Practice 3: Find Inflections in Cyclical Businesses Undergoing Secular Change like Kuppy
“But I’m buying stuff where, revenue’s growing rapidly. I’m buying stuff where value creation is happening rapidly. I’m buying, you know, growth momentum names. I’m buying them before anyone else realizes that they’re growth momentum names...they’re still valued like uh, value stocks. If you look at this sort of stuff we’re doing, we call it—, I call it inflection investing for lack of a better word, but they tend to be industries that have destroyed a lot of capital, that have bored people to death, that give people PTSD.”
Welcome Listeners,
Kuppy has a magic formula that makes a lot of money. By magic I mean a simple approach that requires thoughtful fundamental work. It is capital cycle meets secular trend meets nobody else is doing the work. It is a beautiful combination that has led to wonderful returns in the mold of an old school hedge fund looking for big total returns - not tiny low vol nonsense. It is macro and micro that leans on breakouts - but fundamental breakouts that precede technical breakouts. If you know a company and sector better than everyone else, you see inflections before the market does. That is the secret but it is also why nobody else seems to pull it off. Nobody wants to do the work to understand every uranium mine or every drillship, semisubmersible, and jackup rig out there. Most will choose complex & fancy paths but with less work. Kuppy and his team do the work and his success leaves clues for us that can help us become better investors.
Cheers,
Chase
“Everyone’s so focused on the short term, “what’s this company going to earn next quarter?” You know, and they never take a step back and say, “Should I even own this business?” “Is this a good business?” “Is this a way to express my view?” Or “Is this suboptimal, versus some other, CUSIP to express some sort of macro view I have?”
“I think there’s too many people that show up to work every day and feel like they have to stay useful. And, you know, I think this is one of the things we wanted to talk about, but I go out of my way to find ways not to be in the office because all I’m going to do is make a mistake.”
Show Notes
The Transcript
Kuppy has been a great friend to Chase since he started PMR. This week they discuss position sizing, what inflection investing really means, how to spot the convergence of cyclical and secular tailwinds, and most importantly, how getting away from the markets allows you to express your trades more effectively. Kuppy’s approach to investing is bold, well researched, and decisive. We also discussed how Kuppy decided to stop missing stuff with the inception of Kuppy’s Event Driven Monitor (KEDM).
This Episode’s Charity:
The Sugar Pine Foundation began in 2004. They are dedicated to restoring sugar pines in the Lake Tahoe National Forest in California.
Donate here: https://sugarpinefoundation.org/get-involved/donate
Sadly, no trees were saved as a result of this episode.
Referenced in the Show:
Kuppy’s Book Recommendations: Tomorrow’s Gold by Marc Faber & Reminiscences of a Stock Operator by Edwin Lefèvre and Roger Lowenstein
Where You Can Find Kuppy:
Kuppy’s X : https://twitter.com/hkuppy
Praetorian Capital : https://pracap.com/
Kuppy’s Event Driven Monitor (KEDM) : https://kedm.com/
“You know, I don’t believe in, anything less than a 5% position. If we’re going to play it at 2%, let’s just not play it. We’re never going to do the research. We’re never going to have the confidence in it. You know, I really want to do 10% minimum positions, preferably bigger. Uh, which means you can’t get it wrong.”
