A Meeting With a Hedge Fund Manager

And A Valuable Lesson!

May 22, 2022

At the end of April, after attending the Berkshire Hathaway AGM, I was very fortunate to be able to attend a private dinner hosted by a large hedge-fund. I made friends with some of the investors who were going (during VIC) and they thought it would be good for me to get to know some fairly successful value investors. I’ve never been to dinners like that before, and so I just silently drifted around the room, smiling and nodding. Eventually, I approached a tall investor, who we’ll call Jack, and introduced myself. Jack is a manager of a large fund in Texas. As we started talking, he brought up Alimentation Couche-Tard, a company I really like and hold a position in (bingo!) We had the same thesis – economies of scale, great management, wonderful culture, and a fair price. Jack also talked about how the threat of EV charging stations wiping out Couche-Tard were overblown given its economies of scale and dominant local market share (plus some favorable regulation), which I didn’t even think about. Jack, very clearly, was an investor who knew what he was doing. After he talked about several of his other positions (a couple of which were financials), I asked if I could recommend him a company: Kaspi.kz. It went something like this:

“Kaspi?” he asked. “I’ve never heard of it before.”

“That’s because it’s a company from Kazakhstan.”

“Kazakhstan?!? (scoff) You’ve gotta be kidding me. I would never invest in Kazakhstan – you don’t know what the fuck is going on in that whole mess. I wouldn't even come close to it.”

Jack, obviously, did not know that I was from Kazakhstan  – but that’s not the point. The point is that he didn’t even think about it. He didn’t even consider looking into or asking about the company. He had a mental/ subconscious barrier that just threw any notion of “opportunity” out with the word “Kazakhstan.” Now, it could very well be that Jack doesn’t know much about Kazakhstan and that it’s outside of his circle of competence. Given some of his holdings, however, Kaspi was (as a business) squarely within his circle of competence, which is why I recommended the company to him in the first place. I’m sure that if he just looked at the company, he would’ve realized that such an opportunity like Kaspi exists exactly because so many people like him dismiss the notion of investing in a country like Kazakhstan – especially today. People run away from bad news at exactly the time when they should be jumping into all the mud and dirt and excavating the few remaining gems the mudslide might have left behind. As Sir John Templeton taught us, the right question is not “where is the outlook best?” but rather “where is the outlook the worst?” It is, as he often quoted, at the time of maximum pessimism that opportunity presents itself. I believe that it pays to constantly keep an open mind and consider any opportunity as long as it is attractive enough. Digging where others aren’t even willing to look makes so much sense, and yet many often label themselves “contrarian” even though they’ll run the other way the moment bad news hits. 

P.S. If anyone needs some book recommendations, read Mr. Bouchard’s Daring to Succeed, which tells the story of how he built Couche-Tard from a handful of stores into a global empire.