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Alternative Market Briefing

"Unconventional" value investor Meson Capital up 9.8% net in Q3

Friday, November 04, 2016

Matthias Knab, Opalesque:

Ryan Morris, President at Meson Capital Partners, writes on Harvest:

Our net performance for Q3 was 9.8%, vs. indices (in order of relevancy for comparison) of: 4.6% HFRI Hedge Fund Equity Index, 9.0% Russell 2000 and 3.8% S&P 500. Our portfolio was market neutral on a beta adjusted basis for the quarter; our longs added 13.4% to returns while shorts detracted 3.6%. Our market neutral portfolio helps us focus on our business’s operations and ignore the headline driven, frothy stock market. "The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs." –Warren Buffett

Conventional vs. unconventional value investing

… One narrative we disagree with conventional value investors is that one can’t make money shorting because the market goes up over time. This is indeed true but the deeper dynamic is creative destruction, and the pace is accelerating with the average life of an S&P 500 company down from 30 years to 10since WWII. For every Amazon success story for example,100 retailers go bust. For every Shake Shack there are 30 bankrupt 'concepts’. The data shows that more stocks actually decline than rise over time –even more so in environments like today where overall valuations are so stretched.

The second area of disagreement is how easily incumbent companies can clone the products of upstarts –especially when it comes to exponential technology changes.This......................

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