Glenn Surowiec on Contrarian Investing in Cyclicals

It is a pleasure to bring you Shai Dardashti’s exclusive interview with fellow value investor Glenn Surowiec, founder and portfolio manager of GDS Investments in West Chester, PA. Glenn is a MOI Global instructor.

The following transcript has been edited for space and clarity.

MOI Global: How did you mature as an investor?

Glenn Surowiec: You are always evolving as an investor. You get older. You learn from mistakes. You learn from success. At the end of the day, you have to trust your own instincts. You cannot maximize the value of someone else’s idea because during the ownership phase you will be tested and stocks will work against you, or they may take longer. There is a variety of circumstances that will test your patience and instincts.

A lot of people go into this business with a very academic view of what should work. The real world sometimes deviates from that. I run separately managed accounts, and my client base is strictly families and individuals, but they have 24/7 real-time access into what I am doing. When I started out, I had the portfolio tilted more toward small-caps. What you quickly realize is that if you have too many small-caps and there is volatility – even though the ideas are great, even though they play out – the average client isn’t set up to handle that. What I have figured out over time is you need a mixture of small-caps, mid-caps, large-caps. People fall in love with the old Buffett Partnership structure where he maybe had 35% in a single name, or even an ESL-type structure, but that is not practical in the real world. You have to structure a business that is viable and makes sense for the client base you have.

MOI: What key criteria do you gravitate toward?

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