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PJ Pahygiannis
PJ Pahygiannis
Articles (149) 

18 Questions With Christian Ryther

Insight from the founder of Curreen Capital

September 22, 2016

"Christian Ryther is an investor focused on excellent businesses with exceptional management teams, whose securities are undervalued. Christian founded Curreen Capital in 2013 having previously worked at NeuStrada Capital, Principled Capital Management and Riva Ridge Capital Management. Christian earned an MBA from the Columbia Business School, where he was selected to join the school's elite Value Investing Program. Christian holds a bachelor's degree in economics from Boston College."-Value Conferences, Source.

How and why did you get started investing? What is your background?

I read one of the Peter Lynch books ("One Up on Wall Street" or "Beating the Street") in high school and got the bug. It all just sounded so fun. I went through Columbia Business School’s Value Investing Program, worked at a few hedge funds and decided to start Curreen Capital in 2013 because I wanted to make money for people I care about. Aside from investing, I run a lot – Boston Marathon in under 3 hours and I took second place in a 100 mile ultramarathon in June.

Describe your investing strategy.

I am a Buffett-Munger-Greenblatt style investor. I want a great business, with great management, and I want it cheap. That’s obviously hard to find, so I look where I think I have an advantage. That’s generally around some sort of special situation, which to me means an event where the shareholder deals directly with the company.

My job is to find reasons that a company won’t fit that ideal of a great management/business/price, and move on quickly to find the next idea. Every once in a while I find that magical combination, and then I make it a decent chunk of our portfolio (generally 10%+).

I also do a fair amount of “cash management” transactions—Buffett called them workouts—because I can’t always fill the portfolio with great ideas, and it “keeps me out of bars”.

What drew you to that specific strategy?

Before business school I really had no idea what I was doing. After business school I tried all sorts of things that fit in “value investing”. ‘Great business at a low price because of some weird transaction’ is simply what was left after I lost money or interest in all the other strategies. Crappy business net-nets, for example – I made money there, but I hated wondering what stupid thing management would do next. So I don’t do that anymore.

The strategy that I have today is the result of cutting everything that gave me negative feedback, and pursuing the things that gave me positive feedback.

What books or other investors influenced, inspired, or mentored you? What investors do you follow today?

For me the greats are Buffett, Munger, Greenblatt and Lynch. They’re the ones who got me into this and lit my fire. Of current investors, I am a huge fan of Allan Mecham. I don’t know how he does what he does, and I am impressed.

How has your investing changed over the years?

Mostly by stripping away the strategies that stressed me out or cost me money. That’s mostly crappy businesses and dumb management, regardless of price. Now I say no much faster and more frequently.

I also do more “cash management” stuff, because I’ve got some cash and I keep testing weird theories… and some of them work.

Name some of the things that you do or believe that other investors do not.

I believe that beta is meaningless, and everything built on it is nonsense.

I use an upside/downside ratio to think about margin of safety, and believe that the x percent discounts to intrinsic value are only useful for balance sheet based valuations like net-nets.

I only check the market price of my holdings at the end of the week or if I’m buying or selling. With few exceptions, I believe that checking more frequently is a waste of time at best, and generally detrimental.

I don’t use relative valuations, and believe that other peoples’ opinions are only useful if they create an opportunity for me to trade.

What are some of your favorite companies? Where do you get your investing ideas from?

I don’t spend much time on businesses that I can’t buy, so my favorite companies are things I own or think that I’ll be able to buy. I don’t want to talk my book or give away good potential opportunities, so… Of the businesses that I can’t own, I think the Catholic Church is the best business that I have ever seen, and if Vanguard or REI demutualize, I want in.

Most of my investment ideas come from some weird transaction (spinoff, RMT merger, rights offering, tender offer, etc.). I also look up businesses that I come across in my life to see if they’re public. That has led to one home run.

Do you use any stock screeners? What are some methods to find undervalued businesses apart from screeners?

I don’t use stock screeners. I just look at every special situation (where a company transacts directly with shareholders) that I can find, and kill mediocre ideas as fast as I can. Whenever curiosity strikes me, I’ll hunt things down, again killing mediocre ideas as quickly as I can.

Name some of the traits that a company must have for you to invest in. What does a high quality company look like to you?

A high quality business is one that earns high returns on tangible capital, for me that’s above 20% after tax. I have to be able to understand how the business can do that in a dog-eat-dog world that’s always changing, and why it will continue to be so profitable in 10 years. I need to trust that the management will act in the best interests of the business, and will let the profits from it get to me. For me to then invest in it, the upside-to-downside must be greater than 5 to 1.

What kind of checklist do you use when investing? Do you have a structure or process that you use?

My first questions are: does this business generate high returns on tangible capital? and can I figure out if they’ll be able to keep doing that in the future? Those two questions wipe out 90% of the universe.

For the companies that remain, I keep digging. I want to make sure that I understand what sustains the company’s competitive position, and whether I can trust management to do smart things that benefit the business and its shareholders. I dig until I find a reason to think that I won’t ever be comfortable, or until I do feel comfortable about the business and its management.

Then I value the business. First with what I think will happen, then with what I think will happen if I am wrong. If the market price provides a >5:1 upside to downside against those fair- and downside-values, then I am interested in buying it.

I write a premortem, describing all the ways that buying the stock will be a disaster in two years. I research any questions that popped up and update my downside estimate as necessary, and I ask myself whether I am willing to bear the risks that I’ve outlined in the premortem.

If the answer is yes, I buy.

Over time, I update my valuation estimates as I get new information.

I start selling when the upside:downside falls below 1:1:, or when I find a more attractive investment.

Before making an investment, what kind of research do you do and where do you go for the information? Do you talk to management?

I always read the 10-Ks, Annual Reports and the transcripts. That leaves me questions that I try to answer. Those questions are often about the competition – how are they relative to the company I’m researching? I want to see who’s profitable, who’s growing or shrinking, who’s biggest, and whether anything important is changing in the industry. I also generally want to know what has been paid in the industry to acquire businesses. Aside from those general questions, my questions are usually specific to the business that I’m looking at – about competitive factors and management’s abilities. I will go where I can to answer those questions. I will talk to management if I think that I can get an honest answer about one of my remaining questions. I generally prefer to evaluate management’s record than talk to them.

What kind of bargains are you finding in this market? Do you have any favorite sector?

My investments have all been one-offs. I don’t trust big themes unless I have done the work to be confident that something big will happen, and that’s very rare. Lately I have been selling more than I have been buying, but that is not a market call, it’s just what I have been doing with the few stocks that I know.

How do you feel about the market today? Do you see it as overvalued? What concerns you the most?

My feeling about the market have never made me money. I am as terrified about things as anyone else. High P/Es, crazy central banks, problematic demographics, etc. But I don’t invest on any of that. I buy and sell one stock at a time, of the few that I’m comfortable with, when the price is right for buying or selling.

What are some books that you are reading now?

"Persuasion," and I really enjoyed "How Not to Be Wrong." "Moving the Mountain" changed my views on China and the 2nd Amendment. I learned some things from Warren Buffett (Trades, Portfolio)’s "Ground Rules," too.

Any advice to a new value investor? What should they know and what habits should they develop before they start?

Read Buffett’s letters, "Poor Charlie’s Almanack" and Greenblatt’s "You Can Be a Stock Market Genius" and lecture notes. Take notes and review them. Ignore everyone else.

Start investing! It is not an philosophical exercise, the goal is to make money and you need to get in there to learn what works for you. Keep an investment journal, write down why you’re going things before you do them.

Over time you will be able to see what does and does not work for you, what excites you and what leaves you cold. Pursue the things that excite you, regardless of whether it fits the labels you have in your head (except for the immoral or illegal stuff, don’t do those).

What are your some of your favorite value investing resources?

Sec.gov is amazing. Twitter is an addictive time waster that randomly spits out pure gold.

Describe some of the biggest mistakes you have made value investing. What did you learn and how do you avoid those mistakes today?

Well, they’re all learning opportunities that made me who I am now. As for what I’ve learned, Owens Corning taught me not to invest in bad businesses, especially with levered securities like warrants. Punch Taverns taught me that I don’t like crappy businesses with questionable managements, regardless of whether I can make money on them. Hammond Power taught me not to invest in mediocre businesses. Vectrus and Keysight taught me to sell according to my upside:downside ratio, regardless of momentum. TGS Nopec taught me that when I want to average down, I should wait. Keysight taught me that same lesson, and that I should review my investment journal! I should stop there before I get depressed.

How do you manage the mental aspect of investing when it comes to the ups, downs, crashes, corrections and fluctuations?

I do not use margin debt, which means that I am not forced to sell if the market crashes. It doesn’t matter how hard-boiled you are if you get a margin call.

I do not look at the value of the portfolio until the market is closed at the end of the week or month. I do not look at the stock price of businesses that we own unless I’m going to buy or sell it. There are alerts for anything you need.

My attitude is that I know more about my stocks than the market does, and that the only purpose of the market is to provide me with opportunities to buy or sell.

When the market punches me in the face, I won’t know how much I’m hurt until the market’s closed and it’s too late to do anything rash. When seeing how bad things are turns my brain to mush, I go running, or go home and put my face in ice water and then hang out with people I love.

I recognize that my emotions probably don’t mean what they feel like. When I feel confident and self-satisfied, that’s probably a signal that I should look at what I own too much of at the current price. When I feel terrible and on the road to failure, that’s probably a signal that there are some outstanding opportunities for me to buy.

Disclosure: No position in the stock mentioned.

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