I don't necessarily seek out situations like that but at the same time if it hadn't been tracking in stock wouldn't come cheap. I never would have invested in it's been great. So I'm glad you did. It. is more plans.
And when did you did you buy Herbalife?
We invested in Herbalife in January of 2013. And the admin short campaign started in late December of 2012. So basically a month after his initial presentation and I only looked at it you know, I watched Jacqueline's presentation on Herbalife for very much the same reason that people like stare at car accidents on the road, right. I i was i was interested in like, you know, I was interested in seeing basically.
