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A Young Financial Genius or an Author's Crush? You Make the Call

December 23, 2012 | About:
Bloomberg Businessweek and Meson Capital Partners present:

Youthful Infatuation at its Worst?

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Businessweek’s title reads, “He’s 28, and Here to Take Over Your Company.”

The story is like a love tribute to Ryan Morris who was lucky enough to start investing a whopping $50,000 via newly created Meson Capital Partners on Feb. 24, 2009. That was just days before the ultimate bottom/turning point that took place on March 9, 2009.

Mr. Ryan, then 24 years old, made some seriously risky bets that paid off big simply because low quality assets were being dumped as potential bankruptcy candidates. Dart-throwing monkeys willing to buy at that moment in time would have been anointed as great stock pickers.

Lower-quality, highly-leveraged companies were being thrown out like garbage. There were dozens of issues that rebounded by five, ten- and twenty-fold from their super-depressed March 2009 quotes.

Mr. Morris made some high-risk bets that paid off. Karen Weise, the article’s author, described in detail his spectacular 2009 returns as the overall market rebounded.

After that impressive run up, Mr. Morris was labeled a certified financial genius. He was then able to attract some serious money to manage. Whitney Tilson, founder of T2 Partners, and Zeke Ashton of Centaur Capital Partners put up some seed money.

In entirely predictable fashion Meson Capital Partners' performance peaked in March 2010 just as it was attracting large cash inflows. The article showed a nice chart comparing their returns with those of the S&P 500.

I’ve highlighted the period from March 2010 through September 2012. The results have been dreadful during a period when the S&P 500 has done quite well.

In trying to verify the actual numbers I went directly to Meson’s own website. It provides contact information only. Unless you are a current client you cannot see their actual performance. I’ve included a comment from an on-line reader who seemed to have the raw numbers handy.

I cannot vouch for their accuracy but they appear to correspond with the article’s chart. If the 2010 to September 2012 numbers are real, Meson Capital Partners would have turned $1 into just $0.6385 over a 21-month period.

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From the March 2010 peak it looks much worse. NAV topped out around $6 and, by the end of Q3 2012 had plunged by well more than 50%.

I wonder if any of Meson Capital’s post-2009 investors find the graph’s title amusing.

Perhaps author Karen Weise has a crush on Mr. Morris. Why else would she be praising him in the pages of Bloomberg Businessweek now?

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com

Visit Dr. Paul Price's Website


Rating: 3.4/5 (29 votes)

Comments

batbeer2
Batbeer2 premium member - 1 year ago
Hi Paul,

In H1 2009 you were:

- bullish on PTEN. Then at $9 now at $18.

- bullish on APOL. Then at $60 now at $20.

- bullish on VALU. Then at $23 now at $9.

- bullish on ITG. Then at $22 now at $9.

and

- bearish on USG.

Now you write:

>> Dart-throwing monkeys willing to buy at that moment in time would have been anointed as great stock pickers.

That's a bit harsh no?

Dr. Paul Price
Dr. Paul Price premium member - 1 year ago
Batbeer2,

It was accurate and not harsh at all.

My whole portfolio had a spectacular year including all those names.

The only thing necessary to make money by buying in March 2009 was to be well diversified and invested.

You act like I had only spoken about 4 cherry-picked stocks rather than the dozens I wrote about here on Gurufocus and elsewhere.

Meson Capital Partners entire portfolio dropped by > 50% since March of 2010 in a rising market environment.

Note: The bearsih call on USG worked out very well.

USG was as high as $19.90 in the first half of 2009 and touched a low of $5.80 during 2011.


augustabound
Augustabound - 1 year ago
The only thing necessary to make money by buying in March 2009 was to be well diversified and invested.

Well which is it? Dart throwing monkeys and well diversified are not the same thing.

Dart throwing monkeys imply picking anything and you would have made money and now you say well diversified?
aagold
Aagold premium member - 1 year ago
Paul,

I have to say I think your article was really harsh and your comments sexist.

Clearly Morris' returns have not been good after 2010, but I think it's a bit unfair to talk about only his March 2010 - September 2012 returns without also mentioning his 753% gross return (433% net return) in 2009. Not sure too many dart throwing monkeys could have achieved that in 2009.

I can also tell you that, having read many of his write-ups on Value Investing Club (VIC) and letters to his partners, he's very bright and doesn't throw darts. He's certainly made some mistakes, but it's no coincidence that he's attracted interest from the investing community. To claim it's all "young love" by a smitten female reporter is really sexist and unfair.

- aagold

pravchaw
Pravchaw premium member - 1 year ago
Actually Paul makes a useful point. The price paid for the security is critical in determining future returns whether by luck or not.

I had a similar experience with my mother in law who gave me a chunk of money to manage in 2001 (just before the market tanked). I lost 30% of the capital in short order and was in the dog house (the portfolio eventually recovered but it took several years). After she sold her house, she gave the bulk of the money to a smooth talking broker from Edward Jones who promptly put the money into deffrerred load equity mutual funds with high MERs while assuring her that everything is safe and he is not putting any money into stocks like her idiot son - in -law. Her portfolio returned 30% when the market went up by almost 100% between 2002 and 2007 - but old gal was very happy that she is making money and not losing it and her investment were safe, Sure enough the portfolio lost 40% of its value over 2007 - 2008. I took over the portfolio, liquidated the funds and put the money into ETF's and it has now eventually recovered & more and I am finally out of the dog house.

Timing is everything.
AlbertaSunwapta
AlbertaSunwapta - 1 year ago
^ So folks what's this magical time period that everyone seems to have in their mind for separating the wheat from the chaff - the genius investor from from the dud. Is it one quarter, one year, two years, three years, five years, ten years?...

i.e. Would you prefer your long-term-great-company-value-investments to reflect intrinsic value tomorrow or ten years from now? I'd prefer ten years as long as I was able to keep buying. So when someone's stock picks decline over one, two or five years I don't deem them as failed investors, maybe it is the marketplace of other investors that are the failures.

Note, I also enjoy seeing graphs of intrinsic values fluctuating wildly as was recently posted by one guru. To me intrinsic value should form a very nice smooth curve, changing only with day count, from birth to death - and of course payouts along the way.
relishpeach
Relishpeach - 2 months ago

Paul, Have you considered updating this article? It seems that you were right to question the "investing genius" of Ryan Morris a couple years ago. Things have gone from bad to god-awful for Morris and his investors in Meson Capital in the intervening 18 months. As you can see in Meson's 2013 letter (on guru focus) he had a miserable 2012 and underperformed by a wide margin in 2013 too. His performance thus far in 2014 is horrific based on his massive stake in LEI. But what has really sent his career into a flaming tailspin is a short call that he has aggressively pumped on OMEX. Within days of publishing his first filthy "report" last fall, a report that was full of outright lies and inaccuracies, he was dismissed as Chairman of LEI. This despite the fact that he controls something close to 20% of the company! His subsequent OMEX reports were essentially ignored by the market and Meson's 2014 is now being ruined as OMEX begins to recover. Having broken the law in a very public fashion, Morris must now suffer through not only poor performance, but also must contend with the real possibility of a regulatory investigation. It's very tough to support the argument that Ryan Morris is an investing genius.

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