Ben Gordon, founder and head portfolio manager at Blue Grotto Capital, shares his journey from analyst to managing his own hedge fund. He discusses his unique research methodologies, emphasizing historical regressions and the resilience of specific business models. Gordon reveals insights on successful investments in Spectrum Brands and Cedar Fair, while also highlighting the challenges of shorting stocks—a 'dark art.' He reflects on lessons learned from past investment missteps, particularly in the fashion industry, underscoring the need for adaptability in fluctuating markets.
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Walking Away From Winners
Walk away from investment sectors or themes after substantial profits, as continued success may be tied to temporary trends.
Avoid becoming emotionally attached to past winning strategies.
insights INSIGHT
Founding Blue Grotto
Ben Gordon left GMT Capital to establish Blue Grotto Capital due to philosophical differences with GMT's founder and a desire for more control.
His departure was driven by a personal investment approach formed through years of experience and introspection.
question_answer ANECDOTE
Spectrum Brands Investment
During the COVID-19 pandemic, Ben Gordon invested in Spectrum Brands, recognizing its undervalued position and the increased consumer spending on home-related products.
This investment highlights his focus on identifying opportunities in overlooked or misunderstood companies.
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This week I had the privilege to talk with Ben Gordon. He is the founder and head portfolio manager at Blue Grotto Capital. This episode is a deep dive into Ben’s process of researching and finding ideas, why he started Blue Grotto, his prior work at GMT, why he went long on Spectrum Brands and Cedar Fair Entertainment, and why shorting is a dark art.
Here is the time-stamp:
[0:00] The Story Behind Blue Grotto
[3:00] Who is Ben Gordon?
[6:40] From Analyst to PM: Emerging Markets Wireless Carriers
[10:00] Reply and Smurfit Kappa
[12:05] Using Regressions to Find Ideas
[16:30] The IT Business
[18:20] Lessons from Bad Investment Ideas: Michael Kors
[22:10] Importance of Walking Away from an Investment Theme
[30:00] The Catalyst to start Blue Grotto
[36:05] Spectrum Brands
[46:00] Cedar Fair Entertainment: The Theme Park Business a Regional Monopoly
[49:10] Shorting: The Dark Art
[55:30] Shorting Orthopediatrics $KIDS
[1:00:00] Position Sizing while Shorting
[1:04:00] VMware: Optionality and Themes Case Study
[1:12:40] Ben Gordon’s Investing Mosaic
[1:22:00] Improving Weaknesses
[1:27:10] More from Ben and Closing Questions
If you liked what you heard, check out Ben's website here.
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