Top 50 Microcap Investor List: Mark Vonderwell
For this week’s Top 50 Microcap Investor we present Mark Vonderwell, a private investor with nearly two decades of stock market experience. Mark graduated from the University of Illinois Urbana-Champaign in 1996 with a Ph.D. in theoretical and applied mechanics.
Read our feature on Mark Vonderwell
Q4 Investor Letters
Tomorrow, we’ll be sending out a summary of our favorite potential investment ideas from the investor letters, and other presentations, that we have been reading over the last few weeks. This only goes out to Premium Members. So if you’re not already a Premium Member and want to join so that you will receive it, you can sign up HERE.
Mispricings
Investors look for mispricings. Sometimes, mispricing happens in small, underfollowed, ignored, or misunderstood companies, as we highlighted in our paper on XPEL, Inc. last year, for example. Other times, mispricing happens in companies everyone knows about. In those instances, investors that are able to see and understand things better than others can reap major rewards when the rest of the world comes to appreciate similar insights. An example of this was Nick Sleep and Amazon over a decade ago, which Sleep discussed at several points in his investor letters over the years.
How does one find mispricings? It helps to read a lot, since you never know where an idea might be. It helps to study the winners of past, to give you a framework to help identify future winners. And it helps to understand the full menu of reasons those mispricings exist. Value investor extraordinaire Seth Klarman has written about those reasons, which is about as good of a list as one can find:
Our approach to value investing is to search for mispricings. Mispricings can exist for many reasons, including situational complexity, institutional constraints, investor error or irrationality, short-term disappointments, disparate time horizons, the urgent unwinding of leverage, turmoil driven by financial distress, and investor indifference or neglect. Over Baupost’s history, the locus of opportunity has varied significantly. Both the public and private markets have generally become more competitive over the years. And yet, both hold the prospect of significant mispricings that investors can uncover if they are patient, disciplined, relentlessly curious, and agile. Many investors, by charter or regulation, can invest only within narrow silos and thus are unable to view opportunity from a sufficiently wide lens. Value may be found, for example, in the stock of a reliably growing company trading at a fairly high multiple based on current results and a materially lower multiple a few years out if (and this is a big “if”) the expected growth actually materializes and is sustained. While the shares of companies enjoying strong growth can become mispriced for many reasons, as noted, a particular risk with high-multiple stocks is that if growth falters, the shares may suffer the double whammy of a lower multiple applied to lower projected earnings. This, in turn, may create opportunity, as disappointed growth investors exit and value investors spot a bargain.
So keep your eyes sharp and focused on places you may find mispricings. If the markets remain volatile, there will continue to be opportunities. But they don’t always last long.
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