Episode #170: Bill Martin, “On The Short Side, Position Sizing Is The Biggest Driver Of Success”
Guest: Bill Martin is the Chairman and CIO of Raging Capital Management, a long/short equity hedge fund founded in 2006. His entrepreneurial experience includes founding finance website, Raging Bull, where he served as the original CEO, and InsiderScore, an institutional analytics business Bill co-founded, focused on money flow-related data that is utilized by more than 250 top tier hedge and mutual fund client firms.
Date Recorded: 7/22/19
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Summary: In episode 170, we welcome our guest, Bill Martin. Bill and Meb start the conversation by diving into Bill’s early entrepreneurial experience running Ragingbull.com. He discusses the business, raising capital, and ultimately selling the business. After Ragingbull.com, he started a research business and InsiderScores before ultimately launching Raging Capital in 2006.
Meb asks Bill to get into Raging Capital. Bill offers that the long side is fairly concentrated, focused on the long-term and thinking strategically about the businesses. The short side is where he and his team focus on a diverse basket of businesses they consider overvalued with fundamentally challenged business models. Bill describes the nuances involved in position sizing on the short-side, and even illustrates with an example of Insys Therapeutics.
Next, Bill covers where he’s seeing opportunity in the world. He talks about a theme with MLPs, companies with exposure to Puerto Rico, and building products.
Meb then chats with Bill about his thoughts on China. Bill walks through his thinking on China broadly, and that the network he’s building in China is beneficial to investments he’s making in the portfolio.
As the conversation winds down, Bill walks through mechanics of short selling, and some names and themes he and his team are working on, including a number of firms in the public storage space, and some auto-related companies.
All this and more in episode 170, including Bill’s most memorable investment.
Links from the Episode:
- 0:50 – Welcome to our guest, Bill Martin
- 1:34 – Ragingbull.com, and Bill’s entrepreneurial start
- 5:11 – Selling Raging Bull during the dot com bubble
- 6:29 – Moving back to New Jersey and launching InsiderScore
- 9:00 – Shifting from entrepreneur to fund manager
- 12:20 – Investing framework
- 17:33 – Experiences shorting stocks and the pain involved
- 21:15 – Opportunities on the long side
- 27:18 – Strategies around exiting positions
- 28:14 – Interest in building products
- 29:36 – Being on the board of small and mid-cap emerging growth firms
- 33:45 – The Golden Bathtub
- 37:08 – How Raging Capital thinks about public vs private investing and changes in the private space
- 39:38 – Mechanics of short selling
- 43:24 – Current themes Bill and his team is exploring today
- 52:07 – Challenges of running a hedge fund
- 55:10 – Capacity in terms of the overall portfolio size
- 56:14 – Advice for young people thinking about entering asset management
- 57:28 – Most memorable investment
- 59:00 – How to connect with Bill: RagingCapital.com
Transcript of Episode 170: