Thread by @jspeiser

I've always been a fan of Buffett, but after years and years of this bull run I slowly lost touch with his deep-value methodology.

This 1 quote, I stumbled upon late Saturday night, made me reevaluate my entire equities strategy.

"If I was running $1 million today...

🧵

or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers...

But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that." - Buffet

Now, I dug into what this really meant and

He was talking about managing a few million dollars AND having the ability to invest in small and illiquid companies.

So while I'm fighting the street to win 10-30% gains on SPOT, SHOP, TWLO, SOFI, CRM, and others, Buffet, in my shoes would be doing something entirely different

He'd be focusing on the <$1b companies that the street is ignoring, and likely mispricing. Looking for the cigar butts trading at insanely low revenue and/or ebitda multiples.

Buffett called these investments "cigar butts." Sure, cigar butts may be worth little, but if you can pay even less than "little," you might still get a few puffs out of them.

I went back to Buffet's bible, the Intelligent Investor by his mentor Benjamin Graham, and re-read the chapters that focused on seeking out these diamonds in the rough.

I then looked at my tech portfolio and realized it wasn't setup for my IRR goals. I'm not looking for slow, steady, and semi-safe. I'm looking for aggressive growth, but in a smart and measured approach.

How do I achieve 2x, 3x, or 5x returns over the next 12-24 months?

In 2020 I achieved 67% IRR, and in 2021 a eye bleeding 150%.

How?

I focused on a beaten down, unloved contrarian bet during the beginning of COVID. Malls, Strip Malls and Multi-Family apartment REITs.

Once these REITs entered long-term gains and hit their 2019 highs, I went searching for the next big bet.

In October of 2020 a Google alert I had setup to track an old competitor, @ryancohen started popping up. Apparently he found a beaten down retailer and was loading up.

I knew Ryan well enough from our years competing with him on Chewy, that he is a very focused investor. Typically holds less than 3 positions and goes all in. Like with 100% of his net worth.

The more I dug into why he was buying GME the more I got intrigued.

So, in Oct and Nov of 2020 I started buying at $10-11/share.

My thesis was a $20-25 exit, fair value at the time. Obviously the meme-gods had something else in store, and by mid-Jan, I exited at almost $120/s. 10x in just a few months.

After GME, I needed my next deep-value fix. I waited for quite sometime in cash, and after having dinner with @moizali got turned onto Casper (the mattress company)

Way under priced, and beaten down. I started building a position.

As luck would have it someone swooped in and acquired the company for almost a 100% gain in < 30 days. Nutty.

This sent me back to the drawing board again for the next deep-value buy.

After searching for 2 months, I lost patience and gave in to FOMO, how does Buffet sit on cash for a decade?!

I piled into all the typical high-growth tech names that were already off their highs by 25%.

I had thought I was buying the bottom, whoops. They had another 20%-25% to fall. No deep value here.

Revenue multiples still sky-high, and ebitda just as elusive as ever.

So that brings us to today - rotating OUT of everyone's favorite tech names and

into something a bit more and boring. This new deep-value attack is an old meme/reddit favorite.

It is trading for a fraction of revenue, has huge cash flows, ebitda positive, rebounding off a terrible covid knockout, and appears perfect for a M&A takeover

just like Casper and GME, but with even better economics.

The company is Express ($EXPR), and looks like it should generate a good $150M in ebidta this year alone. Line that up against a $250m market cap and you can see my excitement.

I rotated out of a bunch of losing tech positions, booked the tax losses, and instead opened a new position this morning into EXPR at $3.60-3.70.

now, I'm no financial expert, so please don't follow any of this advice, just super excited to share my new/old investing approach, and getting back to deep value hunting.

If you want to follow me on this journey, as well as my SAAS, and VC/Angel tweets, grab a follow now!