Taking Advantage of the Algos

Published on
November 21st, 2018
29 minutes

Taking Advantage of the Algos

Skin In The Game ·
Featuring Harris Kupperman

Published on: November 21st, 2018 • Duration: 29 minutes

Harris Kupperman of Praetorian Capital talks to Real Vision's Jeff Zananiri about the opportunities for finding value in small-cap stocks. Algorithmic trading programs may be making life more difficult for some market participants, but in the small-cap space, Harris believes that their rules of engagement leads to advantageously deep discounts. He also touches on a bevy of related topics, including as overall market valuations, and Mongolian mining stocks. Filmed on November 7, 2018 in Miami.


  • PS
    Paul S.
    2 January 2019 @ 02:51
    Great to put a face to a name When a guy specialised in dumpster diving for value names - I cant believe people get upset about a miss here or there. Take one of five of Kuppy's trades that may actually fit your preferences - I hate Mongolia and Shipping but Aimia was an excellent trade Find cheap assets - buy em - wait Better than listening to some narrative about 'charts' or 'leadership' or some other narrative focused garbage.
  • JM
    Jason M.
    23 December 2018 @ 02:05
    Lies regarding Mongolian Mining. Mongolian Mining has NET Debt (including its CSPs, but excluding its Perps)/EBITDA of 2.8x....how can u claim it trades at 1 or 1/2x cash flow? Shame on you small cap pumper. This might be cheap if the catalysts come in but the numbers and returns are nowhere near accurate.
  • CT
    Craig T.
    17 December 2018 @ 04:29
    Flying under the algos radar makes sense to me. Diversification is nearly impossible buying "me too" funds and high PE tech and internet stocks. Now may be the right time to bargain hunt among the algo wreckage.
  • MK
    Michael K.
    24 November 2018 @ 08:25
    He's so full of it... couldn't watch the whole thing.
    • MK
      Michael K.
      3 December 2018 @ 17:11
      The moment I heard him say how he he's doing "lots of 5 and 10 baggers" I just had to turn it off. Ah wait... it was actually a bit later when he said he'll just have another 10% of returns in a single month. Again: unwatchable.
  • MM
    Mak M.
    30 November 2018 @ 14:30
    Excellent interview with a lot of great informations.
  • HB
    Hector B.
    29 November 2018 @ 22:18
    Buy the dip as a hedge fund strategy. Never seen that before. Maybe I left the industry too long ago.
  • CS
    C S.
    22 November 2018 @ 02:03
    Knowing the Chinese and Chinese stocks, I doubt the risk/reward prospects for 0975. If its such a great buy, how come management havent gone private (its massively down)? How about the myriad of potential Chinese insiders/connected interests that arent buying? Did they ever pay dividends? I wouldnt risk much on it.
    • LT
      LYALL T.
      29 November 2018 @ 01:12
      It’s a Mongolian company, not a Chinese company. And they probably haven’t privatised it as they don’t have the money. They restructure their debt in 2017. Are in debt paydown mode atm. Need capital to potentially fund raiilway also.
  • MH
    Michael H.
    22 November 2018 @ 19:22
    Kupperman has been making a bull case for Mongolia for a long time. I think his thesis is analytically attractive, and I'm sure we'll look back in 2040 and value his insight. However, his thesis hasn't worked at all since 2012 or so. Paraphrasing Howard Marks, being early is effectively indistinguishable from being wrong. Given the political situation in Mongolia and the economic situation in China, I'm not aware of any potential catalyst that changes that reality. If Kupperman knows of one, I didn't hear him share it in the interview. I'd caution anyone who gets excited about Mongolia from this interview to chart Kupperman's company, Mongolia Growth Group (YAK), over the past five years. I don't mean to criticize, because I thought it was a good idea and we all have losses. He's an entrepreneur hustling to make something happen, and I wish him the best. Yet the reality is I'd take the odds at a rigged online casino over the odds that any aspect of his Mongolia thesis works in the near future.
    • KW
      Kenneth W.
      25 November 2018 @ 13:49
    • LT
      LYALL T.
      29 November 2018 @ 01:11
      Mongolia was destroyed 2012-2017 by a combination of a collapse in commodity prices and terrible economic policies. Commodity prices have since rebounded (remains to be seen if that is sustainable) and policy has improved (also uncertainty as to sustainability). Highly risky place, but if things work they can work big. Asymmetry exists today in asset prices there that did not exist in 2011-12. Mongolia mining used to be a US$3bn market cap company.
  • NH
    Niall H.
    25 November 2018 @ 13:53
    Can’t get the numbers to add up based on H1 2018 financials. #’s don’t add up.... H1 2018 Debt $443mn (ignoring deferred tax liability) Cash at h1 2018 $20m. Net debt $420mn Ebitda $180mn (h2 2017 + h1 2018) Capex $35mn Market Cap $220mn EV (net debt + market cap) = $640mn excluding tax liability. FCF (EBITDA - capex, ignore WC) = $150m EV / FCF = 4x EV / EBITDA = 3x Market cap / FCF = 1.5x
    • LT
      LYALL T.
      29 November 2018 @ 01:04
      Coal sales were depressed during 1H18 due to export issues at the Mongolian boarder. Volumes have since recovered to approximately double 1H18 run-rate. So you can double revenues vs. the above and then there is operating leverage to consider. Key risks are political + coking coal price. Boarder issues have been partly political in nature and could reappear.
  • WB
    William B.
    28 November 2018 @ 08:01
    Great stuff. I watch each interview video as another opportunity to learn a lot about something that’s not my space yet. Much to learn here. For me it’s not about his specific investments but rather his thought process and logic behind them. Lots of geniuses on RealVision.
  • tk
    theo k.
    27 November 2018 @ 10:29
    great interview, bring him back!
  • VC
    Vince C.
    25 November 2018 @ 21:20
    Enjoyed it, but what I’m hearing is that discretionary traders/investors are getting squeeEd out into more and more niche markets... which in turn will crowd these spaces, lower profits with an eventual takeover of machines. Of course, the machines are simply tools leveraged by fewer and fewer humans. If anyone disagrees with my assessment please do reply comment an opposing view.
  • SS
    Sam S.
    25 November 2018 @ 14:33
    For me, the interview was more about ideas to follow certain opportunities then just buying Mongolian coal. How to identify what's coming for a potential yet nibble positive outcome. Also thinking about "selling puts" to pickup discount on building a position. Harris is well spoken yet I felt humble to say it doesn't always work out. I always try to learn something and just did. Thx.
  • SL
    Shanan L.
    21 November 2018 @ 22:39
    Recognized the name, been reading his blog for over a year... it’s insightful (and free). Good commentary and unique ideas/perspective. Thank you Real Vision, I think I may have requested this interview with Kuppy.
    • TM
      The-First-James M.
      24 November 2018 @ 23:32
      Hey Raoul. Kudos to you for getting Kuppy on. Any chance of Chris MacIntosh now? ;)
  • DR
    Daniel R.
    24 November 2018 @ 21:33
    Kuppy is great. He does real fundamental research (he travels to Mongolia etc.), speaks and writes in plain language, and doesn't follow any crowd. He publishes his theses on his blog - Adventures in Capitalism - to anyone who cares to follow. I do, and when I see a new post I stop what I'm doing and read it. Would be happy to see more of him on RV.
  • RS
    Robert S.
    24 November 2018 @ 19:20
    Where, I can't see? here, diagonally. retty sneaky sis!
  • M.
    Milton .. | Founder
    23 November 2018 @ 08:27
    Hey folks - I bet you loved this interview. Make sure you check out Harris's blog at www.adventuresincapitalism.com
    • CM
      Christopher M.
      23 November 2018 @ 10:29
      Great interview very open. "random Mongolian mining Co" I just need someone to notice it! Oh here I am on RealVision talking my book.
    • DS
      David S.
      23 November 2018 @ 11:52
      There was more here than just talking his book. Good interview. DLS
    • RK
      Robert K.
      24 November 2018 @ 13:10
      Yes, please do more of this kind (i.e. real investing in contrast to crypto klepto).
  • my
    markettaker y.
    23 November 2018 @ 22:54
    Milton can we make Kuppy an RV regular please?
  • PC
    Paul C.
    23 November 2018 @ 12:10
    Really enjoyed the interview & hearing how Harris approaches the market. So Harris likes 'bottomed-out' markets with good fundamentals... i'd like to know what he thinks about uranium miners. RealVision has had some interviews with Leigh Goehring, Adam Rodman & Raoul all excited by this idea over the next 5 years.
    • PS
      Patrick S.
      23 November 2018 @ 14:31
      Even something like CCJ large cap leader once spotlight returns to sector is an easy 5 bagger with same risk as walmart
  • DS
    David S.
    22 November 2018 @ 21:06
    Algos can help create mini to maxi-bubbles. Maybe a good way to play around a current position. DLS
  • RM
    Robert M.
    21 November 2018 @ 21:35
    Interesting idea on 975HK (Mongolian Mining Corp). It has been in a down trend since 2012 and still is. The only rally was out of the Feb 16 general mkt bottom (and Oct copper recovery). The downtrend has slowed since late 2016 however is still in place. Given global and China growth is slowing, the downtrend will probably continue and the downside moves will be substantial if the general market sells off hard (per Jan16). That will be the time to buy.
    • AC
      Andrew C.
      22 November 2018 @ 08:38
      A lot of discussion on market timing has been had over the years. I have given up trying to time it, and have sleepfull nights not worrying about it. I do own 0975HK and have done for a while. It seems Kuppy's misdemeanor is carefree, and I attribute it to not worrying about trying to pick the exact bottom. For sure I will be interested if the price drops more, and this might go bankrupt again for me to loose 100% of my investment. But it seems prudent and stress-free to put $5k on this and with a bit of luck get 5x or more in a few years. I am just wondering whether you can expand on your market timing suggestion, and why it is worth the trouble. Thanks.
    • RM
      Robert M.
      22 November 2018 @ 16:51
      My trend lines are drawn from the Mar 12 and Jan 13 highs on a log chart. This strong downtrend needs to base first and then show signs of strength and then start making higher highs and lows. Buy a higher low then. There does appear to have been elements of basing and SOS, however the price is currently still in the same downtrend frequency (ie: copy the original downtrend line and paste it onto the recent highs). This process will probably only start happening when global and chinese growth starts increasing again. Suggest you chart various growth measures such as PMIs or OECD CLIs next to asset prices like copper and coal etc. Especially use a 3 month rate of change on both to reveal this. You will see the strong relationship. I used the same process to sidestep YAK.VN, Kuppy's Mongolian real estate company. This also has a strong downtrend from $6 in 2012 to 38c now.
  • EF
    Eric F.
    22 November 2018 @ 03:50
    What a fantastic interview. I’m definitely going to read / subscribe to that blog. I could definitely have listened to Harris for an hour or more.
  • WM
    William M.
    21 November 2018 @ 19:19
    Excellent! Microcap investing is one of the few areas where individual investors can have a big advantage over institutions and computers - mainly because of the lack of liquidity. The little guy can build a significant position without moving the price a lot etc. But be prepared for (and ideally take advantage of) really crazy price moves...that often are just short term noise... Harris clearly does excellent in depth research of his chosen companies - and that's really essential. He's one of the few investors who actually embraces averaging down - which most investors avoid (even using stop losses to do the opposite of what Harris does). It takes a lot of guts to do what he does ... most investors would get too rattled and nervous to do this. but for those that can, there's clearly a lot of potential opportunity.
    • DR
      David R.
      21 November 2018 @ 20:45
      Soooo true dat.
  • TR
    Thomas R.
    21 November 2018 @ 20:39
  • AP
    A P.
    21 November 2018 @ 18:01
    Learned a ton. Very open and good vibes. Loved how he moved from "I'm primarily interested in US liquid companies" to a rocking thesis on a distressed Mongolian mining company.
  • JH
    Justin H.
    21 November 2018 @ 16:06
    here's his blog, he's a great writer - http://adventuresincapitalism.com/
    • JV
      James V.
      21 November 2018 @ 16:28
      Second that. Blog is terrific with some great investment ideas.
  • JV
    James V.
    21 November 2018 @ 16:26
    Interesting interview. Would have been even more helpful to talk about specific examples of themes discussed (e.g. LNG shippers).
  • MM
    Mike M.
    21 November 2018 @ 15:51
    Smart guy has a discipline and it makes money for him. Nice.
  • Nv
    Nick v.
    21 November 2018 @ 14:27
    Very interesting. Great job