J. Carlo Cannell runs Cannell Capital, the long/short activist investment firm he founded in 1992 with just $600,000 under management. Cannell’s ideas are as unconventional as the man himself – he’s a Princeton liberal arts major, then freelance journalist in Fiji – and he describes himself as a “fox, not a hedge hog” (referring, I guess, to either the Isaiah Berlin essay or the Philip Tetlock book). Cannell has also taken the unconventional step of returning money to investors. In 2004, when funds under management had grown to $765 million, Cannell started returning funds to investors and stepped down to spend more time with family, saying:
The mortality rate of hedge funds with more than a billion dollars of assets under management is very high. I think about that every time we rise to that level through retained earnings. I would like to think that we practice prudence over greed.
He left only briefly, returning just six months later to manage the three Cannell Capital funds, the Cuttyhunk Fund, the Tonga Fund and the Anegada Fund, but funds under management were considerably reduced: By September 30, 2009, Cannell had trimmed his holding to approximately $168 million, investing in 85 companies. (See here for more on Cannell’s background, and investment approach)
Given his unconventionality, the awesome oddness of Cannell’s presentations at the Value Investors Congress should come as no surprise. For example, Cannell’s 2009 presentation was called Hydrodamalis Gigas, the Steller’s Sea Cow, which we hunted to extinction just 27 years after discovering it:
Steller’s Sea Cow: Delicious, and easy to catch.
How does the Sea Cow relate to investing? Cannell looks for companies that, like the Steller’s Sea Cow, have a difficult time adapting to a changing environment. He gave as an example a restaurant stock, which would have a more difficult time adapting to a slowdown in the economy than an oil and gas company. In the 2010 New York Value Investing Congress, Cannell expanded on his restaurant theme. He compared his search for short candidates in the restaurant industry to picking up roadkill on the side of the freeway, saying that he avoids them if they still have any life left, but if they’re dead, he grabs his shovel and sticks them in his portfolio. Another short anecdote: I was hanging out in the audience at the Pasadena Value Investing Congress in 2010 when Carlo sat down beside me. We had quick chat and he was lovely guy. Another hedge fund manager lamented to Cannell about the high cost of activist campaigns. Cannell’s response was words to the effect, “My activist campaigns are cheap. All I spend is the cost of the stamp to send a letter.” That’s really deep value investing.
Cannell is speaking again at this year’s Spring Value Investing Congress in Omaha, NE on May 6 and 7. (The Spring event was previously held in Pasadena, CA, but was moved because Charlie Munger no longer holds the Westco meeting in Pasadena). This year’s event is conveniently scheduled immediately after the Berkshire Hathaway Annual meeting at the CenturyLink Center (formerly the Qwest Center). Register here by December 19th and you’ll save $1,800 from the $4,595 others will pay later to attend. Remember to use Discount Code O12GB1.
I’ve attend the last four Value Investing Congresses, and can highly recommend them. There’s nothing better than seeing an investor you admire explaining live his or her process for finding stocks. There’s also a chance they’ll sit down beside you in the audience. For more information on Cannell or the other speakers, click here.
Disclosure: I get a commission if you buy through this link. You should know that every little bit helps keep me in the style to which I’ve become accustomed, by which I mean I buy the third cheapest bottle of vintage Champagne on the wine list, and all of my caviar is Sterlet. Above all, I am a deep value guy. Know that the commission is well spent.