YE21 Investor Letter
Dear Investors,
Returns for the managed client accounts ranged from -2.7% to 0.5%, net of fees, from the various inception dates through year-end 2021 (please check your individual statements for your respective figure). For clients who are eligible and have opted for the performance fee option, this payout was not triggered since returns were below the minimum 5% absolute threshold. This hopefully serves as a small consolation knowing that in years when my performance is not satisfactory, you pay less in fees.
Clearly though, this is not the dream start one envisions when offering an investment management service, or a result clients will be enthusiastic about for that matter. However, there is one critical reminder I’d like to reemphasize. These are measurements over a short period of time…less than eight months for all managed accounts and in some cases only a month or two for recently onboarded clients. Had portfolio performance been exceptionally strong over the second half of 2021, I would still be advocating for the same caveat.
A year is just simply not enough time to evaluate the results of an investing approach as there is nothing inherently special about a calendar year turning over in relation to the operations of businesses we own. In fact, a more telling evaluation should likely include multi-year timeframes, with a minimum of 3-5 years preferred. Still, in a year when the market – as measured by the S&P 500 index – performed remarkably well, we find ourselves behind the curve. However, it also shouldn’t come as a surprise that our performance differs significantly from the index because we do not own any companies included in the S&P 500 index.
So, where could I have improved?
For starters, I should’ve had a better sense of the 8-10 companies I wanted to allocate day-one client funds to. Having left my prior firm at the end of January 2021, my initial focus was to get the new firm up and running as quickly as possible. Much of this work and preparation had been started well before departing my former company, and by April, Shadowridge Value was open for business. Unfortunately, the focus in those interim months had been largely on administrative and compliance tasks, as opposed to research and investment activities. Upon reflection, it would’ve been a better to slow things down and hold off on accepting client accounts until mid-summer when I had time to refocus on investment research. This way I could have had a ready list of where to deploy a decent portion of client funds as opposed to taking on cash and then searching for ideas beyond the few names I held at the time. In my 1H21 letter, I noted the high cash levels across investor accounts that I was working to deploy as quickly and prudently as possible.
The challenge of deploying capital in a timely matter was exacerbated by an environment in which I thought a lot of pockets of the market showed signs of wildly optimistic sentiment and consequently, high valuations. All else equal, higher business valuations at the initiation of an investment will lead to lower forward returns. Consequently, I was relatively cautious deploying capital over the course of 2021 despite looking far and wide. In the end, I resorted to a few niche investment spaces, as I’ll detail momentarily.
On that front, there is some good news as the excess cash has been getting invested, especially as the market has retreated from the peak levels of 2021. I have used the recent market volatility to our advantage and placed a larger number of bets. These companies may continue to be temporarily pushed lower by market movements in the interim. And while that may not be optimal from an emotional standpoint (especially if I have already allocated fully to the position), it will be acceptable. I deem it acceptable because enduring volatility is the price of admission one must pay for solid long-term performance. It will happen many times in the future I can assure you. Moreover, our companies should be able to endure a period of economic weakness because of a few their qualities described below.
Now, my focus shifts somewhat more to monitoring these companies as their management teams hopefully execute against the investment theses. Those that do so successfully will grow to larger positions within the portfolios. Those which do not will ultimately be replaced by other companies who I think can better compound our capital over time. Again, I would encourage you to focus on the long-term outcome for these businesses because things can look dire in the financial markets based on price alone at any given point in time. Of course, the constant search for additional investment ideas will also continue. When new, compelling investment opportunities arise, I will either upgrade the portfolio by rotating out of what I deem to be the weakest holdings at the time, or use dwindling portfolio cash levels to allocate to the new idea(s).
Recently, what many market participants label “growth” stocks have tumbled in share price, some of our holdings included. Fortunately, we do not own any of the sexy, high-flying stocks trading at 50x revenue on a hope and a prayer. Growth, however, does plays a critical role in increasing the intrinsic values of our businesses over time. I am searching for the right combination of sustainable growth rates and fair entry valuations. So far, I see no reason to be concerned with the operating results of our “higher growth” companies or their progress in building their businesses towards a better end-state. At certain times, the financial markets will provide stock quotations at values I simply don’t agree with. My job in such situations is to remain vigilant and periodically assess if anything relevant has changed. Otherwise, I am free to ignore the fluctuations and can capitalize on them if still building the position(s).
Now before I highlight a few of our investments, I want to draw attention to a couple overarching themes among the companies held in our portfolios:
· Strong balance sheets
· Founder led/involvement
· Capital dislocations
The Importance of Strong Balance Sheets
Excluding the banks (which I’ll address in a moment), most of our portfolio holdings have exceptionally strong balance sheets and use low levels of debt. Of the 12 non-financial institutions currently held, 10 have more cash on their balance sheets than they do debt. Several of them don’t hold any debt altogether. Why is this important?
Leverage (or debt) is a tool that when used appropriately can significantly enhance investment returns. Think of real estate as an example. Usually, a primary benefit of buying it is that you put very little of your own money into it – aka you use leverage – and that turns otherwise pedestrian returns into sometimes spectacular figures. But many investors also forget the downside associated with leverage, particularly after a long economic expansion. The truth is, leverage really only magnifies outcomes, whether good or bad. And since there are few certainties when dealing with the future (which paradoxically is what investing is all about), financial or operational outcomes often are in fact, negative.
When high leverage is attached to a serious negative outcome, a company can destroy itself in one clean swoop. Alternatively, high debt levels may also reduce a company’s resiliency and flexibility. A debt burdened company may have to pause or curtail business reinvestment which can jeopardize their long-term competitive positioning and/or value proposition to customers. If, however, a company holds little to no debt, it’s near impossible for them to go bankrupt and produce a permanent loss within our portfolios. I prefer this latter scenario most of the time. It helps protect our capital even in the event when I may be wrong in my assessment about a business’ future results.
Now, I also have a portion of the portfolio dedicated to a niche investment area known as thrift conversions. As banks, these companies do use debt and leverage. A thrift conversion is a general term used to describe the process by which typically small, “mutual banks” turn to public stock ownership and begin trading on public market exchanges. In doing so, they raise capital from investors and add the proceeds of the offering to the existing equity base of the bank.
You may have heard investing in banks is risky, and in fact, in can be just like any area of investment. Common criticisms against banks generally accuse them of being levered entities (using lots of debt) or maintaining incredibly complex lending practices. Fortunately, neither critique typically applies to thrift conversions. These are plain-vanilla lending institutions that specialize in safer areas of loans such as residential and commercial real estate mortgages. They are also conservatively capitalized with multiples more of equity relative to their asset base than average banks. This means large amounts of excess capital stand ready on their balance sheets to easily absorb any potential loan losses. Thrift conversions, as a result are often much safer than many banks. Thrifts also tend to frequently reward their owners with shareholder-friendly capital return policies such as dividends and/or accretive share repurchases. The key is finding the right ones and management teams. As usual, it comes down to people.
Exact figures will vary by account, but approximately 10-12% of the managed accounts are currently invested in a few thrift conversions. I believe they are an uncorrelated source of asymmetric returns. In other words, the proposition that they provide respectable 10%+ returns over the coming years is associated with relatively fewer risks and is also less related to how the broader financial markets perform. If you’d like to learn more about thrift conversions, please visit my new Substack Newsletter Conversion Confidential which I recently started on the topic:
https://thriftconversionconfidential.substack.com/
So far, reader enthusiasm and engagement has been strong with over 300 subscribers enrolling since late November for my weekly write-ups on thrift conversions. I find writing Conversion Confidential helps me clarify research ideas, learn more about the space, network with other investors, and perhaps even serves as a source of marketing for the firm.
Founder & Family-Owned Companies
A look through the portfolio holdings may also reveal that I am also partial to investing in companies where the founder or founding family remains involved with the company. That is, as long as I believe those in charge are treating shareholders fairly as partners. You may hear these management teams also referred to as “owner-operators”. In truth, it’s less important that they are truly a founder in the technical sense of the word, and more important that they act like a fellow owner who is enthusiastically engaged. It just so happens I’ve come across a fair number of leaders who act in I way I respect and they tend to also be founders. Here are a few of the aspects I find compelling:
· Founders are often heavily invested alongside shareholders. This financial incentive/alignment doesn’t guarantee success by any means, but it does mean that if things go poorly, the management team will feel the sting just as shareholders do.
· Beyond the financial motivation, a company started from scratch is often the life’s work / legacy of the founder. When you have that degree of commitment, you’re simply dealing with people who are obsessed about building their businesses and care far more about the company’s success than the typical run-of-the-mill management team.
· Founders usually appreciate and emphasize a longer-term perspective. They tend not to risk their company with reckless leverage. They better navigate the sometimes-competing interests of customers, employees, and shareholders. As influential shareholders themselves, they are more willing to make difficult decisions that may have strange optics or which impair short term profitability for the benefit of the company’s long-term prosperity.
· Founders have a strong influence in shaping the early DNA of a company. They do this by leading by example and through hiring the right people to build/grow the business. This qualitative focus on people and culture permeates throughout the organization and helps drive strategic decision-making as well as day-to-day operations long after the founders depart.
Similar to the safe balance sheet statistic noted in the previous section, an overwhelming majority of our portfolio companies have direct founder ties. I peg it at 13 of the 19 total companies held across managed accounts.
Capital Dislocations
Thrift conversions discussed above would also fall into the theme of capital dislocations. What is a capital dislocation? Simply put, it means there is a structural reason(s) that prevents investors from allocating to that specific corner of the market. Smaller company (micro and small market capitalization), over-the-counter (OTC), corporate spin-offs, and international stocks are several common areas of capital dislocations. In the case of thrifts, it would be a combination of lacking investor interest, the small sizes involved, and the unique come-to-market transaction. Many investors simply rule out investing in any and all banks. Of those investors willing to invest in banks, thrifts are yet another subset often overlooked by many due to misunderstanding or simply lacking awareness. That presents our opportunity.
Another industry currently experiencing a capital dislocation is cannabis. As a result, I think this is an interesting “pond to fish in” for investment ideas and one that faces limited competition at the moment. Due to its federal status as a Schedule I drug, any company that “touches” the cannabis plant cannot be listed on a US national exchange. That means most large, institutional investors (think pension funds, endowments etc.) are restricted from investing in the space, lowering valuations. Cannabis companies are also currently subject to onerous tax and banking regulations. That could all change with future legislation that seems to align with the wishes of most citizens. Gallup polls suggest as much as two-thirds of the US population supports recreational cannabis legalization, a figure that has only increased over time. Despite the many obstacles, it appears to be a bet of when, not if.
I have no insight as to the “when”, but I have acquired shares in one cannabis company for the managed accounts. It is founder led, product/customer obsessed, and focused on achieving the lowest production costs in the industry. This latter point should help them endure the severe pricing volatility as supply and demand find an equilibrium in their home state. More importantly, I believe they have the ability to reach the scale required to achieve the lofty goal of operating at a sustained cost advantage. Shares were acquired at prices not all that much higher than the replacement costs associated with their massive cultivation facility. As such, I believe the downside is relatively low and protected by real assets. If cannabis develops along a similar route as alcohol and tobacco, developing strong brands that inspire customer loyalty and support high profits margins in the process, the upside should be immense. It is yet another example of an asymmetric bet where we shouldn’t lose much if things go wrong, but we could make multiples of our money if things break right.
Top Positions
Our two largest positions by percentage of the portfolio are profiled below as well as one investment that was recently made that I’d like to explain in further detail. Recall however, the separately managed accounts (SMA) structure of the firm means various client accounts will hold differing position sizes and/or holdings altogether. I do my best to get everyone on a similar page, but as one example, there is an outstanding order as we speak to buy one of the below names for an account which does not yet hold any shares in the company.
Automatic Bank Services (SHVA) – Automatic Bank Services is the payment infrastructure network in Israel. It is a microcap company with limited trading liquidity as large institutions own a significant percentage of the company’s outstanding shares (a situation known as “low float”). SHVA was publicly listed on the Tel Aviv stock exchange in 2019 after regulators required the Israeli banks to divest their stakes over 10% in the company. Visa and Mastercard each acquired 10% stakes in SHVA subsequently. The business earns both subscription fees for tying merchants into the existing payment network in addition to transaction fees as all forms of electronic commerce take place. As more transactions occur on its network, the company’s profits and margins increase as the higher volume and revenue is spread over a relatively fixed cost base.
Meanwhile, cash transactions (which SHVA does not benefit from) represent a higher proportion of total transactions in Israel than in many other developed markets. Israel is estimated to be near 40% while in the US the figure is more like 70%. I expect this will change over time and fuel growth for the company for years to come. Recently, Apple Pay was introduced in Israel which should help accelerate digital payments adoption. While not founder led, SHVA possesses a pristine balance sheet with no debt, plenty of excess cash, and recently initiated a dividend. Shares were initially acquired for a 5% position (at cost) at a price corresponding to my estimate of a low-teens multiple of cash flow, suggesting an initial at-cost earnings yield approaching ~8%+. This struck me as a very compelling value for a high-quality business earning solid returns on capital with no debt and plenty of tailwinds for future growth. My mistake in SHVA may have been not allocating a higher weighting right off the bat.
Kelly Partners Group (KPG) – Kelly Partners Group (KPG) is an accounting firm servicing the SME space in Australia’s Sydney and Melbourne regions. The parent company was founded by owner-operator Brett Kelly in 2006 and takes majority 51% stakes in local accounting firms. These businesses provide accounting, tax, and compliance services/advice typically on a fixed-fee basis. By entrenching themselves with customers based on great service and by taking on advisory roles, KPG enjoys the benefit of long relationships (10+ years) and low customer churn (2-4%). Globally, tax megatrends in developed markets include ongoing budget deficits, shrinking tax-base demographics, increased societal pressure/inequality, and increasing disclosure requirements. Specific to Australia, the tax law volumes have grown 14x since the 1950s. I believe this likely means taxes rates are going up over time and may be spread across a wider base to capture more tax revenue. Since most people dislike (hate?) paying taxes, this means the market for sound tax advice should increase and remain quite durable.
I expect KPG will announce a handful of acquisition transactions per year, on average to help consolidate the industry and continue growing. There may also be years where nothing gets done if management doesn’t like the opportunity set. KPG should also exhibit modest organic growth each year with price increases of 3-4% and volume adding another 1-3%. But this is really a bet on the jockey. Given his appreciation for all the subtle qualitative aspects in business such as capital allocation, talent recruitment/retention, culture, incentives, and relationships, I expect CEO Kelly to compound earnings at high rates for years to come. My approach has simply been to allocate capital to a company controlled by Kelly where he subsequently allocates it in a growing business on our behalf.
Redfin (RDFN) – A newer investment I have made while attempting to capitalize on the recent market declines is Redfin. Unfortunately, if I had the foresight to wait another couple weeks, I could’ve built our positions in the company at a 30%+ discount to our cost basis. While I don’t think there is much of a lesson to take away from short term market gyrations, it has made me reconsider how quickly I attempt to build an entire position. Patience is key. Based on my track record however, I half-jokingly have concluded my base assumption should be that if I’m buying stock, shares will continue lower and if I not buying stock, shares will immediately march upwards!
In line with their stated mission, Redfin redefines the residential real estate experience in the consumer’s favor. They do this by utilizing a technology stack that helps removes legacy transaction costs and benefits from the high visibility of their popular online portal. The Redfin website provides incredibly low-cost lead generation. This in turn enables the company to offer a compelling customer value proposition as a full-suite brokerage at significantly reduced commissions. The typical real estate brokerage earns 5-6% on a real estate transaction whereas Redfin earns 4% on a transaction if both ends of the sale (listing and buyside) are handled by them. Listing fees are only 1.5%, as low as 1% in some cases.
1-2% commission reductions may not sound like much, but that’s meaningful savings when it comes to a high-priced item like a home! Real estate remains an isolated industry where far too much of the economics are still siphoned off by middlemen hiding behind archaic practices. It would be one thing to forgo the savings if the Redfin service level were vastly inferior (and in fact competition will claim it is), but I believe Redfin to be a far better, easier, more efficient, and cheaper solution for consumers. With just a ~1.2% market share in the massive $2 trillion (by volume) / $100 billion (assuming 5% commission) US residential real brokerage industry, Redfin has plenty of room to rapidly expand operations and take market share in its core service for many years to come.
Competitors often criticize the company for being a “discount broker”. While they are correct in their assessment that Redfin offers brokerage services at lower costs, they are extremely off base in their implication that Redfin cannot match the value provided by a traditional real estate agent/brokerage. In fact, Redfin hires full-time agents who, free from having to drum up business via prospecting and marketing (one of a traditional agent’s largest time commitments/costs), can specialize in the highest value-add roles in the transaction process. These include listing consultations, accurately pricing homes for sale, writing offers, negotiating contracts, and providing general support/advice to eager clients throughout the process. Other roles such as marketing, coordinating, and showing homes are delegated to siloed roles enabling Redfin lead agents to be extremely productive (3-4x more transactions per year than industry agents). As someone personally close to the company (I contract for Redfin), I’d wager Redfin always offers, equal if not far superior customer service when buying or selling a home.
Various Redfin offerings include guided video tours, in-person home tours (both guided and self-guided), 3D virtual tours, traditional brokerage services, i-buying options, mortgage financing, title services, and mountains of data (currently un-monetized). What’s more though, Redfin is the only company committed to lowering transaction costs across the industry. Over time, I expect this model to win over customers. Who doesn’t like a better service at a lower price?
At this point, you may be wondering, can’t any real estate firm use technology to lower transaction costs and increase their agent’s productivity? My answer would be no. All competitors utilize an agent-first model as opposed to the consumer-first model at Redfin. Obviously, these traditional agents have a conflicting interest with what is best for consumers in the form of lowering transaction commissions. I don’t expect it to be a widespread priority for agent-first business models to voluntarily cut their commissions much below 5%. One primary reason is that it would damage their existing way of doing business and serve as a culture shock. And if widespread pricing was in fact lowered, agents would have to make it up on volume to maintain their same income levels. That will be a near impossible task for most given the time and financial obligations associated with traditional marketing and lead prospecting. The average real estate agent does ~10 transactions per year and makes ~$50,000. This will not be feasible competition to Redfin’s lead agents who do 30+ transactions/year and tend to make well over $100,000 after their first full year with the company.
Second, the Redfin website will reinforce the company’s relative strength vs. competition as it only becomes more popular over time. Redfin’s high website traffic enables low-cost customer acquisition (home buyers and sellers), reinforcing the agent productivity advantage of Redfin agents. I expect there will only be one or two online portals that emerge as winners and establish themselves as “go-to” real estate websites. What would smaller and newer portals offer over the established ones? What experience would they bring that doesn’t already exist?
Redfin’s online portal is currently ranked #3 for real estate. I expect this will jump to #2 in short order, passing Realtor.com once rental listings are added this coming March. Redfin already has a much higher share of direct traffic (viewers who go straight to the site as opposed to finding it via paid search results). Meanwhile, #1 ranked site Zillow also employs an agent-first model where agents pay for advertisements that place them as local zip code experts. There is no innovation occurring to lower real estate industry transaction costs, nor a culture of trying to do so. Note however, that Zillow does have far higher website traffic and Redfin has plenty of catching up to do in this regard. In my mind though, Redfin is extremely well positioned against the incumbent competitors. Any attempt to replicate Redfin’s model would likely run up against severe friction, both operational and cultural.
Now in an ideal world, an investment with a long-growth runway benefits from a competitive advantage that helps protect their excess profits for extended periods. I believe Redfin is still in the building phase of theirs, but that it is in fact being built and strengthening over time. In other words, it’s trending in the right direction and compelling returns should ultimately bear themselves out as a result. Here are a few areas I expect competitive advantages to ultimately emerge for Redfin:
Brand – Many folks have an agent referred to them by a friend or family member and find themselves underwhelmed by the experience. Even more find the overall home buying/selling process frustrating and question the merits of paying up to 6% per transaction. Redfin has positioned themselves counter to the incumbent brokerages with an offering that emphasizes superior customer experience (in fact agents are measured by it) at a much better price. And because agents are employees, Redfin has more control over the way things are done vs. regular real estate agents who are actually independent contractors. Customers know Redfin agents get the same training and have the same tools at their disposal no matter the location across the US (other brokerages are very local). This builds trust in the customer experience and with the Redfin brand. As word spreads about the value Redfin provides, I expect the company to increase its mindshare standing with the average consumer. Repeat transactions with the same consumer will likely become more common over time.
Scale – Redfin is also the only player in the real estate space committed to vertically integrating all aspects of a real estate transaction under one roof. These are complex and tough challenges to navigate and execute on. I’ve already outlined how Redfin’s technology stack and website portal are key to lower customer acquisition costs. This enables Redfin lead agents to be far more productive than traditional real estate agents and ultimately results in lower costs to consumers. In time, I also believe the incremental cost efficiencies that come from increased scale will be shared with consumers, creating a positive feedback loop that further entrenches customers to Redfin’s model.
Culture – You can’t teach customer obsession if it isn’t ingrained in the DNA of the company at an early development point or if employees don’t buy in. I believe Redfin leadership and employees have bought in on the tough challenges of finally disrupting the real estate industry. They are on a mission to build an ecosystem that will meet all the potential needs of buyers and sellers of residential real estate. CEO Glenn Kelman is not a “founder” in the truest sense of the word, but he’s about as close as they come having led Redfin since a year or two after its founding in 2004. His orientation is long-term and he seems to have a strong grasp that building a company is about people. My read of the situation is that Kelman is obsessed with 1) all things related to disrupting traditional real estate transactions, 2) providing superior customer service at lower prices, and 3) building a one-of-a kind company for employees and shareholders.
Because Redfin’s consolidated financials don’t show clear cash flows given the high reinvestment occurring, it’s even more important to view the business with a long-term time frame when thinking about its future potential and valuation. In short, I believe its superior customer value proposition, low market penetration, and its emerging/self-reinforcing advantages will enable the business to grow at high rates for years to come. Bear with me, but if we look out 5+ years, it will not shock me to see Redfin doing ~$3.5 billion in brokerage sales (excluding their I-buying operations). That breaks down to annual transactions of 225,000 (~25% growth for five years implying ~3% market share) combined with revenue/transaction of $15,000 (6% annual growth). It’s my belief Redfin should be able to increase the latter figure if they are successful increasing take rates via dual-sided transactions or increasing attachment rates of ancillary services such as mortgage and title, or both. Rising home prices also don’t hurt in that regard.
Assuming a 10-15% margin (it could be higher) on that revenue estimate at a 20x multiple equates to a rough valuation estimate of $6.75 billion to $10 billion. This only credits the company with its main brokerage business. That range compares to a market cap of ~$4 billion at our average purchase price.
I also expect there will be upside optionality in the various projects, or “shots on goal” that Redfin has in the pipeline. These include:
· a high-margin rental listing business that should benefit immensely from the integration with the main Redfin portal beginning March 2022
· product improvements such as Redfin Direct which could alter the industry landscape altogether
· potential licensing deals for Redfin tools, tech, data, etc.
· any other upside surprises that Redfin may provide if I am correct in my assessment about its qualitative strengths
It’s worth noting that the industry and addressable market are so large that Redfin likely wouldn’t be anywhere near maturity even in five years’ time. As such, it would probably still be heavily reinvesting if the opportunity presented itself. Redfin’s most established local markets have only gained market share rates in the mid-single digits. As Redfin becomes more of a household name, this should only accelerate and grow over time. Given their ability to service consumers essentially wherever they are located nationally, a market share upwards of 10% nationally does not seem unreasonable to me. With the position has been established, it is time for the company to execute and earns its place among our portfolios. As your investment manager, I look forward to monitoring Redfin’s progress and evaluating whether the investment case outlined here ultimately comes to fruition.
Redfin is not without risks:
· Cyclicality / Competition – The real estate brokerage industry is highly fragmented, very competitive, and prone to market downturns. While I like the competitive positioning of Redfin vs. peers, I do not expect Redfin would be spared if macro-economic conditions deteriorated significantly.
· Execution – Redfin still has plenty to prove by growing their market share, scaling costs, and operating at a profit in perpetuity before it’ll become entrenched as a clear market winner. The bear case is that Redfin can’t scale because its agents aren’t productive enough or churn too often. I believe this misses the larger “under the hood” point that the brokerage is already profitable and consolidated losses come from other areas of growth reinvestment.
· Balance Sheet – Redfin does not possess the best balance sheet among our portfolio companies. There is debt, preferred shares, as well as some dilution historically. Some of the debt is distorted by the company’s i-buying activity. Those who haven’t studied Redfin intimately enough assume this segment will go the way of Zillow’s i-buying operation. However, I’m not convinced. Redfin has always been much more apprehensive in its use of i-buying. In fact, it is offered as a complement to consumers who may need to liquidate quickly or prefer to have cash in advance of their next home purchase. The Redfin intent was never to build a massive operation for the sake of doing so.
Other Operational Notes
I welcomed another client/partner in late 2021, bringing the total now to three client groups. On that note, if you know any potential investors who have a long-term time horizon in addition to the confidence and patience to bet on a new investment manager, please don’t hesitate to make an introduction. Of course, in line with my principles, I will be vetting them from my side just as I expect they will vet me from theirs. I have mentioned it before, but I strongly believe one critical advantage an investment firm can develop is a stable and aligned investor/partner base who provides permanent capital to deploy. As such, appropriate investors for Shadowridge Value:
1) understand business operating performance is more important than short-term stock price movements,
2) are willing, able, and desire to invest on a multi-year or multi-decade timeline, and
3) can tolerate seeing significant fluctuations in their portfolio holdings.
Thank you for your support and I look forward to what’s to come in 2022 and beyond! Please don’t hesitate to reach out if you have any questions or would just like to chat. It’s always great to hear from investors. Thanks for reading.
Sincerely,
Brett Dorendorf
Managing Member
Shadowridge Value LLC
