John Griffin — Blue Ridge Capital
John Griffin: Background & bio
John Griffin is one of the more prominent Tiger Cubs. Before, staring Blue Ridge Capital during 1996, John Griffin earned his undergraduate degree from the University of Virginia and an MBA from Stanford Graduate School of Business. He began his career as a financial analyst for Morgan Stanley Merchant Banking Group before moving on to Tiger Management, where he became president in 1993.
John Griffin left Tiger Management and started Blue Ridge during 1996. The fund’s performance over the financial crisis really set it apart from its peers. Blue Ridge returned an impressive 65% in 2007 and weathered the financial crisis with an impressively minor 8% loss in 2008.
Blue Ridge currently manages around $8.3 billion.
John Griffin: Investment philosophy
Like most of the Tiger Cubs, John Griffin uses a long/short strategy with a long bias. His long positions are usually in large cap and high performance stocks, (such as Morgan Stanley or McDonald’s). John Griffin’s short trades tend to be companies that are struggling and undiscovered by the wider market.
Investments are based on bottom-up in-depth research of the fundamentals to determine the long term perspectives of each individual company.
John Griffin has been known to use an exhaustive investment checklist to screen the market for ideas and weigh up potential investments. The checklist focuses on several factors. For a start, in contrast to his traditional bottom-up style, John Griffin assesses the industry in questions outlook. The industry is assessed on some basic factors such as relative power of stakeholders, barriers of entry, core competencies for success, opportunities and how they are addressed by competitors. On the top of the list, Griffin asks; can a high performer can differentiate itself effectively from the bad ones in that particular market?
After assessing the industry environment, John Griffin the turns back to his bottom-up approach. A number of questions on the company’s business model, management, financial measures and risks will be made.
After the business and its environment is assessed and understood, John Griffin moves onto the balance sheet. According to John Griffin, the best way to assess a company’s finances is to follow the steps taken in Howard Schilit’s book “Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports”.
First, the balance sheet is stress-tested against the following criteria: capital structure, inventory and interest coverage. After, profitability is investigated based on how visible earnings are on a quarterly and yearly basis. What determines earnings growth unit sales, price or margin changes?
And lastly, Griffin takes a look at the company’s valuation. Taking into consideration the accounting policies applied by the company, John Griffin uses a mix of earnings, EBITDA, Sales, and Free Cash Flow Yield to arrive at a suitable conclusion.
Blue Ridge also uses a timeline to pinpoint trigger events for the proper valuation to be realized, possible future news affecting the price and the position building timeline.
After all the analysis is complete, Blue Water uses a noteworthy and common-sense benchmark of whether an analyst has understood the big picture. If John Griffin, or one of his analysts can explain the company’s business model to a ten-year old, it’s a green light.
John Griffin: Articles
- Billionaire John Griffin’s Five Picks That Killed the Market
- Blue Ridge Capital raises its stake in LinkedIn
- Tiger Management Helps Next-Generation Funds
- Blue Ridge Capital’s Recommended Reading List
- Blue Ridge Capital Opens Position in Air Products
- Latest Picks From Hedge Fund Blue Ridge Capital – Forbes
- Griffin’s Blue Ridge Capital Enters Facebook
- Blue Ridge Capital Buys Allegion; Dumps Tesla Motors Inc