Brian Bares is Bullish on Stratasys, Inc

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Brian Bares

 

Brian Bares, Bares Capital Management – The Small Cap Advantage

Odey’s Brook Fund Posted A Commanding Q3 Return On Long And Short Sides [EXCLUSIVE]

Eurekahedge Hedge Fund Index invest Value InvestingOdey's Brook Absolute Return Fund was up 10.25% for the third quarter, smashing the MSCI World's total return of 2.47% in sterling. In his third-quarter letter to investors, which was reviewed by ValueWalk, James Hanbury said the quarter's macro environment was not ideal for Brook Asset Management. Despite that, they saw positive contributions and alpha Read More

Brian Bares is  author of The Small-Cap Advantage: How Top Endowments and Foundations Turn Small Stocks into Big Returns, and the founder & portfolio manager at Bares.

Bares leans more toward the Munger approach and focusses on the small/micro-cap space

  • Small Caps
    • Better compounders
    • Persistently outperform larger cap stocks
    • More good ideas
    • Less market efficiency in prices
    • Less or No analyst coverage
    • 3k-4k companies smaller than those falling in the Russell 2000
    • Most mangers typically start with a screen
      • Bares leary of ‘rear view mirror’ aspect
      • Screen leads more to ‘just cheap’
      • Bares uses a ‘Moats & Management’ search
  1. First search for 40 ‘best’ companies in small/micro space
  2. Then get into the valuation of this group
  3. Pare down to the ‘best’ 10 options
  • Long Term price is approximately the long term growth in business value per share

 

  • Moat +Management=Quantitative
    • Find before other managers
    • Find before the results are in the 10-K
    • 8 analysts are constantly on the road
    • Intentionally stay small
    • Note: over 80% of market risk is diversified away in first 8 stocks (assuming they are un-correlated)

 

  • Example is Stratasys, Inc. (NASDAQ:SSYS)
    • Manufacture 3-D printers
    • Nascent industry & growing quickly
    • ‘Razor Blade’ model
    • Came from #2 position (Former #1, 3-D Systems dropped the ball) now has +41% market share
    • The management invested the technology
    • Deal with HP for branding of printers
    • Important part of Moat – also have established distribution network
    • Q&A
      • Turnover?
        • Around 30% – less worry for them as they manage institutional money
  • Is it different in the post – financial crisis?
    • Some companies have had a level of trouble, but many they invest in have no debt
  • Experience with takeovers of companies you are in?
    • ½ dozen or so (not always a good deal)
  • Mistakes you’ve made?
    • In the sales area – part of the story that is not working/growing
  • Value vs. Growth?
    • No distinction – linked

 

Value Investor Conference: Omaha, Nebraska – May 4rd, 2012

Dustin Hunter, SunRift Capital Partners (www.sunriftcp.com)

 (These notes are to the best of my recollection and trusty ink pen. Discrepancies are due to my error in understanding & transcribing.)

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