Graham & Doddsville An investment newsletter from the students of Columbia Business School Inside this issue: Issue XXVI Winter 2016 25th Annual Craig Effron of Scoggin Capital Graham & Dodd Management Breakfast P. 3 Craig Effron P. 5 Craig Effron is the co-portfolio manager of Scoggin Capital Management, which he founded with partner Curtis Schenker in Jeff Gramm P. 19 1988. With approximately $1.75 billion in assets under management, Scoggin is a global, opportunistic, multi-strategy Shane Parrish P. 30 Craig Effron event-driven fund. Scoggin focuses on identifying fundamental Jon Salinas P. 39 long/short investments through three primary strategies including event driven equities with a catalyst, special situations, and distressed credit. Mr. Student Ideas P. 47 Effron began his career as a floor trader on the New York Mercantile Exchange and New York Commodity Exchange. Mr. Effron received a BS in Economics from the (Continued on page 5) Editors: Brendan Dawson Jeff Gramm ’03 Shane Parrish MBA 2016 of Bandera of Farnam Scott DeBenedett Partners MBA 2016 Street Anthony Philipp Jeff Gramm manages Shane Parrish is MBA 2016 Bandera Partners, a the curator for the Brandon Cheong value hedge fund based Shane Parrish popular Farnam Jeff Gramm in New York City. He Street Blog, an MBA 2017 intellectual hub of teaches Applied Value Eric Laidlow, CFA Investing at Columbia Business School curated interestingness that covers MBA 2017 and wrote the upcoming book “Dear topics like human misjudgment, (Continued on page 19) (Continued on page 30) Benjamin Ostrow MBA 2017 Jon Salinas ’08 of Plymouth Lane Capital Management Visit us at: www.grahamanddodd.com Jonathan Salinas founded RolfPlymouth Heitmeyer Lane in April 2013 and acts www.csima.info as sole portfolio manager to the Fund. Prior to founding Plymouth Lane, Jonathan worked as an analyst at Marble Arch Investments, a long/short hedge fund manager. Before joining Jon Salinas Marble Arch, Jonathan served as a consultant at ZBI Equities, a long/short hedge fund manager operated by Ziff Brothers Investments. Prior to ZBI, he was an analyst at Festina Lente Investment Management, a concentrated, value -oriented investment manager, and worked as an analyst in capital markets and research divisions at UBS AG. (Continued on page 39) Page 2 Welcome to Graham & Doddsville We are pleased to bring you the walks through current ideas investing. This year’s breakfast 26th edition of Graham & including Famous Dave’s featured a conversation with Doddsville. This student-led in- (DAVE) and Star Gas Part- Philippe Laffont of Coatue Man- vestment publication of Colum- ners (SGU). agement moderated by Profes- bia Business School (CBS) is co- sor Bruce Greenwald of Co- sponsored by the Heilbrunn Shane Parrish discusses the lumbia Business School. Center for Graham & Dodd origination of Farnam Street Investing and the Columbia Stu- and his focus on becoming a Lastly, we are proud to bring dent Investment Management better learner, as epitomized you pitches from current stu- Association (CSIMA). by Warren Buffett and Charlie dents at CBS. We feature final- Munger. Shane explains how ists from the Darden at Virginia Meredith Trivedi, the In this issue, we were fortunate these learnings apply to becom- Investing Competition, Colum- Heilbrunn Center Director. to speak with three investors ing a better investor and shares bia Business School’s inaugural Meredith skillfully leads the and the founder of the popular his hopes for Farnam Street CSIMA Stock Pitch Challenge, Center, cultivating strong blog Farnam Street. and its readership. and Alpha Challenge at UNC relationships with some of Kenan-Flagler. the world’s most experi- Craig Effron of Scoggin Capital Jonathan Salinas ’08 of Plym- enced value investors, and Management discusses the evo- outh Lane Capital discusses his The three finalist ideas from creating numerous learning lution of his firm and his invest- experiences with varied invest- our classmates include: Marc opportunities for students ment approach from commodi- ment approaches and mentors Grow ’17, Benjamin Ostrow interested in value invest- ties to the stock market. Craig and how his background lead- ’17, and Evan Zehnal ’17 — ing. The classes sponsored offers insights into his risk man- ing up to founding Plymouth Dexcom Inc. (DXCM) Short; by the Heilbrunn Center agement mentality, challenges Lane has contributed to the Nielsen Fields ’17, Joanna Vu are among the most heavily facing the investment manage- firm’s world view and how he ’17, and Adam Xiao ’17 — demanded and highly rated ment community, and creative seeks to invest. Jonathan also Quest Diagnostics (DGX) classes at Columbia Busi- ways to express investment shares current ideas DHX Short; and Justin Hong ’17, ness School. theses while managing against Media (DHXM) and Sequential Zachary Rieger ’17, and Cristó- downside risk. He shares recent Brands Group (SQBG). bal Silva ’17 — XPO Logistics case studies in the event-driven (XPO) Long. space and opportunities he cur- This issue also highlights pho- rently see in distressed credits tos from the 25th Annual Gra- As always, we thank our in Puerto Rico and energy. ham & Dodd Breakfast, held on interviewees for contributing October 9th, 2015 at the their time and insights not only Jeff Gramm ’03 of Bandera Pierre Hotel in New York. This to us, but to the investment Partners discusses his book on event brings together alumni, community as a whole, and we activism “Dear Chairman: students, scholars, and practi- thank you for reading. Boardroom Battles and the Rise tioners for a forum on current of Shareholder Activism” and insights and approaches to - G&Dsville Editors 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. Keynote speaker Philippe Laffont Attendees gather at the 25th Annual addresses attendees at the 25th Annual Graham & Dodd Breakfast Graham & Dodd Breakfast Volume I, Issue 2 Page 3 25th Annual Graham & Dodd Breakfast— October 9, 2015 at The Pierre Hotel Mario Gabelli ’67 at the Graham & Dodd Breakfast with Professor Bruce Greenwald with Philippe Laffont at the keynote speaker Philippe Laffont Graham & Dodd Breakfast Sid and Helaine Lerner speak with Heilbrunn advisory Heilbrunn advisory board members David Greenspan ’00, board member Tom Russo William von Mueffling ’95, and Jenny Wallace ’94 Page 4 SAVE THE DATE FOR THE 7th ANNUAL “From Graham to Buffett and Beyond” Dinner Friday, April 29, 2016 6 p.m. to 9 p.m. The Omaha Hilton 1001 Cass Street • Omaha, Nebraska Tickets will go on sale in March at www.grahamanddodd.com Page 5 Craig Effron (Continued from page 1) Wharton School of try my hand at trading right. Business of the University commodities. I said that if I of Pennsylvania. didn't do well, I would go to After about a year of managing law school a year later. I did Paul’s money and these other Graham & Doddsville well. I learned a lot about life accounts, I realized that I liked (G&D): Could you tell us and about commodities and doing this more than trading about your background and trading. And I was fairly good commodities. I left and told how you came to investing? at it. everybody I was going to put together a fund called Scoggin Craig Effron (CE): It’s The problem with with my partner Curtis important, because I am not commodities trading is that it Schenker, who is still my the traditional hedge fund ends at 2:30 in the afternoon. partner. Craig Effron story. I didn’t work two years When you’re 24 years old you in investment banking and then can get into a lot of trouble if Here’s a key element of our go to Harvard Business School. you’re done at 2:30pm unless partnership and how Curtis I went to Wharton for you have something to do. I and I complement each undergrad. I did not get into decided to start learning the other—it’s an important fact NYU Law, but I got into Duke. stock market. I had gone to about Scoggin. Curtis was my I went down to Duke for a Wharton for undergrad and best friend before we started weekend with my parents and somewhat thought I knew Scoggin. He’s my best friend everybody there was 6'4” and what I was doing, but I didn’t still. Curtis and I keep each blonde. I said, "I'm not going to really know how to invest. other grounded. We realize do very well here. Socially, I About five years into trading we caught a 30 year bull cannot go here." My parents on the COMEX, I started market. We weren't that said, "I tell you what, take a doing risk arbitrage. smart. We happened to have year off, defer, and then money under management, and reapply to NYU a year later That was the heyday of Mike it worked out. Curtis and I and hopefully get in.” Milken. I thought I was a genius don't take ourselves too because every time there was seriously. He has always been During that year, I met up with a deal announced, Mr. Naysayer, and I'm Mr. It’s- two buddies for a card game at automatically—within a Always-Bullish. Penn. They were playing for week—there would be a stakes that I had never even topping bid. Then there would He’s the guy who kept us in known existed. I said, "What be a third bid; it was crazy. business a lot because I do you guys do for a living?" Everyone on the floor knew would've been a lot more One said, "We trade about my success trading aggressive during the commodities.