Evaluation_December 2015_Final Copy

Dec. 2015 eVALUATION Page 1
The rise in popularity of ‘activist investing’ has led many
commentators to herald this as the ‘golden age’ of activist shareholders.
The concept of shareholder activism often inspires the image of fiery
eyed hedge fund managers writing artsy letters demanding corporate
change. However, long before ‘activist investing’ became a buzzword,
successful ‘active shareholders’ have been working with incumbent
management to enhance shareholder value for many decades – often
under the radar. Therefore, we at eVALUATION apply a much broader
definition to the term.
Today we are in an era where ‘activist tweets’ drive share prices.
Globally, 344 companies were subject to shareholder activism in 2014,
compared to 291 in 20131 (the actual number is much higher asa number
of ‘campaigns’ are not publicly disclosed by ‘active shareholders’).
Shareholder activism is prevalent not only across all asset classes but
also across investor classes. To raise their voice and effect change, many
institutional investors as well as individual/minority investors, are
increasingly taking a more ‘active shareholder’ role through proxy
contests and focused public forums, respectively.
It is our pleasure to introduce this fifth issue of eVALUATION, where
we elected to focus on this broader definition of shareholder activism. In
our view, the dynamic relationship between shareholders and
management is a source of value creation and is therefore worthy of
deeper investigation. We hope to give readers detailed insight into the
mind-set of some of the most experienced and successful long-term
active shareholders. These success stories often do not receive the
publicity of widely covered activist campaigns; however, they carry
poignant fundamental investing lessons. We hope that you enjoying
reading our interviews with leading ‘active shareholders’ as well as some
of our best student investment write-ups. Finally, we would like to thank
all our interviewees for their invaluable time and contribution.
Happy Reading!
Gary Claar: Managing
Member, Claar Advisors
LLC…Pg. 2
Rajeev Das: Head of Trading,
Bulldog Investors…Pg. 8
James Rosenwald:
Co-Founder and Portfolio
Manager, Dalton
Investments…Pg. 13
Aswath Damodaran:
Valuation Expert…Pg. 18
Mark Kronfeld:
Partner, Plymouth Lane
Capital Management…Pg. 20
Troy Green:
Associate, Brookfield
Investment Management
…Pg. 24
Student Investment Ideas:
long UBNT, long KOSDAQ:
086900, long DISH…Pg. 30
SIMR Recent Events…Pg. 39
eV Editors – Sid, Ethan, Neha, Marian
eVALUATION
Investing Insights brought to you by the students of NYU Stern
LETTER FROM THE EDITORS INSIDE THE ISSUE
1
The Activist Insight Activist Investing Review 2015, in association with Schulte, Roth & Zabel
Issue 5

Gary Claar – Managing Member, Claar Advisors LLC
Gary Claar is the founder and Managing Member of Claar Advisors LLC, organized in 2013 as an
investment advisor to family offices. From 2001 to 2012, he was a founding partner and co-
portfolio manager at JANA Partners LLC, an investment firm known for activism and special
situation investing. Prior to JANA, Gary founded and ran Marathon Advisors LLC, an investment
management firm. He began his career as a corporate attorney with Schulte Roth & Zabel LLP.
He is a graduate of the Wharton School of the University of Pennsylvania and the NYU School of
Law. Gary serves on the Executive Committee of UJA-Federation of New York where he is Chair
of Planned Giving & Endowments. He is a Director of The KCF Foundation. Gary will join NYU
Stern in Spring 2016 as an Adjunct Professor of Finance.
Mr. Claar, thanks for taking the time to speak
with us. You started your career as a
corporate attorney. How important was that
early experience in the legal world, and how
did this path ultimately lead to investment
management?
Thanks for this opportunity to introduce myself
as I prepare to teach Value Investing: Special
Situations and Activism at NYU Stern next
semester.
Ultimately, I am very glad I got a background in
corporate law for several reasons. It was great
training in problem solving and in being precise
and wholly accountable for everything you say.
Surprisingly, this differentiated me in business as
someone people could rely on and heap
responsibility on. It also gave me a broader
perspective as an investor, which wasparticularly
valuable in the multi-disciplinary arena known as
event-driven investing. Having a good feel for
boardroom dynamics or the bankruptcy process
or the mechanics of securities offerings are some
examples.
My path to investment management from law was
not so smooth. I was an outsider who had to bang
on the door for a while to get in. I was constantly
learning on the fly. During this time, I discovered
I had an entrepreneurial streak. I somewhat
relished the opportunity to re-invent myself
professionally and broaden my network in spite
of all the risks and uncertainties.
In the mid-1990’s, you became in-house
counsel with the hedge fund Perry Partners
and eventually a principal at another hedge
fund before launching your own. What were
some of the fundamental lessons you learned
in the early years of your investing career?
As I bounced around and tried to become a money
manager, I learnt a lot. I saw Wall Street’s best and
brightest move away from risk arbitrage, which
had become too competitive. They began to
embrace special situation equity strategies, which
married both event analysis and fundamental
analysis. Around this time, Joel Greenblatt wrote
his first book, “You Can Be a Stock Market Genius”,
which told where to look for the most inefficient
markets. Joel has claimed the book only helped a
few rising hedge fund managers, and I was
fortunate to be among them.
This stage in my career involved learning as much
as possible while trying to earn enough to justify
throwing away a perfectly good legal career.
There were a lot of ups and downs. Other valuable
Gary Claar

lessons I learned were more entrepreneurial,
such as how to communicate ideas, how to set
realistic business goals and how to perform
honest self-assessments.
In 1998, you founded your first firm,
Marathon Advisors LLC. Tell us how you
navigated the dot-com boom and bust. Did this
experience impact the way you valued tech
and Internet stocks in later years?
Yes, I was fortunate that the markets were so
crazy in the first year of my launch – it kept my
new business solvent at its critical early stage.
The dot-com boom required those who were
raised on value investing principles to think
outside the box. A value investing discipline is not
supposed to confine you to only low multiple, low
growth stocks – its merits are in keeping you
away from large losses. I was able to apply a
value-investing framework to all kinds of
businesses with undervalued optionality to the
Internet. It helped me navigate the boom without
getting caught in the bust.
A memorable investment of the boom time was
Nielsen Media. It was a small cap spinoff of
Cognizant Corp. Shareholders dumped it because
of its size. But it was basically a natural monopoly
in audience measurement with a highly
incentivized management team. Plus it had a
“new economy” angle to potentially measure the
Internet. It quickly tripled and got bought out.
There was a silver lining to the bust and the bear
market of 2000-2002 as well. Value stocks,
especially small caps, had been absolutely left for
dead in the mania. Not only were new economy
stocks overvalued but also many blue chip stocks
had risen to over 25x earnings. So in the wake of
the mania, it was rather easy to outperform the
market indices with off-the-run value stocks and
special situations. The hedge fund industry
blossomed at this time, especially long/short and
event-driven strategies.
In 2001, you became a founder and co-
manager of JANA Partners with Barry
Rosenstein. At the time, you were willing to
fold your fund Marathon Advisors into JANA to
amass roughly $50M AUM. Could you talk to us
about the decision to link with JANA?
Marathon was a one-man shop. Though
performance was fine, it was reaching its natural
limits. In 2001, I was looking for the right partner
or strategic alliance. Barry was also looking for a
complementary partner for the public market
activist-oriented vehicle he was planning.
We met and found we had a lot in common. We
recognized the activist opportunity in small caps
but agreed it was best to make that part of a
broader long/short, event-oriented strategy. We
could see we had complementary skills and the
division of function between us would be quite
natural. Basically I’d work in front of screens
while Barry would be out meeting investors and
companies. There was synergy despite the fact
that he lived in San Francisco and I was in New
York.
From our fairly modest beginnings, we built a
strong firm and reputation. The activism set us
apart from the many other funds popping up at
that time. The earliest JANA crusade was
Herbalife, many years before the current
pyramid scheme imbroglio. Its founder and
largest shareholder had died leaving behind
chaos. It traded near net cash and had a high ROIC
business. JANA and Steel Partners demanded that
the board right the ship or sell the company. They
soon sold to private equity at a big premium.
You were with JANA Partners for over a
decade. In 2011, the firm forced the split of

then 123-year-old McGraw-Hill into separate
Global Markets and Textbook Publishing
companies. Could you discuss your strategy
before taking the position, and how you
identified McGraw-Hill as a quagmire of
locked-up value?
Certainly. McGraw-Hill is a terrific example of
the great care an activist must take in selecting
targets. For years and years there was talk about
the clear merits of separating Standard & Poor's
and the higher-growth Financial group from the
Education group. But conditions were never quite
right for an activist. We needed to see sufficient
stock underperformance and evidence of an
elevated cost structure relative to peers. We
needed to hear sufficient displeasure with
management among the shareholder base. By
2011, the role of shareholder activists was more
widely accepted and even century-old companies
with founding family members in charge (like
McGraw-Hill) were fair game.
The bottom line is that an activist should know
that if push comesto shove, he or she will have the
votes. Very few activist campaigns go all the way
to a proxy vote. This is because once management
fears losing such a vote, they are willing to listen
and settle. The split of McGraw-Hill was not the
only thing we were after. They needed to reform
the cost structure. They needed to optimize the
capital structure. And ultimately, they needed
new blood and fresh direction in the C-suite.
JANA Partners “applies a fundamental value
discipline to identify undervalued companies
that have one or more specific catalysts to
unlock value”. Over the years, the firm has
become a notorious “actively engaged”
shareholder in several companies. In terms of
idea generation and investment skillset,
where do you feel you added the most value
while you were a co-Portfolio Manager at JANA
Partners?
I feel I was most valuable to JANA in the early
years. I wore a lot of hats when the business
needed me to, and ultimately hired the right role
players. This eventually left me as more of a pure
portfolio manager, focusing on position sizing,
and adherence to strategy and risk control. As a
unique team for activism formed around Barry, I
became more of a sounding board for the activist
ideas but still acted as a primary idea generator
for all our other “value + catalyst” disciplines, like
mergers, spinoffs and bankruptcies.
My greatest strengths as an investor are pattern
recognition and issue spotting. I think I’m pretty
strong at synthesizing and simplifying reams of
information into essential decision points. I think
I also score pretty well on the competitiveness
scale and I know how to think creatively in
pursuit of answers to hard questions. A criticism
I’ve heard is that I can be “a mile wide and an inch
deep.” Perhaps that’s true – I’m unlikely to
change that now.
In 2012, you left your throne at JANA to once
again found your own firm, Claar Advisors.
What prompted the change and how does the
new firm differ in terms of strategy and style?
After 12 years at JANA, it was time for a change.
The growing component of managing people in an
institutional investment firm, which I did when I
needed to, was something I never felt well suited
for. After the financial crisis, JANA needed to
rebuild itself around new talent. As a result, my
transition was carefully planned over three years.
I’m proud of my role in the rebuilding and JANA’s
great successes since my departure.

Claar Advisors is in part a family office and in part
an entrepreneurial stage investment manager.
We have a public markets long/short portfolio
and also see a fair amount of private deal flow.
We are not pursuing public shareholder activism
but have been a lead investor in several private
situations.
My investment style has certainly changed. I
think longer term and primarily look for great
entry points to great businesses I can hold as long
as possible. I am averse to most crowded event-
driven names, not because I can’t compete, but
because it seems senseless to do so. With all the
short-term focus in the marketplace, longer tailed
opportunities are naturally less well bid and less
efficiently priced. However, markets are very
much in the grip of the extraordinary monetary
policies of central banks. That’s what makes
investing so hard at present and why we are
under-invested.
We took a peek at Claar Advisors’ most
recently filed 13F, and noticed that you have
high conviction long positions in Crown Castle
International (CCI) and Macquarie
Infrastructure Corp. (MIC). Very briefly, what
attracted you to these names?
Core to value investing is predicting multi-year
cash flows and, in today’s binary market
environment, predictability is exceedingly rare.
In the case of Crown Castle and Macquarie
Infrastructure, you do have high visibility into
the cash flows and the shareholder returns. Both
are pure domestic businesses not making wild
earnings adjustments for FX. Both are unusually
stable but also benefit from durable secular
growth trends. Wireless towers and long-tailed
infrastructure projects are each exceptional
business models that should always have a place
in my portfolio. CCI and MIC have each earned the
right to be valued on a “total return basis” - their
dividend rate plus their cash flow growth rate
should approximate your annual return
(assuming constant multiples).
Ironically, both CCI and MIC are high multiple
businesses, but I submit deservedly so. This goes
back to my point that value-investing principles
need not lead you only to smokestack industries
and metal-benders.
Lastly, in the case of both CCI and MIC, I can point
to transformative corporate events, yet they have
not become too popular with hedge funds. A year
ago, CCI listened to shareholders, tripled their
payout, finalized their REIT status, shed their
international exposure, and became very
transparent about their growth guidance and
capital allocation policies. All this enhanced their
multi-year earnings predictability, which again is
a holy grail for value investors though not that
interesting to short-term profiteers. In mid-2014,
Macquarie Infrastructure solved an impasse by
buying out a partner in its largest business, IMTT
bulk liquid storage facilities. After this
transaction they raised their payout and growth
guidance and extended the life of their income tax
shield. MIC is now a company much more in
control of its destiny. To me that is a
I am averse to most crowded event-driven names, not because I can’t compete, but
because it seems senseless to do so. With all the short-term focus in the marketplace,
longer tailed opportunities are naturally less well bid and less efficiently priced.

transformative event and a likely precursor to
many years of strong returns.
Regarding portfolio construction, it appears
that your top 5 ideas account for close to 50%
of your entire portfolio. What combination of
factors leads you to move with confidence into
a new investment; are there recurring
themes?
The first lesson here is some legal background on
Form 13F. A manager doesn’t include cash, short
positions, or foreign or unlisted securities on such
quarterly filings. Plus they are 45 days stale when
released. My top 5 positions are actually about
30% of my portfolio right now though I’d love to
see that grow, as I do believe in the goals of
building conviction and increasing concentration.
The factors we use to filter the many ideas we
hear and to prioritize our workflow are three
simple questions. First, is this a good business?
This question goes to the quality of management
and their control of things within their control
like capital allocation, employee morale, and
customer relations. Is the business in a virtuous
cycle or a vicious cycle? Many investors don’t
seem to appreciate this.
Next we ask, is this a good industry? Is there
something special about the business model, like
a moat or network effects that will insulate them
from competition and disruption. Do they set
price or take price? Is there some secular growth
trend they benefit from? We don’t agree with
Warren Buffett that you can just “buy America”
and everything will be ok. We want to stand on
Buffett’s shoulders and reach higher, if you will,
by being even more selective about business
quality.
Lastly, we ask, is this a good entry point? This is
where valuation and catalysts come into play. We
are looking for multiple ways to win and a margin
of safety. Even the best businesses can yield poor
returns if you buy them wrong.
In the spring of 2016 you’ll begin teaching an
exciting new course at NYU Stern – Value
Investing: Special Situations and Activism. I
don’t want to spoil any of the fun, but what do
you hope are the key lessons that students
take away from the course?
I’m excited to have this opportunity. Some of my
most memorable classes at NYU (Law ’91) were
seminars taught by real practitioners using live
case studies. I hope I can provide such an
experience to Stern students. I’d like the course
to demystify the money management industry for
students, so they’ll see how far you can go with
basic curiosity, judgment and common sense. I
would also like to give them enough perspective
to make self-aware assessments of which parts of
the industry might be their best fit.
Opponents of activism argue that it’s a
destructive process, where activist investors
pursue quick profits (generally capital
return) at the expense of companies making
necessary investments for the future
(generally growth capex). What are the merits
of this argument?
We don’t agree with Warren Buffett that you can just “buy America” and everything
will be ok. We want to stand on Buffett’s shoulders and reach higher, if you will, by
being even more selective about business quality.

There are certainly instances of good and bad
activism, but each case is unique and should be
evaluated on its own merits. To me, it’s
undeniable that the trend of shareholders having
a greater voice is a positive change that is long
overdue. The paradigm of entrenched CEOs with
boards of cronies and only passive, index-hugging
shareholders is certainly not ideal. You can argue
all day whether to increase capital return or capex
in a particular company – but that’s healthier than
not having the argument at all.
An activist shouldn’t have a short-term outlook. If
he does, he may be grandstanding or pandering to
investor pressures, rather than focusing on the
issues. It’s the same with politicians.
Some of the 1980s exploitation of high-yield debt
availability goes down as bad activism. More
recent successful multi-year turnarounds such as
Canadian Pacific, Six Flags and Walgreens go
down as beneficial activism.
Today many of the most influential investors
on Wall Street (Bill Ackman, David Einhorn,
Dan Loeb, etc.) are activists; this style of
investing has exploded in popularity. As a
member of the “old guard”, do you feel as
though the activist space is getting more
crowded? Is it now more difficult to create
your own investment catalysts utilizing
shareholder rights and public opinion?
Importantly, all of those influential managers are
value investors first, and activists when
necessary. This was an important consideration
when we started JANA. It’s senseless to confine
one’s self solely to conflict situations.
As far as crowding, I definitely feel it in the short
selling arena and also in anything with a visible
near-term catalyst. This is a function of the
proliferation of active managers and the
availability of capital itself. But this is no new
phenomenon – investing success has always been
about leading not following the herd.
I do not think activism gets crowded in the same
way. First of all, unlike other disciplines, there is
strength in size and strength in numbers with
activism. It wasn’t until recently that large cap
companies became fair game for activists.
Secondly, the wave of shareholder representation
is here to stay and it will only gather steam. We
have seen companies drop their knee-jerk
defenses to activists and listen to their ideas. We
have also seen a revolution in how large pensions
and fund groups welcome change. Look at how
many proxy initiatives are now filed annually by
CalPERS or CalSTRS, for instance.
Finally, what advice do you have for students
looking to break into investment
management? What about those interested in
special-situations and activism?
Take my class, read everything you can, question
everything you hear. Study the great ones and try
to understand why they do what they do. Be
honest with yourself – not everyone is an activist
or portfolio manager or entrepreneur. Try to find
the facets of this business that fit your skills,
personality and interests. They say the right job
is the one that doesn’t feel like work.
Mr. Claar, thanks for your time!
There are certainly instances of good and bad activism, but each case is unique and
should be evaluated on its own merits. To me, though, it’s undeniable that the trend
of shareholders having a greater voice is a positive change that is long overdue.

Mr. Rajeev Das - Head of
Trading, Bulldog Investors
Mr. Rajeev Das is Principal and Head Trader at
Bulldog Investors, an activist investment fund. He is
also a Director of the Mexico Equity and Income
Fund, a NYSE listed closed-end fund investing in
securities issued by Mexican companies. He gained
experience in several roles in Finance before
joining Bulldog Investors. Mr. Rajeev completed his
bachelor's degree in Economics from St. Xavier's
College in India and his Masters of Art (M.A) in
Economics from New York University. He is also a
CFA charter holder.
How did you decide upon the name, Bulldog
investors? As we understand, many Special
Purpose Acquisition Companies (SPACs) now
incorporate a “bulldog” provision –
preventing any investor from holding more
than 10% of the shell company to exercise
conversion rights. Seems like Bulldog
investors was a pioneer in such transactions.
Is this where the name is derived?
We had Bulldog investors first, before they
inserted this provision. Bulldogs are pretty
tenacious and stubborn, and in the activist
segment, one has to be that way. So, after a lot of
thought, we chose this name. I think it describes
us pretty well – what we do and how we are, as
far as the mindset goes. Regarding the SPAC
provision – yes, this is because of us. In the first
batch of SPACs, before the financial crisis, if a
certain number of shareholders voted against the
transaction and asked to redeem the money, the
transaction would not go through. So, that’s why
they put the provision in there. You cannot vote
more than a certain number of shares against a
transaction. It is typically 10%, but it can vary.
Regarding current SPACs, you can actually vote
for a deal and get your money and the transaction
will go through.
Can you please briefly explain the focus of
your funds? What is the investment strategy?
How is it different than other activist funds?
We are value activists. We are looking to buy
assets at a discount to their value, which can be
either their NAV (Net Asset Value) for a closed-
end fund, or it can be a discount to their private
market value. But what we really have to be sure
about is that the “value” is there. So, we look for
companies that we can really hang our hat on, as
far as the value is concerned. We try to avoid
turnaround situations. I think that’s where we
differ from a lot of activists. I think we are also the
only “real” activists in the closed-end fund space;
there are few others that do share proposals and
things like that. We are the only ones that go full
out for things like proxy contests in the CEF
(Closed-end Fund) space. We also look at
generating alpha over an asset class. So, for
example, if you look at SPACs, and look at the
underlying assets, that’s mainly US treasuries,
which are yielding nothing. If we can generate a
Rajeev Das
Bulldogs are pretty tenacious and stubborn, and in the activist segment, one has to
be that way. So, after a lot of thought, we chose this name.

return of 600-700 basis points over that asset
class, without practically taking any risk, that’s
phenomenal.
How has your journey been from graduating
from NYU to the current role of “Head of
Trading” at Bulldog Investors?
When I first got into this business, I was on the
retail side. This was even before NYU. So, I
worked at Lehmann Brothers. I worked at Smith
Barney, primarily with high net-worth
individuals on the retail broker side. From there,
I moved to what’s called the mid-office. Worked
with a couple of brokers, primarily doing a little
bit of everything. I moved to Bulldog in mid-1997
and that’s also when I started grad school. I
initially started on the operational side and then I
moved to trading and research and things like
that. So, I know pretty much the entire business.
You have covered quite a few funds in your
career – the Mexico Equity and Income Fund,
and then the Special Opportunities Fund. How
has this experience been in terms of changing
focus, investment analysis and learning?
I am still on the board of directors of the Mexico
Equity and Income Fund. We bought this fund in
the late 1990s and early 2000s, when it was
trading at about 70 cents on the dollar. We
accumulated a small percentage of the fund and
launched a proxy fight. Oppenheimer ran it at that
time and they were doing absolutely nothing as
far as the discount was concerned. The portfolio
was managed by a company in Mexico which still
continues to run the fund. Our problem was with
the discount. Once we got control of the fund, we
got on the board. We did a tender offer and
allowed all shareholders who wanted to get out to
do so - the fund shrunk from over $100 million to
roughly $20 million. We were able to grow the
fund organically and also did rights offerings, and
the performance has been great. Pichardo Asset
Management in Mexico runs it, and they have
been outperforming the Mexico market for
around 20 years now. Pichardo has been doing a
great job. It is a very well run fund and a great
exposure to Mexico if that’s what you are looking
for. And with us on the board, we have been able
to keep a check on the discount. We are very
proactive and very open to hearing from other
shareholders, and doing what they want. The
shareholders own the fund, and that’s what I
think most companies tend to forget.
The Special Opportunities Fund was actually a
municipal bond fund that was run by UBS Global
Asset Management. Again, it was trading at a huge
discount. The board was not staggered, and so
you could gain control over the board with one
proxy fight. We accumulated probably about 5-
10% of the fund at a double-digit discount and we
got control of the board. Once we got control of
the board, we allowed everybody who wanted to
get out to get out, and then we changed the
mandate of the fund. Now we use the fund as a
vehicle to buy other discounted assets.
Have you seen any major change in this
industry since you joined in 1997?
There are more activists now, especially in the
last couple of years. I don’t think of “activism” as
an asset class. We see it as a strategy, which you
can use in a closed-end fund, in an operating
company, or anywhere the opportunity arises. In
the closed-end funds space, discounts aren’t as
wide as they were back in the 90s and that’s
primarily because of activists. I think now the
fund companies know that if they let this discount
linger, people are going to buy in. As a result, you
are no longer seeing those wide discounts, but at
the same time, even with narrow discounts, you

are taking less time to close that gap, so the IRRs
are still pretty good. I think slowly people are
realizing that with modern corporations there are
principal agent problems, and there are managers
that don’t own stock in the companies they run, so
there will always be room for activists. Managers
and corporations tend to do what’s in their best
interest, and this is not always aligned with
shareholder’s interests, so there will always be
room for activists unless the structure of the firm
changes.
Your most recently filed 13F shows that you
increased your exposure to Real Estate to
24%. What attracts you to this sector? What is
your current view on the sector?
As far as making macro calls, we are agnostic and
don’t do that. In real estate, we own two closed-
end funds. One is a fund run by Legg Mason. The
ticker is RIT and we own over 20% of that. We
bought in about a year ago. We have since
nominated three people to the board. We asked
that they take actions to reduce the discount, but
they really didn’t do anything. At the shareholder
meeting, a quorum wasn’t reached. In such a
situation, the directors that are currently on the
board hold on for another year. However, this
didn’t stop us from continuing to buy, and I think
Legg Mason saw that. They understood that this
year we have three directors, and next year six,
and ultimately, we will have control of the board.
So, they came back to us and said that they will
open end the fund in first quarter of 2016. You can
buy now at a 5.5% discount and there is a 1% fee
to get out - you are talking about net 4.5%
discount closure in about 5 months and you can
completely hedge it. We end up with about a
10%+ IRR with minimal risk.
That sounds interesting. So, I read on your
website that you try to avoid “value traps”. Can
you please elaborate on that?
Absolutely. When we are looking for discounted
assets, we are not just looking for things that are
cheap - you have to identify a catalyst to close that
discount. There are plenty of closed-end funds
trading at a 20-25% discount that we won’t even
touch because we know that there’s no way to
close the valuation gap. Sometimes the
management is really stubborn and they have
destroyed all the assets so that they can protect
themselves or there is just not enough support
from the shareholders. So, we really want to avoid
that situation. I mean, I would rather buy
something at a narrow discount and close that
gap quickly and continually repeat that process.
You also bought a sizeable stake in the Nuveen
Long/Short Commodity Fund last quarter. Any
particular reasons to select this fund?
Well, the Nuveen Commodity fund is interesting.
It’s actually not a fund, but a commodities pool
that trades like a stock. I think Nuveen first
brought this out in 2011 and it traded at a
premium briefly and then started trading at
around a 20-25% discount. I think it was some
kind of embarrassment for Nuveen, only at $250-
300 million and trading at 80 cents on a dollar, so
When we are looking for discounted assets, we are not just looking for things that
are cheap - you have to identify a catalyst to close that discount. There are plenty of
closed-end funds trading at a 20-25% discount that we won’t even touch because we
know that there’s no way to close the valuation gap.

they decided to convert it into an ETF. We started
buying this early, at an average discount of
around 5%. This was a long-short fund, so there
was very little market risk. If you look at its YTD
October performance, I think the NAV is down
around 1.5-2%. If you look at other commodity
ETFs like GCS, I think that’s down around 20%.
The only issue has been that they were supposed
to convert it into an ETF in the fourth quarter of
2015, but it’s been pushed to next year, which
affects IRR. However, it’s still a great IRR if you do
that math - you can buy it today for a 5% discount
with no market risk and hold it for 4 months with
NAV performance much better than other ETFs.
Your current biggest holding is Stewart
Information Services Corp. (STC), where you
hold more than 10%. How did you select this
investment?
I think we invested in a solid company. STC is in
title insurance, which is a great business to be in.
They were trading at a discount relative to peers
mainly because they had to improve
operationally. Also, they had a lot of capital, which
we asked them to give back to the shareholders
either through share buybacks or as dividends,
which they have been doing. Our average cost
basis on Stewart is around $32.50, and the stock
is currently at $43. They recently increased the
dividend to around $1.2, which is the highest that
they have paid out, I think, since 2007. They also
just announced another buyback. What’s really
keeping the stock down is the dual-class
structure. You have a small number of shares
controlling a large number of votes. Last year, we
launched a proxy fight and now have a
representative on the board. This year we have
decided to submit a proposal to shareholders
asking them to get rid of the dual-class structure,
which they will not oppose. Generally, when we
submit a share proposal, the firm will send out
several mailings to the shareholders asking them
not to vote in our favor, saying that we (activists)
are bad, that we are arbitrageurs. STC has agreed
not to do that and to let the shareholders decide.
If this happens, it could be a $50+ stock. But again,
it’s a company with solid assets and that’s what
we liked.
In terms of idea generation, for Stewart, there was
another value investor who was a large holder
who contacted us, that’s one way. Then there are
people who are stuck in a “value trap” and want
us to help get them out - that’s another way to
generate ideas.
You seem to focus on investing in mainly
SPACs and also in small caps opportunistically
- can you tell us why you like them, compared
to mid or large caps?
Well, SPACs have been around for a while. They
were called “blank-check” companies and had a
pretty bad reputation. When you invested in
SPACs earlier in the 1990s, there were no
safeguards around your investments like those
we have today. Now, if a SPAC announces a deal
that you don’t like, you can get out. For example,
the SPAC will issue $200 million of shares at $10
a share, giving investors one share and one
warrant. The money from the IPO will go into the
trust, which will be used to fund the deal. When
the deal is announced, you have two options – you
can continue to stay in the new company or you
can get your $10 back. Meanwhile, you also have
that warrant which you can sell. If it’s a bad deal,
the warrants will be worthless, and you can get
your $10 back. If it’s a good deal, the shares will
trade above the trust value and the warrant will
pop. And you can make 10-15% on your deal. So,
really you have no downside in this investment.
SPACs put their money into US treasuries and you
can easily get mid-to-high single digit IRRs. It’s

really a great investment when compared to the
risk you are taking.
We invest in small-caps because this is where we
can be effective. We can buy a meaningful stake,
bring people on board, and bring about change.
With the amount of capital we manage, there’s
really no point in buying large cap companies.
Please share an example of an investment that
went very well - the key takeaways and what
steps you took to ensure success?
One area where we’ve had a lot of success, it’s a
little off-the-beaten path, is auction rate
securities. Closed-end funds are allowed to use
leverage unlike open-ended funds. They will raise
debt and issue auction-rate securities. Auction
rate securities are vehicles where the interest
rate is set weekly. If you bought these debt
securities and you want to re-sell them, you can
put these out for auction. Pre-2008, these
auctions were failing because there weren’t
enough buyers. So investment banks would step
in and provide liquidity (take the other side of the
trade). In 2008, the market totally froze when the
investment banks stopped propping up the
market. These AAA securities were, by statute,
covered by closed end funds that had to maintain
asset coverage of 200-300% for these debts, so
the investments were supposed to be very safe. If
there was any problem, the fund was required to
sell its shares and pay back these investors first.
The market froze when suddenly nobody was
buying them, and these securities started trading
at 70-75 cents on the dollar. That’s where we
started buying. In September of 2014 we were
able to buy auction rate securities issued by a
muni bond run by Alliance. It is called Alliance
New York Municipal Income fund (ticker AYN).
We bought about 52% of outstanding auction rate
securities, and, by statute, preferred holders of
closed-end funds hold two seats on the board. We
simultaneously bought common shares, which
were then trading at about 85 cents on the dollar.
We had a holding period of ten months and were
able to get full NAV on the auction rates and on
the common. On these auction rate AAA-rated
securities, we had an IRR of over 20%.
Why did you choose to work in activist
investing? What lessons did you learn before
deciding to immerse in this investment style?
We didn’t actually want to be activists, but after
buying closed-end funds so many times at 70
cents on the dollar, waiting five years, and having
the shares still trade at 70 cents on the dollar, I
thought it was time to do something. So, we
decided to do a proxy fight. The first proxy fight
that we did was back in 1998. Everyone thought
it would fail as nobody had ever done it. We were
the first ones to do it, and we were successful, and
so we continued doing it.
Do you have any advice for MBA students who
are interested in a career in activist
investing?
Activism is just a tool. You should not be an
activist just for the sake of it. It should be
something in your arsenal that you can use
prudently. Activist investing is tough - you need
to have thick skin. People are going to call out
your name and you won’t be liked, and you would
have to stand up to that. You need to believe in
yourself as others are going to tell you that you’re
wrong. You also need to be able to think
independently and stick through these situations,
if you want to be successful.
Thanks so much for your time Mr. Rajeev Das.
It was a pleasure speaking with you.

James B. Rosenwald III – Co-
Founder & Portfolio Manager,
Dalton Investments
Mr. Rosenwald is Co-Founder and Portfolio Manager for
Dalton Investments’ Asian Equities strategies. He is a
recognized authority in Pacific Rim investing with more
than 30 years of investment experience. He formerly co-
managed and founded Rosenwald, Roditi & Company,
Ltd., now known as Rovida Asset Management, Ltd.,
which he established in 1992 with Nicholas Roditi. Mr.
Rosenwald advised numerous Soros Group funds
between 1992 and 1998. He commenced his investment
career with the Grace Family at their securities firm,
Sterling Grace & Co. Mr. Rosenwald holds an MBA from
New York University and an AB from Vassar College. He
is a CFA charter holder and a director of numerous
investment funds. He is a member of the CFA Society of
Los Angeles and the CFA Institute, and is an Adjunct
Professor of Finance at New York University's Stern
School of Business.
In what geographies/sectors are you
currently finding the most compelling
opportunities on the long side? What about
the short side?
In terms of geographies, we can first talk about
Japan. The implementation of the corporate
governance code by the Japanese Government in
June 2015 now forces management to focus on
return on equity and alignment of interest
between shareholders and management. Non-
controlling shareholders should benefit over time
from this. This is particularly valuable when
combined with the fact that Japan has one of the
lowest costs of capital in the world. From an
enterprise value multiple perspective you should
be able to find some interesting companies in
Japan.
Number two is China – it is commonly known that
industrial production is declining dramatically
(and unemployment at industrial companies is
increasing) – China’s wages are not as globally
competitive as they used to be. In spite of that,
China’s consumer economy continues to grow in
the very high single digits and therefore focusing
on companies which benefit from China’s
consumption should do very well. The Chinese
stock market (including Hong Kong and Taiwan)
has been hammered and there are some good
opportunities that emerge from this type of
situation. One should be particularly focused on
the entrepreneurs in Hong Kong and the
technology companies in Taiwan that benefit
from consumption in mainland China. This is
another long theme.
The third country we have a long bias on is India.
We continue to believe that the current prime
minister of India is the most pro-business leader
in the country’s history. In spite of the recent
election in the Bihar region (the ruling coalition
suffered a heavy defeat), we continue to believe
that there are material improvements within the
bureaucracy. The problem is that they are starting
from such a low base with high expectations - and
the stock market is starting to come back from its
highs post-election. Three years out or longer,
there are phenomenal opportunities in India both
on the manufacturing side and on the consumer
side.
James Rosenwald

On the short side, we continue to hold our South
East Asian shorts. Due largely to high valuations
in those areas and low commodity prices that are
a terrible headwind for many of these countries.
The potential devaluation of the Renminbi and
the Yen also puts pressure on these countries to
devalue their currencies.
On November 2, 2015, Dalton filed a 13D
disclosing a 6.2% stake in Eros International
Plc – a company that has recently come under
attack by a short seller. What is your long-
term outlook for this name?
We met with the CEO and founder of Eros while
he was raising money in the U.S. and Europe to
buy film libraries in India. He had been doing it for
the last few years and it was still very early in the
purchase of film libraries. He was able to buy the
libraries at a small multiple of their annual
revenues – far smaller and cheaper than in the
U.S., for instance. My research team explained the
valuation and how deeply discounted Eros was
versus what private equity would pay for such a
film library. That got us focused on Eros’
valuation when the stock was at $14 per share.
More recently, the last purchases were made
when we started to see the royalty and
membership of ‘ErosNow’ – their online platform.
The short sellers then started coming out about
issues that were highlighted in the initial
prospectus that the company filed with the SEC
when it went public. There was nothing new
about what they were talking about. They
focused on these issues when the stock price was
an all-time high ($30+). This created fear among
people who were short-term momentum focused.
Eros had a disproportionately large number of
short term focused shareholders and the fears
exploded. Dalton saw this air pocket as an
opportunity to increase its stake in the company
and subsequently we more than tripled our
existing position over the last 2 months and
increased our focus on what we see as a superb
opportunity. And I am pleased to say that there
are other like-minded, longer term shareholders
that are invested in the name. While short-term
investor ownership in the company has fallen,
there continues to be a large short position in the
market.
Could you give our readers an example of an
investment where Dalton worked hand in
hand with incumbent management? What
were some of the challenges you faced?
As related to working with management to
enhance shareholder value, I actually have
highlights from different decades:
1980s - We suggested to management of closed
end mutual funds that they would do better for
shareholders if they became open ended funds
rather than the closed end structure wherein they
traded at big discounts to NAV.
1990s - We suggested to savings and loan
institutions (what later became commercial
banks) that savings banks did not make much
sense as small, stand alone, individually listed
enterprises. There were sizable economies of
scale to be had – in particular because of the high
cost of filing and regulatory requirements. This
led to investments whereby these banks merged
with other banks.
2000s - In Japan, we tried to convince
management in the early to mid-2000s to buy
back shares to increase return on equity. In many
instances, they responded positively and
shareholder value increased across the board for
everyone. The final culmination was the first
privatization of a Japanese company by private
equity and other investors including Dalton. We
took a company called “Sun Telephone” private.

Share buybacks and privatizations were activities
we pursued in the 2000s in Japan.
2010s - We have focused on trying to convince
management of the benefit of having a major
shareholder (in the form of a non-controlling
minority) as a director on the board. We’ve seen
the benefit of this in the U.S. and Europe. This is
similar to the practice of private equity firms that
usually have multiple board members from
different private equity firms with different
experiences, but also represent minority
ownership in a private company. The concept is
to run the company more like a partnership
instead of a public enterprise. Partnerships tend
to focus on all the partners that enter. The public
enterprise sometimes moves away from this type
of behavior. This is our corporate governance
focus.
Dalton’s four investing pillars are: 1) Is it a
good business? 2) How good is management at
allocating capital? 3) Is management aligned
with shareholders & 4) Is there sufficient
(50%+) margin of safety? Do you have an
example of an investment that satisfied all
four criteria but did not turn out as expected?
What went wrong?
The one thing that comes to mind is value traps.
These were most common in Japan where
management teams (usually 2nd/3rd/4th
generation owner/operators) did not regard
public shareholders as important when
considering corporate actions. While the
companies were good businesses, traded with a
large margin of safety, theoretically had a strong
alignment of interest between the family owner
operators and the shareholders, and had a long
history of being able to allocate investor capital
well, the management’s view of long term
shareholder interest was different from what you
or I would normally consider long term. For
example, we could consider long term to be 3, 5 or
even 10 years. However, management here
viewed the long term as spanning different
generations. Therefore, returning cash to
shareholders was a low priority and of no interest
to management. I am potentially invested in a
bunch of these companies even today. You have to
take a tremendously long-term view of the
company and be patient. You don’t know when
the family will decide to focus on their share value
and the market cap, rather than their day-to-day
business.
The other mistakes or problems with the four
criteria are when you get the alignment of interest
wrong and the family’s goals and objectives are
not really in the best interest of shareholders. The
assessment of the character of the family is
usually incorrect. While initially we may believe
that the alignment of interest is strong and you
have a benevolent family managing the
operations, you can fall in the trap of being
incorrect.
So value traps and misalignment of interests are
the two areas where we have fallen the most.
In today’s highly volatile global environment,
how do you bridge the lure of quick short-
term returns v/s your long (5+ years) time
horizon? Are your clients comfortable with
your holding period?
The only thing I control is my philosophy of value
investing and the process that we use to choose
our investments (the four criteria and the
detailed criteria within the four main criteria).
Beyond that, the most important thing we can and
need to control in order to maintain our strong
conviction is managing the client. Matching client
objectives with our portfolios. If you do not have
investors who have a similar philosophy and who
understand your philosophy and your process,

and understand that the ownership of the long
positions is 5+ years, then you will end up with
clients who are short term focused which will
make it nearly impossible to manage your
portfolio. We try our best to manage our clients in
a way that matches client objectives with our own
objectives. If we can’t find investors who are
comfortable taking a private equity approach to
public markets in Asia, then we will have to avoid
those types of clients. We have had situations in
the past where we had a sizable amount of money
from fund of funds – this turned out to be very hot
money that follows short term performance. We
avoid funds of funds money at all costs. In 2015,
we are seeing plenty of hedge funds blowing up or
closing down, due in large part due to the
mismatch between the investment horizon of the
investors and the fund managers/founders.
Is Dalton’s future goal to increase AUM or will
you be focusing specifically on performance?
Have you considered branching out to frontier
markets?
The objective of Dalton is performance and has
nothing to do with AUM. 90% of the money we
manage is based on referrals. All we focus on for
our client base is performance. We really are very
focused on performance.
Dalton has a broad reach – we consistently look
for opportunities in places like Vietnam (we
bought Vietnam bonds at 22 cents on the dollar
during the Asian crisis). We’ve been invested in
Russia since the 1990s. So we are always looking
at frontier markets. But if frontier markets are
more expensive than the developed markets of
Japan or Hong Kong or India – why invest in
frontier markets? A lot of money has chased
frontier or emerging markets. However the
valuation analysis has not used a high enough
discount rate. We are constantly looking at
frontier markets of Asia – Myanmar, Vietnam,
Cambodia, Laos etc. However, if the valuations
don’t justify the high capitalization rate, then
what is the point of investing in them? When
they’re desperate for capital and the valuations
are screamingly cheap, you’ll find us there.
Having worked with the likes of George Soros
and the Grace family, what have been your
main takeaways?
My mentor, Oliver Grace, who I believe was one of
the greatest value investors of all time, although
very low profile, helped me to learn tremendous
amounts on the value of being able to take
advantage of short term swings in the market and
going where others were fearful. Be greedy when
others are fearful and be fearful when others are
greedy. These are two consistent ways of making
money in the market.
George Soros was also a proponent of this type of
behavior. George was unbelievably contrarian in
his general investment style. He invested in Korea
with me when the market was just opening to
foreign investors and was at an all-time low. He
went against the banks with the British pound
these types of trades would make any other
investor balk.
Your partner, Gifford Combs, has spoken
about investors experiencing FOMO (fear of
missing out, specifically in a rising market).
Dalton has a broad reach - we consistently look for opportunities in places like
Vietnam (we bought Vietnam bonds at 22 cents on the dollar during the Asian crisis).
We’ve been invested in Russia since the ‘90s…we are always looking at frontier
markets.

Do you believe this is especially true in Asian
markets where sentiment is a highly
influential factor and where investors tend to
buy in a rising market?
FOMO is a fun topic. FOMO is fueled to a large
extent by momentum investing. The criteria we
use essentially eliminates the concept of FOMO.
Dalton is the opposite of this type of concept.
Gifford points this out as one of the great risks of
the market. In China, we saw the unbelievable
momentum – going up 100% and then the bottom
falling out over a two to three week period in
June/July. Markets – whether it’s China, U.S., or
Europe – markets climb a wall of fear – and then
fall off a cliff when things hit the fan.
Do you expect your net exposure to remain
low in the upcoming months given the global
uncertainty and somewhat excessive
valuations in your target universe?
Our net exposure is low in our long short fund and
we will continue to maintain that exposure. On a
beta-adjusted basis, we are close to flat. In 2015
we have made more money on the short side than
we did on the long side.
How do you think about risk when it comes to
global investing? Is there an added level of
diligence that is required? Are there any
frameworks that can be applied in an
international setting?
As a portfolio manager, you have a number of key
areas to manage risk. One is sizing each of your
position. Second is sizing net exposure. Third is
your currency management and exposure. Fourth
is your overall cash position. I look at risk in all of
those different ways.
Thanks a lot for sharing your insights.
Anything else you would like to add?
Yes. I am humbled by students’ ratings of my most
recent Global Value Investing class at NYU Stern
this Fall. I am absolutely overwhelmed. It is my
highest rating ever and I believe one of the best
group of students to take this class thus far.
That is great to hear. And thank you for your
time, Mr. Rosenwald.
Soros invested in Korea with me when the market was just opening to foreign
investors and was at an all-time low. He went against the banks with the British
pound – these types of trades would make any other investor balk.

Professor Aswath Damodaran
Professor Damodaran is a Professor of Finance at
New York University Stern School of Business. He
has been the recipient of Giblin, Glucksman, and
Heyman Fellowships, a David Margolis Teaching
Excellence Fellowship, and the Richard L.
Rosenthal Award for Innovation in Investment
Management and Corporate Finance. Professor
Damodaran received a B.A. in Accounting from
Madras University and a M.S. in Management from
the Indian Institute of Management. He earned an
M.B.A. (1981) and then Ph.D. (1985), both in
Finance, from the University of California, Los
Angeles.
Activist Investing: Fact and Fiction
Are activist investors good or bad for markets?
How about for the economy? Do they create or
destroy value? These are questions that evoke
strong responses, both pro and con, from
everyone. Since both sides of the divide seem to
draw on mythology rather than reality when they
make their cases, here is my list of the top
misconceptions that I see on each side.
Anti-activist myths
Most companies are well run. A common
refrain you hear from those who dislike activist
investors, and especially from incumbent
managers who are or fear being targeted, is that
left to their own devices, managers tend to run
companies well and that bad management is
more the exception than the rule. Using the
difference between return on capital and cost of
capital at a company as a simplistic measure of
whether managers are doing a good job, my
conclusion from looking at 41,800 publicly traded
companies at the start of 2015 is decidedly more
negative. About 60% of all companies generate
returns on their investments that are lower than
their cost of capital and more than half of these
companies have been underperforming for more
than a decade. From my perspective, good
management is more the exception than the rule
and an astoundingly large proportion of
companies have a long record of value
destruction.
The typical company targeted by activist
investors is well run and well managed. The
reality is very different. The typical target for an
activist investor earns less than its cost of capital,
under performs its peer group both in
profitability and stock price performance, and has
managers with little or no stake in its equity. In
many cases, it is a mature company that is
refusing to act its age, by continuing to invest,
finance and pay dividends like a growth company.
Activists are greedy and short-term focused. If
by “greedy”, critics mean that activists want to
earn high returns on their investment, all
investors are greedy, since that is the focus of
investing and I see no basis for the argument that
activists are greedier. As for “short term”, the
typical time horizon for an activist investor is far
longer than that of a portfolio manager or most
individual investors and definitely longer than
most managers at public companies.
Pro-activist myths
Activist investors are smarter than the rest of
us. This presumption of smartness comes usually
from focusing on successful activist investors in
the news, and assuming that their success must
be attributable to their smartness in targeting and

fixing companies. Not only is there a selection bias
in this process, where we don’t get to see, hear
from or read about all those activists who don’t
succeed, but even those who are successful at
activist investing are often one-dimensional
investors, with little that sets them apart from the
rest of us. In fact, activist investors often are guilty
of many of the behavioral biases that have been
noted with all investors, insofar as they often hold
on too long to their losers, fall in love with their
winnersand let pride get in the way of good sense.
Activist investors are shareholder advocates.
As an individual investor, I have benefited from
activists targeting firms that I have held shares in,
but I am not naive enough to buy into claims that
activists are motivated by the larger interests of
shareholders. Thus, when I held shares in Apple,
and Carl Icahn raised the heat on Apple to borrow
money and pay out more to shareholders, I gained
but I did not operate under the delusion that
Icahn cared about anyone but himself in the
process.
You can make money by imitating activist
investors. There are many investors who
obsessively track leading activist investors,
buying shares in companies that they have
targeted and hoping to piggyback on their
success. The research here on whether you can
make money from this strategy is mixed, since the
bulk of the returns to activism come on the
disclosure that the activist has targeted the
company and not in the periods after. If you
combine this with the reality that activist
investors are as likely to make mistakes in
investing as the rest of us and that they are driven
by self-interest, again like the rest of us, the
dangers of following activist investing are
magnified.
Shared myths
Activist investors make big operating changes
at targeted companies. Both supporters and
opponents of activism seem to start with this
presumption, with the division between the pro
and con groups primarily on the effects of these
changes. Thus, those who dislike activists argue
that they slash investing and R&D at targeted
companies, putting jobs, growth and the future of
these companies on the chopping block. Those
who are in favor believe that the changes in
investing policy are for the best, and that the
money saved can be shifted to other companies
with better investment prospects. Both groups
seem to agree that activist investing is far more
focused on financing and dividend changes than it
is on investment policy. In fact, if you look at
activist investors as a group, the critique is that
they are not “activist” enough on the investing
dimension.
Activists make easy money. To the question of
“Do activists make high returns?” both parties
seem to agree that the answer is yes. That
conclusion, though, may be based not only upon
looking at the most successful, high profile
investors in the group but also listening to the
hype around them. Bill Ackman, Carl Icahn and
Nelson Peltz have all had their share of bad
investments, and looking collectively at all
activist investors, the returns to activism are
modest. In fact, given the cost of being activist, a
large proportion of activist investors barely break
even. Activist investors are almost as often wrong
as they are right in their claims about companies,
but I do believe that they are a necessary and
integral part of a well-functioning market. I view
them as market laxatives, irritants that challenge
the status quo and disrupt the system. Removing,
banning or restricting them from markets, as
some critics would have us do, would lead to
clogged markets, where managers remain
unaccountable, and shareholders get ignored.

Mark Kronfeld - Partner,
Plymouth Lane Capital
Management
Mark Kronfeld is a Partner at Plymouth Lane
Capital Management, LLC, where he leads the
firm's distressed and special situations investment
strategy. Mark specializes in event-driven,
distressed and special situations investing with an
emphasis on legal, structural, and process value-
drivers and activism.
Mark is an adjunct professor at Boston University
School of Law where he teaches a corporate
restructuring class. He also guest lectures on
advanced distressed investing and corporate
restructuring at Columbia Business School,
Wharton, Duke, and University of Virginia. He has
published numerous articles on topics in
bankruptcy law and distressed investing. He is also
a member of the American Bankruptcy Institute
and a member of the advisory committee for ABI’s
Commission to Study the Reform of Chapter 11,
which published and submitted its report and
recommendations to Congress for U.S. Bankruptcy
Code reform. He is also a member of the board of
directors of Reorg Research, Inc.
What are the key indicators or criteria you use
to help identify businesses and circumstances
in which you can create and extract value as
an activist investor?
My focus is on distressed and special situations
investing with an emphasis on complex legal,
litigation, structural and process value-drivers
and activism. Our primary investment thesis is
not primarily driven by what we think the
underlying business is worth or macroeconomic
factors. Rather, this style is designed to be highly
idiosyncratic and we try to focus on investment
returns that are as uncorrelated as possible to the
broad market. This is not a play on beta. When I
think about valuing a situation and the assets that
will be distributed to creditors, our value drivers
are quite different. I use my background as an ex-
litigator and an ex-bankruptcy lawyer to find
mispricing in particular situations that are driven
by complex legal issues that are not widely
understood. For example, some may look at a
mining company and look at EBITDA, PP&E,
performance projections etc. But there are lots of
other things that could drive value for creditors.
For example, there could be tax assets, litigation
recoveries, or substantial disagreement about
how existing value ought to be distributed, to
whom, and in what order. These are thingsdriven
by legal analysis as much as by valuation analysis,
if not more so. These legal value-drivers could
create incremental value that exceeds the value of
the underlying operating business. The
bankruptcy process itself can also make a
business more valuable. One has to understand the
interplay between investment analysis and legal
analysis. In the world of distressed investing – they
are inextricably interwoven.
One has to understand the overlay between investment analysis and legal analysis.
In the world of distressed investing – they are inextricably interwoven.

How do you source ideas and screen
opportunities?
In my opinion, the single most important key to
investment success is time management. I am
always asking myself: How do I get the highest
IRR for the use of my time? Distressed situations
generally tend to be less efficiently priced than
other investment areas, usually because the right
skill set is not being applied. These situations are
so complex and there is so much going on, that in
many cases, even in well-covered distressed
situations, many things remain unanalyzed for a
long time.
We source ideas in different ways. We screen the
news and research services including Reorg
Research and Bloomberg for distressed events or
companies facing restructuring or possible
restructuring or other legally driven special
situations. There are certain patterns I look for
and that attract my attention. For example, as a
company becomes more stressed, they may
desperately start to raise more capital, or they
may start to negotiate with existing lenders, or
they may start selling assets – often to the
detriment of one or more parts of the capital
structure. There are often corporate actions
designed to benefit equity to the detriment of
creditors. Sometimes, we see actions that benefit
one group of creditors to the detriment of
another. There are legal consequences to such
actions and analysis of these patterns may lead us
to believe that the market has misinterpreted the
propriety of such actions. There may also be
conditions that are driving the problem – too
much leverage, pending lawsuits, or even
conflicts of interest or poor corporate
governance. Also – whenever a company is doing
desperate things – they tend to push the envelope
of what is appropriate as outlined in the
indentures and credit agreements and applicable
state and federal law, and sometimes even foreign
law. All these instances have the opportunity to
create legal opportunities and pitfalls for
investors.
A lot of our idea generation is organic and comes
from our analysis of a particular event or pricing
structure. For example, I will look at how the
market prices various parts of the capital
structure and the factual and situational context
of a distressed borrower or issuer (e.g., a
company, municipality, or sovereign) and this
tells a big story. Give me an organizational chart,
a capital structure page with pricing and a
timeline of events and something will typically
stick out begging for further analysis and a
preliminary investment thesis.
Another big source of ideas is fellow investors.
Distressed investing is highly collaborative and
distressed investors often join forces in ad hoc
committees. Likeminded investors who own a
similar part of the capital structure will get
together and hire a common counsel, a common
advisor and will negotiate collectively. This
allows the parties to share the costs of these
services. The terms of credit documents also
creates the need for a critical mass of investors
with a specific voting percentage to combine
forces to cause an event to occur not occur. For
example, if you want to direct a trustee to take a
particular action on behalf of your class of
creditors, you may require a 25% vote. Or if you
would like to do a coercive bond exchange offer,
Always try to buy when there is clarity on your downside risk and the price you are
paying suggests that the outcome distribution is skewed to the upside.

you may need the majority of the bondholders to
agree to the terms. A lot of what you do requires
collaboration. There is a lot of complexity and we
bring each other in to supplement our own
analysis and collaborate on an idea. Also -
concentration of ownership makes it easier to
negotiate and creates a more efficient and value
creative process.
Can you give us an example of what your due
diligence process looks like before pulling the
trigger on an investment? In other words,
what are the most important questions you
need to get answers for?
After a preliminary analysis designed to assess
interest level and “actionability”, the next step is
a deeper dive analysis that ensures we have a
solid understanding of the legal documents, the
inter-creditor dynamic, and the rights of our class
of securities. There are 3 critical questions that
must be answered: What is the expected value
and optimal structure of the company or estate?
How does one maximize the distributable value of
the estate? Who is entitled to the value and in
what order and amount? Basically, we ask what
is the pie? How can we make the pie as big as
possible? And how should, under the law, the pie
be distributed? And then, under the facts and
specific situation, how will the pie be distributed.
How something should happen isn’t always how
something will happen. This is a reality that we
are very aware of and plan for.
I am very downside risk focused. We are always
asking: How can I lose money? Where in the
process can things go wrong? Can I as a creditor
be disenfranchised? Is it possible that a court
could rule in a way that is inconsistent with my
legal analysis? How can I mitigate that risk? What
is my worst case outcome? What is the liquidation
value? I want to understand exactly where our
worst case is. Are we buying at a price that
already implies close to certainty that the worst
possible outcome occurs? If so, then there is
significant upside optionality.
Next, I do a decision or probability tree to depict
the wide range of potential paths and outcomes
that are possible. I will work through every
possible outcome and think about the probability
associated with each outcome. We try to select an
opportunity that has a very high expected value
and a very high return. We look for significant
upside and very limited downside. The risk-
reward profile has to be very attractive. The
upside-downside profile has to be attractive. And
if there is a way to create a paired-trade with no
risk at all and attractive upside, that’s something
we will do. Once this is done, the next big task is
to execute and move it forward as an activist.
Can you share with us an example of an
investment that didn’t go as planned?
Generally, there has rarely been an investment
where something completely unexpected
occurred. Because I always identify the downside
risks, these aren’t a surprise. But having said that,
I may still have thought that the court was more
likely to rule a certain way, although I knew it was
possible it may rule differently. So, I have been
disappointed by a legal decision, I wasn’t
surprised. Thankfully, this doesn’t happen often
and even when it does, the investment can still be
quite successful because we seek investments
that have multiple uncorrelated drivers and not
an investment driven by a single binary outcome
driver.
Can you share with us an example of a
successful investment?
Washington Mutual, Inc. was the holding
company of its subsidiary Washington Mutual

Bank. In 2008, there was run on Washington
Mutual Bank and it was seized by regulators. The
assets of the subsidiary bank were sold to JP
Morgan, leaving behind the bondholders of both
the bank (“the operating company / WMB”) and
the holding company (“Washington Mutual
Inc/WMI”). The holding company subsequently
filed for chapter 11 – a major catalyst for value
creation. At this point, we started buying the
senior, subordinated and junior subordinated
bonds the holding company for cents on the
dollar. In our estimation, there were quite a few
sources of value that, based on our legal analysis,
were owned by the holding company and not the
operating company. For example, we determined
that, based on analysis of regulatory filings, the
holding company had a $4 billion deposit in the
subsidiary bank that was sufficient to pay the
senior bonds at our cost basis, with material
upside optionality on a number of highly valuable
assets that belonged to the holding company. The
operating company also had a large net operating
loss which gave rise to a $5 billion tax refund to
which we determined that the holding company
was entitled. In addition to the cash deposit and
tax refund, the holding company owned an
insurance subsidiary, shares of Visa, material
litigation claims against the U.S. government as
well as fraudulent transfer claims against WMB
and JP Morgan, and a massive NOL carryforward.
After extensive litigation and negotiation, we
successfully arrived at a global settlement
agreement. By 2012, the senior and subordinated
bonds of the holding company traded above par.
The junior subordinated debt of the operating
company also ended up trading at many multiples
of where we first entered the trade.
Do you have any advice to students?
It is really important for any professional or
student to know what you are good at and also
know what you are not so good at. There is no
rule that says that you have to compete with
everyone else in his or her game or on the same
criteria. Pick an area that you have a particular
view on and a special skill set; pick an area that
you think you can do better in. Try to become as
good as you can be. Self-awareness is important.
While I was at Stern, I was trying to get all these
jobs in banking but none of it was consistent with
my background and it didn’t fit my core skill set.
In the end, I was most successful when I found
something that really fit my skill set and
strengths. It takestime to find out what that is, but
when you do, that’s when you emerge as the best
version of yourself and find true success. Also,
focus on reputation and ethics. Be a good
contributor to your profession and build a stellar
reputation. This will take you a long way.
It was a pleasure to speak to you Mark.
Thanks.

Troy Green - Associate,
Brookfield Investment
Management
Troy Green is an Associate in the global energy
team at Brookfield Investment Management, a
registered investment advisor with over $17 billion
of assets under management as of Sep 30, 2015.
Troy graduated with an MBA from NYU Stern in
2015. In the summer between his first and second
year at Stern, Troy worked at Claar Advisors LLC, a
long/short value + catalyst, event driven hedge
fund. Prior to Stern, he founded Green Oak
Investments, a long/short equity fund. Troy
managed the portfolio of Green Oak for 6 years
earning an average annual return of 24%. He holds
a BS in Electrical Engineering from Virginia Tech.
Can you talk to us about your background?
What got you interested in investing and when
did you decide to make a career out of it?
My father served in the US Air Force for 20 years,
and my mother is a nurse for military veterans, so
neither of my parents have a finance background.
Nonetheless, my father is very financially savvy,
so I would say that he helped me develop my
sense for investing. He taught me the power of
compounded interest. He invested a percentage
of his monthly paycheck for 20 years to send my
brother and I to college. Investing has always
been a personal interest. I recall in my early teens
routinely reviewing the financial quotes section
in the Wall Street Journal. I had no clue how to
decode the seemingly random mix of words and
symbols, yet I remained fascinated and
committed to one day understanding this data.
Reading ‘The Intelligent Investor’ really
elucidated the difference between investing and
gambling in the stock market, and stock quote
data finally began to make sense. This book
offered a more practical methodology to
investing, contrary to others that provide only
general aspirational investing theory. It sparked
a fire inside of me, and confirmed what career I
wanted to establish myself in for the rest of my
life. I studied and applied the valuation
applications of Graham, Dodd, Buffett, Greenblatt,
Damodaran, and many others. I decided to
change my career to investment management
after managing my fledgling investment fund for
6 years (which generated a 24% average annual
return) and when one of my senior engineering
supervisors became an investor. I found myself
more focused on research and investing in great
companies than constructing buildings.
Having made the successful transition from an
engineering career to investment
management, what specific advice do you
have for students/outsiders trying to break
into the buy-side?
Transitioning form a non-traditional path is very
difficult, but not impossible. Most importantly,
know your story and what you bring to the table.
I think that most non-engineers respect the fact
that engineering is very technically challenging,
but do not really understand how your skill sets
translate into finance. As a result, you must lay out
exactly what skills you developed in your prior
job that make you a better analyst than the next
guy who partied his way through undergrad
finance, and worked as a spreadsheet monkey at

bulge bracket bank for 4 years. You have to
explicitly lay it out for people, which may cause
for you to provide a more detailed model and
write-up than others. Have a few of your best 2-3
page idea write-ups ready for presentation at all
times. Additionally, I submitted ideas to multiple
stock idea contests across the country to gain
some level of industry respect, and self-
reassurance that I had the tools to break into the
buy-side.
Looking back, is there anything you would
have done differently when trying to move
into the investing world, immediately after
your MBA?
Yes, start early. Practice telling your background
story until it is succinct and seamless, portraying
why someone should invest in your success. The
most important key to transitioning into any
industry is to start building a network early.
Always remember that no one will know your
story if you do not have the audacity to position
yourself in front of people that you admire, and
tell them your story. When I started as an MBA1,
and after having managed money for a number of
years, I was admittedly over confident. I sought
out the most senior level managing partners and
executives, but I was not ready to have an
impactful and memorable conversation with
them. My industry skills were not as sharp as I
assumed, and my past experience did not verbally
translate as well as I had expected. I would advise
others to first reach out to junior level employees,
and work your way up the ladder. Fully
understand how your story aligns within a
specific organization, and how it will be perceived
among professionals at different levels. Learn to
leverage your most interesting attributes.
You founded and ran your own long-term
focused investment fund for a six year period
prior to business school. Can you tell us more
about the fund and how you managed to
simultaneously have a full-time job and run a
research intensive fund?
When you are passionate about something you
make the time to satisfy your goals. The fund
started when a few friends from college, and
family members, asked me to manage their
money after years of hearing my tirades about
what stocks they should own. The fund’s
investors soon grew to fellow engineers, lawyers,
doctors, and other working professionals. To get
started, I studied the operating structure of the
Buffett partnerships, hedge funds, and other
platforms. Next, I registered a limited partnership
with New York State, and started an investment
brokerage account to execute trades. I drafted
comprehensive operating agreements with a fair
fee structure, investment philosophy, and other
pertinent information and disclosures. I
committed to owning a minimum of 15% of the
fund at all times, and was only paid a performance
fee on any returns greater than 3% on any given
year. Juggling portfolio management with my
engineering job was quite challenging. I was a full-
time construction engineer managing multiple,
I was a full-time construction engineer managing multiple, million dollar
construction contracts at Yankee Stadium, Barclays Center, and the World Trade
Center projects (in New York City) sequentially. I actually think this full-time job
helped my returns because it forced me to be long-term focused, as I spared no time
for daily knee-jerk trading decisions.

million dollar construction contracts at Yankee
Stadium, Barclays Center, and the World Trade
Center projects (in New York City) sequentially. I
actually think this full-time job helped my returns
because it forced me to be long-term focused, as I
spared no time for daily knee-jerk trading
decisions. Fortunately, my engineering job helped
me develop a very keen sense for identifying key
data, and deciphering critical information from
jargon. Additionally, a construction site is
managed as a small business, and construction
managers manage service contractors who are
themselves small businesses. This field actually
supplemented my understanding of business
operations, and financial management better
than just reading books or visiting factories. In the
investment partnership, my research and
investments were very concentrated. At max, we
owned 15-20 holdings, which included long and
short positions, and options. I published 6-10
page semi-annual and annual reports detailing
specific investments that we owned, and why we
owned them. My goal was not only to make
investors’ money, but to educate them.
Ultimately, I wanted each investor to be able to
manage their own portfolio, and provide for their
own families just as my father provided for ours.
I decided to close the fund because I wanted to
rebalance my toolkit. I wanted to strengthen my
knowledge and understanding of investing and
valuation, build a stronger industry network base,
and re-launch the fund on a much larger scale.
What were your biggest takeaways from this
experience? How practical is it for students
without prior professional investing
experience to launch an actual fund?
Never discount or undermine how valuable your
experience, fresh perspective, and determination
is to an organization. Regardless of your
background, something in your past experiences
helped you become a better investment
professional, which is why you got to this point in
your life as a student at a top 10 MBA program
pursuing this career field. Launching a fund today
is becoming increasingly more difficult to
implement given regulations, and investors lack
of confidence in investment professionals. Start
small and develop a track record. I managed
money in my own account for many years, before
I started managing money for others. I learnt
more from experimenting with different
strategies with my own money before I was able
to gain the confidence to manage money for
others. Similar to boxing, you can punch the heavy
bag 10 rounds, jump rope for 2 hours, and chop
500 piles of wood, but until you actually have a
real opponent throw a punch at you, then you’re
really not a boxer. Investing is very similar; put
knowledge into practice on any platform to really
gain conviction behind your buy or sell
recommendations.
What attracted you to value investing? Who
are some of the value investors you follow
currently?
Similar to boxing, you can punch the heavy bag 10 rounds, jump rope for 2 hours,
and chop 500 piles of wood, but until you actually have a real opponent throw a
punch at you, then you’re really not a boxer. Investing is very similar; put knowledge
into practice on any platform to really gain conviction behind your buy or sell
recommendations.

Everyone claims to be a value investor, but most
individuals do not actually endure the patience
required to be a successful value investor. Hedge
funds are particularly guilty of this temptation.
Monthly returns are frequently passed around
the community from fund to fund, and the
pressure to always make clients’ money is a daily
conversation. This environment is
counterintuitive to long-term investing, and
promotes a herd mentality where there is little
differentiation between funds. As a result, I
admire investors who share unique perspectives
on investing such as Einhorn, Ackman, and
Klarman. I may not agree with their portfolio
stock by stock, but I admire their concentrated
approach to investing as opposed to portfolio
diversity simply for the sake of diversity. I also
subscribe to very insightful research idea
bloggers such as Muddy Waters or Bronte Capital.
Can you tell us about your internship
experience at Claar Advisors? Did you work on
a special situation or a name with a near-term
catalyst?
Working at Claar Advisors was a very pivotal
point in my early career and education. Typically,
a summer analyst at a large buy-side firm
generally will cover 1-2 sectors, and maybe a
hand full of stocks during their entire 10 week
period. In contrast, I was able to work as a true
generalist. I was exposed to 13 unique industries,
and over 40 companies ranging from media to oil
tanker shuttles. Identifying near-term catalysts
such as triangular mergers, MLP conversions,
CEO/CFO transitions, and other events is
generally an interchangeable strategy that
applies across any sector of the public markets.
Working directly with 2 managing directors and
Gary, I was fortunate to focus my analytical
horsepower on more than building spreadsheets
and presentation materials. The bulk of my days
were spent on high level discussion, and
granularly analyzing business drivers or
imminent events that would bridge the valuation
gap. Portfolio update meetings were held every
day, which gave me the chance to ask questions
on each holding, pitch new ideas, and absorb
Gary’s advice on certain companies and past
experiences. The fund’s focus was to identify
events that would unlock intrinsic value within a
company, a very similar strategy as Gary’s
founding firm Jana Partners LLC. As an analyst, I
also learned the separation of focus between a
buy-side and a sell-side analyst, and how to
leverage each to learn more about specific
companies in forming my own unique
recommendation. This experience taught me to
concentrate more on forming an intellectually
honest, forward thinking, differentiated opinion,
rather than being a more detailed consensus story
teller.
You were a 2-time guest panelist on CNBC,
while still in business school! Not many
students can claim that on their Resume. Talk
to us about that experience.
This was a very random experience, but a great
opportunity. A NYU alumnus and CNBC producer
reached out to SIMR about a new segment focused
on understanding what stocks retail investors
were buying and selling. I was a Co-President of
SIMR, and had a few stocks in my personal
portfolio ready to pitch, so I volunteered to be on
the show. This was my first time on live TV, so I
was extremely nervous. A 2-3 minute segment
seemed like a lifetime. It was only me in a green
room with a live camera, monitor, ear piece, and
bright light in front of me. The segment must have
been a success because I was invited back for a
second segment a few months later on New Year’s
Eve. While having a phone chat with a director at

a hedge fund the following year, he recognized me
from the first CNBC segment. This doesn’t make
me quite a TV star yet, but is still very exciting. I
think I would prefer to stay behind the scenes for
now.
You focused a lot on investing classes and/or
activities while in business school. Can you
compare and contrast some of the
methodologies and valuation tools that you
employ most often in the real-world v/s what
you are taught in school?
At Stern I took Damodaran’s full suite of valuation
courses, merger arbitrage accounting, distressed
investing, private equity, and other courses to
learn a wide array of perspectives on valuing a
company. I would say in the real world to not
ignore any valuation technique learned in class.
You should use all the tools in your toolbox when
assessing valuation, because even the most
pristine technical analysis can be inadequate if
there is a larger macroeconomic force that is
skewing a stock price. Valuing a company is both
a science and an art, which is why some of the
most successful investment professionals also
come from humanities and liberal arts
backgrounds. There is a popular misconception
that discounted cash flow models, or net asset
valuations are antiquated or non-practical in the
hedge fund world, but nothing is off limits. The
more methods you can use to build your
conviction in a company the better. In a new job
interview, or in your first weeks on the job, it is
important to understand how your portfolio
manager or senior management team thinks
about each valuation method. It is very important
to ensure that your highest conviction method
aligns with theirs, or there will be internal clashes
of opinion that can lead to bad work
environments.
Why did you decide to join Brookfield
Investment Management (BIM)?
BIM is a world class organization run by really
great people. The team I work with are former
engineers, and so we share common struggles of
breaking into investing. Our office is a place
where intelligent individuals with a mix of
traditional and non-traditional backgrounds and
cultures collide in an exceptional manner to help
our clients make money. Additionally, post-MBA,
I wanted to start my career at a large organization
with skin in the game. Having a large AUM base
means that I not only get to work with some very
experienced professionals, but I also have access
to tons of experienced sell-side coverage analysts
who provide corporate access, proprietary
research, insightful opinions, and tools to aid in
my valuations. Larger companies also have access
to expensive commercial software licenses that
help obtain the most minutia of industry data.
BIM has been a great place for me to start my
career, and I am glad I made the decision to join
this team.
Can you talk about your origination process
for uncovering investment ideas (either at
BIM or while in school)? What areas are you
I would say in the real world to not ignore any valuation technique learned in class.
You should use all the tools in your toolbox when assessing valuation, because even
the most pristine technical analysis can be inadequate if there is a larger
macroeconomic force that is skewing a stock price.

focusing on currently? Any specific names you
can share?
I currently work for the global energy team at
BIM. Our group also coversoil and gasexploration
and production companies, fully integrated and
national oil companies, and oil field services
companies. I specifically cover oil field services
for the team. Without sharing specific names, I
think that the energy industry in general is highly
undervalued at the moment. U.S. shale oil and
offshore deep-water production are critical global
suppliers of crude and natural gas. Oil prices have
driven the rig count down over 55%, but U.S.
production has stayed flat year over year. One
reason that oil prices have sustained such a low
price is because we have not yet seen the pain
from declines in production. At NYU Stern, you
learn the difference between growth and
maintenance capex, and currently capex spending
across energy producers is down to maintenance
levels. If you graph out the production of an oil
and gas well over time the line will have a natural
declining slope. This is because the well's asset is
depleting without replenishment. As a result,
production in aggregate will inevitably decline
without increased spending for exploration
growth of new oil and gas wells. If energy
consumption demand remains relatively strong
for the next few years, then at some point growth
capital expenditures must resume or there will be
a large supply gap. After cutting capital spending
down to the bone over the past year, this supply
gap is almost inevitable. The decline curve always
wins. Given these economics, we are seeing great
long-term buying opportunities in companies
with ~80%-90% market share in offshore drilling
and onshore services. Be greedy when others are
fearful. I am fortunate that BIM prides itself in
investing for the long-term, so we are simply
cherry picking companies with the best
production assets, strongest balance sheets,
healthy cash flow yields through the downturn,
and unwavering market share positioning.
Are you able to apply an activist/event-driven
mind-set in your current role?
We are not specific activist investors, but I think
all investors look for specific events to drive their
own internal valuation targets. Given that the
energy sector is in a cyclical low, the only near
term events are mergers and acquisitions. M&A is
nearly impossible to predict, so my main focus is
on reducing our cost basis on long-term
investments wherever possible, and managing
short positions. Short positions are usually driven
by a liquidity shortfall event, which I have been
seeing in high frequency over the past year,
especially in smid cap service companies.
What are your long-term career goals?
My long-term goal is to re-launch Green Oak
Investment Partners (or its equivalent) as the
managing member, and one of several portfolio
managers. Before dissolving my prior investment
fund, I partnered with two former Bridgewater
Associates investment professionals to launch
alternate strategies for investors. Partnerships
are key to success, and I would like to relaunch on
a larger scale with other like-minded individuals.
In additional to institutional capital, ideally I
would like to specifically accommodate investors
that are entertainers, athletes, or musicians. I
think this is an underserved group of investors. I
would like to do my part in reducing the number
of great artists and professionals that go bankrupt
as their careers descend.
This has been truly insightful. Thanks, Troy.

Billy Duberstein is a second-year MBA student at NYU Stern. This past summer, Billy was an equity
research intern at Wedbush Securities in Los Angeles, which built upon his prior research internships at
Express Management Holdings, Culmen Capital, Resolve Capital Management’s Eco Fund, and years of
personal investing. Prior to Stern, Billy was a filmmaker under his own production company, Stone Oak
productions, and at several large production companies in Los Angeles, and then a political researcher
on energy issues for Beehive Research. Billy has a B.A. in Music with a minor in English from University
of Virginia. He can be reached at wzd201@stern.nyu.edu
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company launched indoor wireless networking products (access points, routers, voip phones, security cameras) for
enterprise, SMB/ SOHO, hotels, and schools under its Unifi brand. Recently, the company announced it was leveraging its
worldwide network of internet service providers to deploy solar under its Sunmax brand, a low-cost, complete solar
solution. The company went public in 2011. Robert Pera still owns 67% of shares.
Thesis #1: Disruptive Business Model: In the wake of Ubiquiti’s breakthrough Airmax product in 2010, CEO Robert
Pera kept the incredibly lean business model of a startup even as the company scaled. Instead of investing in a large sales
force, Pera developed the Ubiquiti Online Community. The Ubiquiti online community usually has over 1,000 users online
at any one time, has had nearly a million total posts since inception, and gets nearly 1,000 posts a day. This is where the
entrepreneurial customer base of Ubiquiti comes to share stories, give each other product support (there are a lot of
variables, bugs and fixes with any tech product), suggest new features, and can directly communicate with members of
the R&D team. Because it was first, (and combined with a disruptive product) the Ubiquiti community has what I believe
to be a “network effect” where most WISPs who want to talk to other WISPS go to the Ubiquiti Community. This means
the company doesn’t have to hire a traditional sales force, in-house product testing, or customer support. The close
relationship with customers allows Ubiquiti to be nimble in reacting to problems, to get ideas for new products their
customers want, and the R&D team thus feels more of a keen sense of ownership and responsibility. Ubiquiti also does
not assume the task of distribution. Instead, the company, sells their products through master distributors all over the
world. Ubiquiti also outsources all manufacturing to further streamline operations and limit costs. This lean structure
affords Pera the ability to hire “All-Star” engineers and focus on the R&D, which is where all the value is. The results of
this are high quality products, rock-bottom prices, and an ROIC of over 100%. I believe these advantages are sustainable
due to the online community network effect, Ubiquiti’s brand equity among its customers, and its cost advantage.
Thesis #2: Fixed Wireless Internet Still Underpenetrated. The penetration of fixed broadband is only around 45%
worldwide, yet growth in this area will not happen in a straight line. While the developed world is roughly 80% penetrated
in terms of internet deployment, the developing world, which is far larger, is only 40%, and the entire world is only 45%
penetrated. Moreover, Ubiquiti has not been able to penetrate China or India as quickly as Pera would have hoped- the
Asia Pacific region accounted for only 13% of sales last quarter. Pera has suggested putting “a man on the ground,” in
these two markets (previous markets were able to be penetrated with no sales force on the ground) as a solution.
Thesis #3: Alignment of Interests with a Visionary CEO. Pera currently owns roughly 2/3 of shares, and does not pay
himself a salary or options. Therefore, there is an alignment of interests with shareholders, and this makes mecomfortable
investing alongside him. Prominent VC Bill Gurley (investor in OpenTable, Yelp, GrubHub, Twitter, Zillow, and Uber) said
of Pera back in 2012: “Robert Pera, the founder and CEO of Ubiquiti, is one of the smartest, most disruptive technology
founders I have ever met. His revenues per employee and profits per employee out-class that of Google and Facebook.
Additionally, the fact that Cisco has never had a price disruptor over 30 years seems to violate the rules of the “Innovator’s

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