Value Investing in a Growth Obsessed Market w/ Scott Barbee (TIP651)

Kyle Grieve spoke with Scott Barbee about maintaining a deep value-based strategy, the three risk assessment buckets, the power of being a contrarian, the future of fossil fuels, navigating a 72% drawdown during the GFC, and more.

Scott is the founder of the Aegis Value Fund, which was created in 1998. Prior to Aegis, Scott worked as an analyst covering oilfield services at Simmons & Company. He also had a stint as a deep value advisor for Donald Smith & Company. He received his MBA from the Wharton School and the University of Pennsylvania. He also holds a B.S. in Engineering and a B.A. in Economics.

IN THIS EPISODE YOU’LL LEARN:
00:00:00 - Intro
00:00:26 - Some of the key lessons he learned from investing legends like Bill Ackman, Bob Robotti, Peter Cundill, and Walter Schloss
00:10:09 - How Scott has managed to maintain a value-based strategy when many investors have bailed to chase more expensive stocks
00:15:26 - Scott's three buckets of investing risk
00:21:06 - A breakdown of the concept of a "genetic contrarian."
00:23:00 - Why risk management is key to investing in businesses with high levels of uncertainty and how to take advantage of it
00:39:36 - Scott's views on energy and how fossil fuels are unlikely to disappear anytime soon
00:48:19 - The potential downsides Scott sees in super high-quality businesses
00:50:04 - Why lower-quality businesses with volatile earnings look very attractive right now due to a widespread de-leveraging
01:04:27 - How to manage through major drawdowns and maintain conviction in your ideas and strategy

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[Fitinfifties]

Enjoyed listening to this fellow, thank you!

[coindrop]

Great Interview. I really need to listen to more valueinvestors, especially a guy like Scott who has been outperforming since 1998.
I bought heavy into the "High quality companies only" mantra in 2021-2022 and it has been great but a lot of my companies now seem very expensive and I fear what kinda returns they can give going forward. I see other companies that dont fit the quality criteria but that are selling for P/E's in 5-6-7 range and have almost non-cyclical revenue (but no growth) and it's getting harder and harder to dismiss those.

[KingwoodStudios]

I'm impressed. Wish his Aegis fees weren't so high.

[kevinmendoza]

Scott may not realize that he uses the phrase “You Know” too much in the interview.

[brianbirnbaum]

He thinks quality will fall more than “traditional” value despite his experience in 2008?

Shouldn’t that have said something?

[MeBee-flow]

Holy... 50% of the funds is materials and 36% is energy. no matter how much you bet on these sectors....that can't be healthy. nice to hear other views, but I'm really getting out of his strategy. so much cyclicality in the portfolio really requires "skill" in valuation as well as timing.

[brianbirnbaum]

He thinks quality will fall more than “traditional” value despite his experience in 2008?

He still doesn’t get it?

[MeBee-flow]

Hopefully he could outperform at least in 2022

[brianbirnbaum]

If there’s a decline in quality companies there will be a decline in non quality companies. Perhaps an even greater decline. Entirely unclear what his reasoning is here.

[michaelfriend]

Scott's got some obscure picks per the 13F

[brianbirnbaum]

🤦🏻‍♂️

He acts like there are no earnings to justify the multiples. Nvidia just grew triple digits over nearly two years.

Rigid, inflexible, dogmatic.