Insights

Famed short seller Jim Chanos remarked that China’s economy was on a “treadmill to hell” back in 2010. Celebrated hedge fund investor George Soros warned that “a hard landing is practically unavoidable” two years later. China has kicked the can down the road since then and added $12 trillion worth of debt to its economy since 2008 (roughly the same size as the U.S. banking system), but the day of reckoning has not yet come. The author explains how one-party rule has led to insolvent banks, zombie companies, and ghost cities. Foreign investors in China should proceed with caution as the Chinese economic miracle must eventually contend with its mountain of debt.

Human judgment and big data combine to transform the Houston Astros from the worst baseball team in a half century to World Series champs in just three years. There are lessons for the investment industry. The combination of statistical analysis AND human judgment can deliver superior performance versus relying solely on big data (quants) or human judgment alone. Commitment to an evidence-based process in the face of adversity is required to achieve the long-term objectives of an investment management firm or a Major League Baseball team.

Ever wondered how Dollar Tree sells everything for just a dollar? So did the three founders when they opened their first dollar store in 1986. Like a great value investor, co-founder and author Macon Brock searched around the world for ‘off-the-beaten-path’ quality merchandise at incredible prices that would surprise and delight Dollar Tree shoppers. The company has maintained the same $1 price point and the best margins in all of retail more than three decades later.

Written by Cal Turner Jr., the former CEO of Dollar General and the son of its founder, the book tells the amazing story of how the Turner family of Scottsville, KY grew Dollar General from its rural Kentucky roots into a national retailer with a $30 B market value. The experiences of Cal Turner Jr., his father, and grandfather provide many useful lessons in business management as they navigated the company through decades of change in the retail industry.

Noted distressed debt investor and author Howard Marks’ investment track record suggests an ability to put the “odds in his favor.” While some on staff hoped for a deeper dive into cycle analysis, Marks chose to keep the material at a high level. Successful investors must recognize how the odds shift as cycles unfold and position portfolios appropriately. Marks urges investors to consider the role of the credit cycle and current valuation levels when determining the “aggressiveness” or “defensiveness” of a portfolio.

The author is the WSJ journalist that exposed the Theranos fraud through unrelenting investigative journalism. Much like Einhorn’s Fooling Some of the People All of the Time regarding Allied Capital, Theranos relied on misleading statements, wildly optimistic projections, and outright fraud to deceive large companies and otherwise smart individuals (e.g. Safeway, Walgreens, Theranos board members and investors). Carreyrou’s investigative work is a testament to the value of thorough research.

An enjoyable book in which Wachenheim shares his take on how investors can improve their investment practices.

A popular read among River Road’s investment team, Shoe Dog is a memoir by Nike founder Phil Knight about his earliest days at the company. The book highlights values we emphasize at River Road, including entrepreneurship, building passionate teams with complementary skill sets, and embracing innovation. The book also highlights the role luck plays in any fledgling venture.