The following is an excerpt from ValueWalk’s interview with the CEO of Grizzly Research, an activist short selling firm. In this part of the interview, the CEO discusses his portfolio construction process, when he likes his short to be effective, his role as an “activist” short seller and his favorite books. The CEO whose identity is still anonymous will be revealing it shortly exclusively to ValueWalk. Please stay tuned for the full video interview with transcript or hear his top idea it our upcoming conference.
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I just wanted to switch over to portfolio construction. Do you concentrate and how do you position your best ideas and when do you sell?
Well, I think if you want to make a lot of money, you gotta concentrated positions, I think portfolio construction always depends on your circumstances, penalties, circumstances, if you're managing money for yourself and young and you know, you can concentrate your positions if you're managing maybe money for other people and you need to make sure that you don't lose it as well, diversification is probably what you need to be looking for, but there's still things that you know, if you have an idea, you gotta have money in it.
So you know, concentration is for some period of time, but I don't want to give you too much. Thoughts on portfolio construction, I think it depends on your circumstances, and that's what it really depends on. So there's no Golden Rule I think that works for everybody.
Yeah, definitely. And in regards to shorting, and when you publish your ideas, is there a timeline as to when you want that short to be effective? Like, do you want it to come down immediately after your report or…
Well, we're patient like that. I think it's nice to see of course, reaction and people, you know, think then everything is great. But that's not that's not what we're looking for. We're looking for medium term long term, I think, because the stocks that we're looking at, it's not it's not a hit and run strategy. I don't think that's sustainable or that works. But it also depends always on the situation. You know, so if it might be a six month timeframe, a two year time frame, that also depends on how the stock develops, you know, goes down 80% within the, within two months or so, you know, reach a price target to cover, you know, so I'm not,I don't have a scorched earth approach, I don’t want to bring the company to zero and then leave after everything is destroyed. I don't think that that's, that's just not a strategy for us.
You're also an activist short seller. So the activist portion can tell me more about that?
Well, I mean, I think the activist portion is simply….. by you become an activist short seller to some degree by going out there and publishing your your findings here. Run risk of retaliation. And you know, you're calling this company out publicly For their wrongdoings I think that's maybe the most important but maybe also the first step in being an activist short seller. I think after that a good activist short seller wants to continue covering the company wants to continue uncovering wants to continue to uncover wrongdoing at the company and really stay on top of things. until things are maybe set right.
I think that just by us publishing our opinion, and and, and putting as much work into the reports as we do, maybe makes us an activist short seller by definition . but we think all good activist short sellers also ought to follow up on companies, we try to do more of that.
What are your favourite books?
I think Poor Charlie's Almanack here ,the book about Charlie Munger is one of my favourites. Intelligent Investor is great. I also enjoy Benjamin Franklin's Autobiography. Berkshire Shareholder Letters are always great. Depends on what category you were looking for. I like to read I think it's very useful. It's a good thing to do.
During quarantine, what are your hobbies or what do you do during quarantine?
Well, nothing, man, I mean, I like to workout normally I like to work out so I'm just doing push ups here but I can't go to the gym. So what the heck I'm just sitting at home reading more you know so I you know, try to take more notes read a little bit more to make most out of the situation. But unfortunately, there isn't too much to be done. started watching Better Call Saul and Breaking Bad. Pretty cool.
And then your closing thoughts?
Let me let me close on this idea. I think The market right now is very distorted. But at some point, I'm afraid that fundamentals are gonna start to matter again. And there will be a day of reckoning for the monetary monetary policy that we are conducting right now.