Insights

Jean-Marie Eveillard’s Value Investing Makes Sense offers a lucid, firsthand account of a legendary global value practitioner whose disciplined approach generated substantial long-term outperformance at First Eagle by focusing on margin of safety, hidden assets, and high-quality businesses at attractive prices. Eveillard provides rare insight into his contrarian toolkit - including prescient gold exposure, sum-of-the-parts opportunities such as the Bank for International Settlements, and the nuanced art of selling - while candidly reflecting on both successes (long-term holdings like Lindt) and errors (exiting compounders like Richemont too early).Most powerfully, the book recounts the severe test of the late 1990s technology bubble, when refusal to chase overvalued growth stocks produced significant relative underperformance (the flagship fund rose just 29% from early 1997through 1999 while the S&P 500 more than doubled) and sharp asset contraction as AUM fell from over $6 billion to around $2 billion amid widespread redemptions; Eveillard’s famous declaration that he would “rather lose half our shareholders than half our shareholders’ money” exemplifies the intellectual honesty and temperament required to prioritize client capital preservation over short-term asset gathering or style drift.

For institutional allocators and value investors navigating today’s similarly euphoric, concentrated markets - where narrow leadership in high-valuation technology and semiconductor names creates parallel pressures - this concise masterclass reinforces why steadfast adherence to first principles, even when painful, ultimately protects capital and positions portfolios for outsized recovery and growth when the cycle turns, as First Eagle’s own experience demonstrated when assets expanded dramatically in subsequent years. It is essential reading for any practitioner seeking to internalize the courage and patience that separate durable value processes from those that bend under market fashion.

Dr. Bob Rotella’s Golf Is Not a Game of Perfect encourages golfers to cultivate an uncluttered mind and resilient attitude rather than obsessing over technical mechanics or past mistakes. Building on similar themes from The Inner Game of Tennis, Rotella shows that accepting inevitable errors, staying loose and optimistic, trusting one’s process, and even “loving it” when in trouble leads to better performance under pressure. We think many investors would be well served to read this book, let go of perfectionism and self-criticism, embrace the mental side of the game, and approach markets with relaxed concentration so opportunities can unfold as they will.

Sebastian Mallaby’s The Infinity Machine is a masterfully written, highly engaging chronicle of Demis Hassabis and DeepMind that solidifies Mallaby’s status as a premier chronicler of modern finance and innovation capitalism. Tracing the path from early chess and gaming algorithms to massive deep learning frameworks, the narrative reveals how artificial general intelligence is being actively willed into existence by a remarkably small, elite circle of visionaries. Crucially, Mallaby captures the fundamental tension between human inductive pattern recognition - extracting meaning from noise - and the structural limits of computing, a dynamic that directly mirrors today's critical infrastructure bottlenecks as the industry shifts from training models to high-volume inference. The book expertly documents the massive hardware, semiconductor, and electricity constraints currently dictating the pace of the AI rollout, making it a foundational text for parsing the structural reality of the ongoing capital expenditure wave. Ultimately, reading The Infinity Machine sharpens an investor’s ability to separate speculative hype from genuine economic moats, providing the pattern recognition needed to uncover reasonably priced businesses poised to compound capital through this sweeping technological shift.

Larry Goldstein’s 500-page collection of partner letters is a definitive masterclass in the rewards of hunting for "stocks overlooked or ignored by otherwise intelligent investors." Over a 40-year period beginning in 1982, Goldstein’s Santa Monica Partners delivered a phenomenal 16.1% annualized return, a record built on an insatiable curiosity for the obscure and a refusal to follow the herd. While the letters begin in 1982, they represent the culmination of a career that started in the 1960s, giving Goldstein the historical perspective to find "jaw-droppers" — his term for companies where the disconnect between the business reality and the valuation was so extreme that an observer's jaw would drop upon discovering the stock's microscopic market price. He focused on the "dark" and deregistered corners of the market that the institutional world had abandoned, proving that significant alpha exists where there is zero analyst coverage.

10 "Electricity Stories" Where Something Was Happening: Below are 10 unique case studies from the letters and Goldstein’s broader career, beginning with his earliest "war stories" and following the path of the mispricings and catalysts he mastered:

• Texas Pacific Land (TPL): This was a lifelong obsession that began when Goldstein was just 13 years old and bought his first 100 shares. In his letters, he became a vocal activist, pushing the board to stop wasting money on "paltry" dividends and instead use Dutch tender offers to aggressively shrink the float. For Goldstein, TPL was the ultimate royalty machine — the goal was to make every remaining share represent a larger slice of the oil-rich acreage.

• Overnite Transportation: In 1960, as a young analyst, Goldstein found this trucking firm selling at $3.50 while earning $2.26 per share. His boss refused to let him publish a report because it was a "pink sheet" stock, so Goldstein bought it personally. His $3,000 stake eventually turned into over $100,000 as the company moved to the Big Board and was bought out at a massive premium.

• Toys "R" Us: In the mid-1970s, Goldstein recognized a "gem" buried inside the wreckage of the bankrupt Interstate Department Stores. He realized the toy division was a superior business model and loaded up on debt and equity for pennies while the company was in reorganization. After multiple stock splits, his cost basis was effectively four cents per share; by the late 80s, it had become one of the most famous 1,000-baggers in market history.

• Warwick Valley Telephone: This was the quintessential "sum-of-the-parts" arbitrage. While the market ignored this stagnant rural phone utility, Goldstein discovered a quiet limited partnership with Verizon. He realized this single "hidden" asset was worth $100–$200MM — multiples of the entire company's market cap — proving that in the pink sheets, the "core" business is often just a wrapper for a much more valuable asset.

• Peter Kiewit & Sons / Level 3: Goldstein spotted a rare Class D share in the pink sheets belonging to the massive, employee-owned construction giant Kiewit. He loaded up between $40-$44, correctly betting on a massive corporate reorganization. When the assets were carved out to form Level3 Communications, the stock "launched like a rocket," opening at $70 on the NASDAQ and nearly doubling his money in weeks.

• The Mutual-to-Stock "Depositor" Strategy: Goldstein treated bank conversions like a systematic printing press. He would identify mutual credit unions preparing to go public and have his partners open local savings accounts just to gain priority status. This allowed them to buy IPO stock at "dirt cheap" valuations — often 50% of tangible book value — with a massive built-in margin of safety.

• International Speedway: This was a multi-decade compounding machine found in the weeds. Goldstein began buying when it was a tiny, illiquid racing micro cap with a total market value of just $3.5 MM. He recognized the dominant competitive moat of its tracks long before NASCAR became a cultural phenomenon, watching that initial $3.5 MM value balloon into a $2.2 B empire.

• Adrian Steel: When a fair price wasn't offered during a corporate cleanup, Goldstein didn't just walk away; he used the court system to trigger appraisal rights. It required years of legal grit and standing his ground, but he eventually forced a significantly higher payout for his partners by refusing to accept management's lowball offer.

• Compass Knowledge: During the 2009 panic, this "dark" stock traded at a P/E of 0.95x while sitting on cash equal to 80% of its market cap. When management tried a 1-for-25,000 reverse split to squeeze out small holders, Goldstein registered single shares in his partners' names to stay in the game. He caught a market maker with a stale quote and banked a $250,000 profit in a single morning.

• Balchem: Goldstein found this chemical micro cap in 1987 when it had only $6.8 MM in revenue. He identified a proprietary encapsulation technology that acted as a massive barrier to entry. Buying at an adjusted cost of $0.41, he held for over 30 years as it compounded into a multi-billion dollar giant. It is the definitive proof that while "getting rich" in these stocks is certain if you're right, it is a slow, disciplined burn that requires the stomach to hold for decades.

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The Regulatory End of an Era: Rule 15c2-11: The book concludes with a warning about the SEC's Rule 15c2-11 amendment. By prohibiting broker-dealers from providing public quotes for companies without current financials, the rule has effectively moved these "dark" stocks to the Expert Market. While not technically impossible to navigate, this rule has fundamentally fenced off the "pink sheet" frontier that Goldstein spent 40 years exploring.

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Expert Insight: For a deeper dive into Larry’s fascinating history — including how he bought his first 100 shares of TPL at age 13 and his early-stage backing of Murray Stahl — I highly recommend the 2024 IBA Interview with Larry Goldstein. It is an hour and 40 minutes of pure wisdom on everything from Phil Fisher’s influence to finding stocks with a P/E of less than 1.

Jeremy Grantham’s The Making of a Permabear reveals the surprising breadth of a career that pioneered indexing, quantitative analysis, and small cap investing long before they became industry standards. We found his unwavering commitment to mean reversion particularly resonant, even as he candidly addresses the challenge of navigating structurally higher profit margins in the post-GFC era. While sections on environmental activism may drag for those strictly focused on markets, his current argument that U.S. markets are in a "Superbubble" offers a provocative counter-narrative favoring international deep value. For institutional investors, this book serves as both a history of modern asset management and a challenge to reexamine the durability of current market valuations.

Andrew Ross Sorkin’s 1929 provides a readable account of the market’s collapse, highlighting the destructive role of margin debt and providing interesting vignettes on figures like Jesse Livermore. However, we found the analysis somewhat surface-level, lacking the rich atmospheric detail and unique observations found in works like Galbraith’s The Great Crash or Benjamin Roth’s Diary. While the sections on the Glass-Steagall Act are informative, the book offers few new lessons for those already familiar with the era. For the value investor seeking to genuinely understand the mood and psychology of a panic, we believe those earlier titles remain the more insightful choices.

"The Compounders" offers an intriguing exploration of successful serial acquirers, notably highlighting the fascinating anomaly that five of the nine featured exemplars hail from Sweden. The book dissects why these specific "roll-ups" succeed, focusing on a strategy of acquiring small, family-owned niche businesses that are often too small for private equity or whose owners seek to protect their life’s work from financial engineering. It illustrates how patience, years of relationship building, and a relentless focus on cash flow by "forever CEOs" drive superior long-term compounding. For value investors, this read provides a compelling framework for identifying the structural traits of exceptional capital allocators—traits that we can often recognize and appreciate within our own portfolio holdings.

In Hidden Investment Treasures, Daniel Gladiš presents a timely argument that the widespread shift toward passive strategies has inadvertently created a "golden age" for active investors by leaving specific opportunities largely unexamined. We loved the book’s detailed case studies—dedicating full chapters to companies like Asbury Automotive, Alimentation Couche-Tard, Markel Group, and NVR. While these companies are compelling due to their unique business models and corporate cultures, it is the fact that they are ignored by passive flows and hold negligible weight in major indices that allows them to trade at attractive valuations. The book's foreword eloquently captures the reality of this discipline, describing the process as "years of quiet growth, occasional setbacks and the profound reward of seeing one's foresight vindicated overtime." For institutional investors, this passionate defense of stock picking offers both a validation of the active approach and a practical framework for finding value where the crowd isn't looking.