Modern value investing emphasizes investing in resilient franchises and letting the compounding do the work for you. Today's guest, Jan Hummel, is a fantastic expositor of this subject and a friend of the Center who has been part of many of our events over the years.
In 2007, Jan launched the Paradigm Capital Value Fund with Bruce Greenwald, the founder of the Heilbrunn Center and Columbia Business School alumnus, Mario Gabelli. Paradigm's investment philosophy is built around a focus on mispriced securities in the small- and mid-cap space within Europe, deep fundamental research, a concentrated portfolio, and hedging of the portfolio through non-equity investments and derivatives.
I've often mentioned that I think the opportunities in Europe for value investors are enormous and with Paradigm's focus on making investments within the European Union, Jan is the perfect person to explore this topic with us.
On this episode, Jan and I discuss the advantages of real-world experience, combined with deep fundamental research and tenacity. We talk about how Jan's early years in Sweden have shaped his whole life, what it was like to make the move from financial economics to business school, making the transition from 15 years of turnaround recovery to running a fund, the key traits of a great analyst and an entrepreneur, and so much more!
Key Topics:
- How Jan's childhood in Sweden has colored his life (2:37)
- Jan's unconventional experience buying shares at 16 (4:06)
- Studying financial economics at the Stockholm School of Economics and Stanford (6:26)
- The first steps of Jan's finance career as a Junior Analyst (7:33)
- How Jan went from studying under Bruce Greenwald at Harvard to working together (9:16)
- How business school broadened Jan's experience (9:56)
- Jan's unorthodox path in asset management (12:07)
- Why Jan became interested in turnaround restructuring (13:08)
- How Jan's 15 years of business experience has helped him as an investor (14:29)
- The Swedish banking crisis of the early 90s (16:24)
- Competitive dynamics of the 80s and 90s (18:03)
- The powerful combination of deep knowledge and a favorable market environment (19:19)
- Events that led to the launch of Paradigm Capital (20:44)
- The experience of founding a fund right before the 2008 economic crisis (23:09)
- Creating an information edge through research (24:37)
- Advantages of a having concentrated portfolio (26:22)
- Paradigm's layered approach to sizing positions in their portfolio (29:05)
- Why Paradigm is country-agnostic when it comes to portfolio construction (30:57)
- How Paradigm hedges currencies as part of their risk management (31:50)
- Navigating the tricky waters of figuring out when to exit a position (35:48)
- What I like about Paradigm's flexible approach to engaging with management (38:55)
- Why data is always foundation for identifying potential investments (39:59)
- What Jan is looking for in companies' return on capital employed (41:05)
- Why Jan believes we'll see an increase in passive investing in Europe in the future (45:32)
- Opportunities for value investors in Europe (47:04)
- Building strategy around the improvement of operational practices (48:51)
- What makes a great analyst (51:32)
- The tenacity of an entrepreneur (53:01)
- And much more!
Mentioned in this Episode:
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