Business
My conversation today is with Nathan Miller, the PM and creator of the Alpha Opportunities strategy that's now available via an active ETF with the symbol, "EOPS." For more information about the ETF, go to https://www.emles.com/etf/emles-alpha-opportunities-etf/ Conversation details: Nathan's experience: Legg Mason (Value) / Goldman Sachs (Fundamental) / SAC (Catalyst/Event) / RBC (Management / Risk Management) – Nathan spent 10 years with the same investment team at Goldman and SAC Focus: Deep fundamental value with a catalyst – Contrarian approach – Long/Short equity with options – Somewhat sector focused in old economy: Industrials/Cyclicals/Consumer/Retail – Primarily Mid-Cap Focused – Repeatable process – Look for asymmetric risk/reward opportunities and structure them correctly Investors will recognize the company names and brands in our portfolio – many of them are actually category killers (they dominate their niche in their specialty retail category) – But buying them correctly is the secret sauce. The focus here is on permanent capital – A long term approach with a goal of maximizing returns over the course of the business cycle – allows Nathan to have a longer term time horizon. Nathan and his partners have have $100m invested in the strategy personally – 2/3 in public entity (EOPS) and 1/3 in a private hedge fund, both run with similar focuses. Value focused (earnings yield) – and if we can find a catalyst that’s even better. We tend to look at normalized earnings over the cycle. Last year is a great example of how useful this can be – Earnings fell off a cliff, but the lack of earnings (or even negative earnings) were temporary in nature. Most analysts suffer from recency bias, we smooth out earnings and look at historical average (assuming a reversion to the mean) – What looked like 20x earnings 2020 earnings was actually only 3x-5x “normalized” earnings. Note: This works well in slower-growing industries like retail and industrials, less useful in VC / startup / high-tech. We talk about Nathans views on the current market and why having portfolio flexibility is critical to generating great returns, particularly going forward. We talk about the flexibility to be short, use hedges to protect the long book and also generate alpha on the short side. We also talk about being a value manager in a world where everyone wants go-go growth and why EOPS is a very unique and timely value focused strategy versus traditional value thats been lagging for a decade. Emles Alpha Opportunities ETF, EOPS: A great strategy for long-term compounding of returns – By having more tolerance for volatility and buying out-of-favor names, you can massively outperform the broader market over the cycle ETF product enables access, liquidity, and transparency - Ability to rebalance the portfolio and have it non-taxable to investors (tax deferred) is another benefit.