Graham & Doddsville An investment newsletter from the students of Columbia Business School Inside this issue: Issue XXVII Spring 2016 CSIMA Confer- ence & Pershing John Phelan of MSD Capital Square Challenge P. 3 John Phelan P. 4 Mr. Phelan is Co-Managing Partner of MSD and Co-Founder of the firm. Prior to forming MSD, he was a Principal from 1992 to 1997 Alex Magaro P. 14 at ESL Investments, a Greenwich, Connecticut based investment firm. At ESL, Mr. Phelan was responsible for ESL’s Special Adam Wyden ’10 P. 25 Situation Investments and helped grow the firm from $50 million Marc Cohodes P. 33 to over $2.0 billion in assets under management. Prior to ESL, Mr. Phelan was Vice President in charge of Acquisitions (Western Pershing Square Region) for the Zell-Merrill Lynch Real Estate Opportunity Funds. Challenge Ideas P. 44 John Phelan Mr. Phelan began his career at Goldman, Sachs & Co. where he (Continued on page 4) Editors: Alex Magaro Brendan Dawson Adam Wyden ’10 MBA 2016 of Meritage of ADW Capital Scott DeBenedett Group MBA 2016 Anthony Philipp Alex Magaro is a Adam Wyden founded MBA 2016 Co-President of ADW Capital in January Meritage Group, a Adam Wyden 2011 and acts as sole Brandon Cheong Alex Magaro fundamentally- portfolio manager to MBA 2017 oriented the Fund. The Fund is Eric Laidlow, CFA investment firm, managing focused on maintaining a concentrated MBA 2017 approximately $10B primarily on portfolio of high-quality and high- (Continued on page 14) (Continued on page 25) Benjamin Ostrow MBA 2017 Marc Cohodes formerly of Rocker Partners/Copper River Visit us at: www.grahamanddodd.com Marc Cohodes is a formerRolf General Heitmeyer Partner of Rocker Partners/ www.csima.info Copper River from 1985-2009. He began his career at the Northern Trust Company in 1982 after graduating Babson College with a BS in Finance. He has been profiled in the books; Reckless Endangerment, Selling America Short ,The Most Marc Cohodes Dangerous Trade. He was the subject of a Harvard Business School Case study on his efforts to expose Mortgage Fraud at Novastar. He resides in Cotati, California, where he runs Alder Lane Farm. (Continued on page 33) Page 2 Welcome to Graham & Doddsville We are pleased to bring you the ment horizons across asset When we inherited Graham & 27th edition of Graham & classes and the return potential Doddsville as editors last year, Doddsville. This student-led in- of businesses with durable we wanted to continue the vestment publication of Colum- competitive advantages. tradition of providing our read- bia Business School (CBS) is co- ership with high quality inter- sponsored by the Heilbrunn Adam Wyden ’10 of ADW views and investment ideas. Center for Graham & Dodd Capital discusses the influence We sought to provide diversity Investing and the Columbia Stu- of an entrepreneurial spirit on of thought and experiences via dent Investment Management his firm and investment pro- our interviews. We hope we Association (CSIMA). cess. Adam walks through past have lived up to those objec- ideas such as IDT and Imvescor tives. Meredith Trivedi, the In this issue, we were fortunate Restaurant Group (IRG.TO) as Heilbrunn Center Director. to speak with four investors well as current theses on Fer- We are honored and privileged Meredith skillfully leads the who offer a range of perspec- rari (RACE) and Fiat (BIT:FCA). to have continued the Graham Center, cultivating strong tives based on their unique paths & Doddsville legacy, and we relationships with some of to and careers in investing. Mark Cohodes shares his look forward to reading the the world’s most experi- experiences from a lifetime of next generation of issues, enced value investors, and John Phelan of MSD Capital short-selling. He offers his per- helmed by three outstanding creating numerous learning discusses lessons learned over spective on the discipline and individuals in Brandon Cheong opportunities for students decades of investing with men- temperament required as well ’17, Eric Laidlow ’17, and Ben interested in value invest- tors such as Richard Rainwater, as the intellectual rewards of a Ostrow ’17. We want to thank ing. The classes sponsored Sam Zell, Eddie Lampert, and career in short-selling. Marc Brandon, Eric, and Ben for by the Heilbrunn Center Michael Dell. John offers insights discusses ideas such as Home their commitment and dedica- are among the most heavily into the development of MSD Capital Group (HCG) and tion to Graham & Doddsville demanded and highly rated Capital as well as his own devel- Tempur Sealy (TPX). over the last year. classes at Columbia Busi- opment as an investor and PM, ness School. while shedding light on challeng- This issue also highlights pho- As always, we thank our es he sees today in the invest- tos from the 19th annual interviewees for contributing ment management industry. CSIMA Conference as well as their time and insights not only the 9th annual Pershing Square to us, but also to the invest- Alex Magaro of Meritage Challenge. ment community as a whole, Group discusses his many expe- and we thank you for reading. riences, from running a business Lastly, we are proud to include as an owner-operator to invest- in this issue finalist pitches from - G&Dsville Editors ing in early stage companies, current students at CBS who which led him to co-manage competed in this year’s Per- Meritage Group. Alex talks to shing Square Challenge. G&D about long-term invest- Professor Bruce Greenwald, the Faculty Co-Director of the Heilbrunn Center. The Center sponsors the Value Investing Program, a rigor- ous academic curriculum for particularly committed stu- dents that is taught by some of the industry’s best practi- tioners. Howard Marks from Oaktree, pictured Columbia Business School students help here giving the keynote talk at the CSIMA at registration for the 19th Annual Conference in January 2016 CSIMA Conference Volume I, Issue 2 Page 3 Columbia Business School Events: CSIMA Conference and Pershing Square Challenge Keith Meister of Corvex Management LP delivers his Howard Marks of Oaktree with Bruce Greenwald after keynote address at the 19th Annual CSIMA Conference their keynote interview at the 19th Annual CSIMA Conference 1st Place Finalists Joanna Vu ’17, Melody Li ’17, and Thais Paul Hilal ’92 and Bill Ackman listen and judge student Fernandes ’16 pitch Alimentation Couche-Tard at the 9th pitches at the 9th Annual Pershing Square Challenge Annual Pershing Square Challenge Judges deliberate at the 9th Annual Pershing Square Bill Ackman and the winning team at the 9th Annual Challenge Pershing Square Challenge Page 4 John Phelan (Continued from page 1) worked as an Analyst in encouraged me to go find good second years at business the Investment Banking mentors. She said one of the school I worked for Richard Division. things about good mentors is Rainwater, and that's where I you can learn on someone met Eddie Lampert. Richard Mr. Phelan received his else's nickel. It's something you introduced me to Eddie. Of M.B.A. from Harvard don't realize when you’re those ten weeks that summer, Business School and younger. But it struck me at a I spent about three or four graduated cum laude with very early age to try to go find with Richard and the rest with distinction and Phi Beta people that were the best in Eddie. Kappa from Southern their particular businesses, and Methodist University with I think my mother pushed me G&D: How did you connect a B.A. in Economics and towards that. with Richard? Political Science. Mr. Phelan also holds a In my real first job, I worked JP: I had been hoping to get John Phelan General Course degree with an uncle rehabbing back to Texas after business with an emphasis in apartments in New York. I was school and I wrote Richard a Economics and doing that during college. That letter. In that letter I told him I International Relations was an eye-opening experience would be willing to work for from the London School of that forced me to focus on free and one of my professors Economics. cash flow every minute of the at Southern Methodist day. It was a very tough University had suggested I Graham & Doddsville business and I was doing a contact him. I told him I just (G&D): To start off, talk number of different things. The wanted to learn from one of about your background and work ranged from running the the best and was willing to your path to investing, numbers to actually doing invest in myself. including mentors and construction work. That influences along the way. teaches you a lot. I also Richard called me on a Friday learned I didn't want to break at like 4:00pm. He said “Hey John Phelan (JP): My mother my back doing that for my John, this is Richard was a very big influence on my entire career. Rainwater.” I thought it was development as an investor. one of my classmates playing a My father was a doctor and, I was fortunate enough to get a joke on me. I used a curse like most doctors job with Goldman Sachs, which word I shouldn't have and just unfortunately, not a very good was really the first big hung up the phone. A minute investor. My mother, on the company I worked for. At the later the phone rang again: “I other hand, came from a real time, Goldman was still a think we got disconnected.” estate background and focused private partnership. I learned a I'm thinking, “Oh my God, this very much on cash flow.