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Holly LaFon
Holly LaFon
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Podcast Transcript: Craig Thrasher CFA on International Small-Cap Investing

Investor discusses how to invest in the space and his outstanding returns in GuruFocus podcast episode

Listen to the podcast here.

Holly: Hi, welcome to the GuruFocus Podcast. I'm Holly. I'm the editor of GuruFocus, and I'm here today with Craig Thrasher. He is a portfolio manager and senior research analyst at Kayne Anderson Rudnick Investment Management in L.A. That is a $22.8 billion asset manager. And he covers international and emerging market small-caps there, which is a fascinating space and it often offers higher risk-adjusted returns. Craig has 14 years of equity research experience, and he's been with his current firm since 2008. And he's also speaking at the 2019 GuruFocus Value Investing Conference, so this will give us a preview of his thoughts that he'll be sharing there, as well. Craig, hi. Thank you for joining us.

Craig: Hi. Good morning.

Holly: Now, first of all, your returns are a headline. They are quite astonishing. In your international small-cap portfolio, you have 16% returns since inception. That's annualized, versus a 9.34% for the benchmark. And your emerging market small-cap, you outperformed with a 9.03 gross since its 2014 inception, versus 6.18 for the benchmark. So how did you go about this? What was the key for you, was it leverage, concentration, just your stock picking? What did you do there?

Craig: Yeah. Well, we definitely don't have leverage. And in fact, the companies that we invest in -- we try to, as much as possible, not have leverage, either operating or financial leverage in the companies that we're invested in. We are more concentrated than some of our peers, although our portfolios are 40 to 50 stocks. So I wouldn't say they're particularly concentrated. I think the general formula that we apply here at Kayne Anderson is to invest in a select group of what we think are high-quality small-cap companies that we look to buy at attractive valuations, and then hold them over time and let the strong business results of the companies that we own generate our returns over time. That's, in general, kind of our overarching investment philosophy.

Holly: I see. And why did you choose to go with small-caps, and particularly international small-caps over domestic?

Craig: Well, I think small-cap investing, in general -- one of the advantages is that small-cap companies -- if you find a special company in a small-cap space, they aren't necessarily subject to the law of large numbers to the extent that maybe a large-cap company would have. So they may have many years of above-average growth ahead of them, which can be pretty powerful, in terms of the power of compounding over time. So that's one of the advantages, I think, of small-cap investing.

Another one that we like is that it's less efficient. There are fewer people paying attention to the companies, less analyst coverage, less institutional coverage. And so we think that that offers us some advantages to add value through our bottom-up research. And then, in specifically international small-cap, we think it's even far less efficient than the domestic small-cap space. So we've done some work on the average analyst coverage, say, and in large-cap land, either international or domestic, you might have 20 to 30 sell-side analysts covering any given company. Sometimes even more than that. In small-cap, we're looking at maybe five to 10 analysts on average covering a particular company. And then international, there are many more companies that have, say, two to three analysts on average covering each company, and many, many, many companies where there’s literally no sell-side analyst coverage. So we think that inefficiency provides us an opportunity to find those great companies at, hopefully, valuations that we don't think we would be able to find in more efficient parts of the equity market.

Holly: And do you think that less information being available, do you think that can cause some individual investors to shy away from international small-caps? Is there enough information for the individual investor to get started in this space, or do you think sometimes they just put it in the too hard pile, and they miss out on these great returns?

Craig: Well, I think it is more challenging. But it's getting better, in terms of access of information, obviously, with financial documents now being available online for everybody. That's pretty helpful. More and more information is being provided in English, as well. So I think that investors, both from an information standpoint and also from accessibility and trading -- it's just not that easy to execute orders internationally. And so I think that those hurdles do dissuade a lot of investors. But I think that for those that are willing to put in the time and effort to find the companies, and to overcome the hurdles that are involved with trading and international stocks-- I think that the opportunities are worth that extra effort, for the people that are willing to do it.

Holly: I see, and so these international small-caps, they have outperformed. But whenever I think of international small-caps, I worry about volatility. That's one of the first things I think of. So do you think that you also need more of a stomach for this type of investing? Or if you're picking the good companies, is it more akin to investing in a large-cap in the U.S?

Craig: Yeah. Well, all of our strategies at Kayne tend to be much less volatile than the benchmarks that we benchmark ourselves against, so I would say yes. Small-caps, in general, are more volatile than large-caps, obviously. But we think with the defensive nature of the companies that we're invested in, you’re going to experience much less volatility.

And we get that comment a lot, as it relates to international small-cap. People think that it’s much more risky. But in fact, international small-cap, if you just look at standard deviation, it’s not too different from, say, international large-cap, or domestic small-cap. So we definitely think that the return opportunities are there, and we don't think that the additional risk is something that should dissuade people from looking at the space.

Holly: Great. And moving onto your investing philosophy, as you look at these companies, are there any investors that we would know of that you consider your influences? Whose ideas do you incorporate most into your investing?

Craig: Yeah, well, they're not necessarily peers, in that sense, but I would say my biggest influences over the years have been from Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio). And I’m sure 90 plus percent of the people that you talk to say the same thing, and I think that there's a reason for that. I mean, they are two of the wisest individuals that you will ever encounter, and I think that they've obviously implemented some very successful principles over time, not just in investing, but in life. And I've found them to be very influential, in incorporating their ideas into investing and other parts of my life. So clearly, I would say far and away, they've been the most influential.

I've followed a number of other investors over time. But I haven't encountered anybody that is as consistently wise, and what they say rings as true to me years into the future, as those two guys. So those have definitely been the most influential.

Holly: I see. Yes, that would ring true with a lot of GuruFocus readers, as well. So that also brings up the topic of high-quality businesses, because I know that's something that you focus on, that Warren Buffett (Trades, Portfolio) focuses on, and also our founder, Charlie Tian, is very interested in. You say that you like high-quality businesses with competitive protections at attractive valuations. So can you describe what you mean by high-quality in the international small-cap space?

Craig: Yeah. Well, for us, there's a number of things that go into that. I guess the most important thing for us, in terms of high quality, is something special about the business, some form of competitive advantage that we think is going to allow them to-- I mean, obviously, if we're looking at the company, they've been successful, historically. We're looking to find something about that company to explain that success in the past and something that we think will allow them to continue to have success going forward for many years into the future. Our investment horizon is five years, 10 years plus. I've been at Kayne for over 10 years now, and there are several companies that we owned when I joined the firm that we still own now. So our investment horizon is very long, and we want to invest in companies that we believe will continue to maintain their competitive advantage for many years into the future. So that's probably the most important element of a quality business that we look for.

There are other things that we consider high-quality, some business characteristics. Like lack of capital intensity is another thing that makes a business better than a business that's not capital intensive. For example, companies that are cyclical are probably worth more than companies that are highly cyclical, companies that don't need as much capital invested into the business to grow. That kind of goes along with capital intensity. So those are some of the other things that we look for. But by far, the most important thing we're trying to understand, and the most important part of our research, is understanding what it is competitively about that business that's going to allow them to withstand competition over time.

Holly: Can you give some examples of these competitive barriers that you look for?

Craig: Well, competitive advantage is pretty much the same no matter where you look. And there's a handful of things that you could look for. Some obvious ones would be brand, obviously brand is something that carries value. If you spent millions or billions of dollars over time building consumer preferences, that's something of value that hopefully can be enduring, although that's increasingly being called into question recently. But brand is certainly one of the things that we look for.

You could have things like economies of scale. A company like Walmart, Amazon benefit from cost advantages through scales, and other, say, competitive advantages. Switching costs would be another one. Software companies like Microsoft (NASDAQ:MSFT), Oracle (NYSE:ORCL) really benefit from the fact that it’s very painful for people to switch from one software to another. So there’s a handful of things that we look for.

And then there are some things that maybe aren't as classically defined, competitive advantages that can be more enduring than people might think, such as, in particular, a great manager. Somebody like Warren Buffett (Trades, Portfolio), for example. I mean, that’s not necessarily a classic competitive advantage, as it is just a great CEO. But you do see instances where somebody, through superior acumen, can generate some very impressive results over decades. So that's another thing that we could look for, is really strong management.

Holly: I see. And whenever you find maybe some lower quality companies, if you find them at a steeper discount, why wouldn't you want to buy the lower quality companies?

Craig: Well, as Warren Buffett (Trades, Portfolio) says, time is the enemy of a bad business, and time is the friend of a wonderful business. And so when you buy a company that you think is trading at a discount on the surface, and the company continues to flounder for years and years, and doesn't grow, the business doesn't grow, maybe earnings are flat to down over a number of years, it makes it more difficult to, say, ensure that you're going to get an appropriate return. And there's nothing magical that says that what you think is a discount to its current value is going to close to what you think it is over time. And what I've found in -- I used to be kind of more of a deep value investor, and what I’ve found is, this mean reversion that a lot of value investors look for, or hope for, I guess, doesn't materialize because the business doesn't really change. And if nothing changes, it's going to be hard for you to realize what you think is the value that was there. And I think that ultimately the way I would define it is that what you thought was a discount wasn't really a discount after all, because the business is probably worse than you thought, overall. So we like to own great businesses because they tend to surprise in a positive way, versus bad businesses tend to surprise in a negative way, and we think that that provides a pretty strong headwind to returns.

Holly: So, also it seems like it might be more difficult to discover what is a high-quality business in another country because there can be a different competitive landscape, there can be a different economy. Do you need to be an expert at every single country's economy that you invest in? For instance, Singapore, or Malaysia, do you need to know everything that's going on in that country before you can determine if this is a strong company or not?

Craig: No. I don't think so. Those things that I mentioned earlier on, whether it's brand, or better, say, low-cost advantage, or switching costs, those really don't change when you change geography. So if we own a Heineken Malaysia in Malaysia (XKLS:3255), the largest beer company, the dynamics that make being the largest beer company with the strongest brand, strong in the U.S., or Europe, or whatever, are the same things that are going to make it work in Malaysia. We own a number of online classifieds companies, which is kind of -- if you're not familiar with online classifieds, there's a lot of websites that have basically replaced the local newspaper for things like real estate, automotive sales, or jobs. Where people used to go to the newspaper classifieds, now that's all online. We own a number of those businesses that have very strong network effects in a number of geographies, and once again, the same network effect that makes that a great business in the U.K., it also makes it a great business in Germany, or Australia, or wherever the case may be.

So we think that these concepts of competitive advantage, and what makes a competitive advantage, don't really change much with geography. Now, obviously, there are different dynamics at play in each country, and so you do have to understand what's going on in each local market. But the basics of what makes a great business a really great business, we don't think changes with geography.

Holly: Great. You answered my next question, which was if you had an example of a stock that met your standards recently. Did you want to add another?

Craig: Yeah. I mean, I could talk about Rightmove. It's not something that we've invested in recently, but we've invested in a number of these companies over the years, and I could just talk in more detail about it.

Rightmove is the largest property portal in the U.K. So when people go to look for real estate to rent or to buy, invariably they’re going to go to Rightmove. It really dominates the market share for time spent looking for real estate. And so people go there because that’s where they know they’re going to find the highest inventory of real estate, and therefore, they get the most traffic. And then because they get the most traffic, if you're a real estate agent, you're going to choose to list on Rightmove because you know that that's where 75, 80% of the traffic looking for real estate is going to look. And so it kind of creates this self-reinforcing network effect that is really strong, and creates really strong pricing power for Rightmove and ends up generating phenomenal economics. Their operating profit margins are over 70%. It's a business that requires little to no capital to maintain. So they generate 100% or more free cash flow, relative to net income, even though they're growing double digits every year.

So it's a really phenomenal business model, so that's just an example of something in that space that we've invested in for the long term that we think-- again, we've invested in a number of those kinds of companies, but Rightmove is probably the best example of it.

Holly: So when you find a company like RightMove -- obviously, you've had to sift through quite a few companies. I've read that there are 20,000 companies in the international small-cap space versus about 5,000 domestic small-caps. So that's one of the great advantages, is to have that huge universe that you can sift through. But where do you begin? Obviously, you've been doing this for a long time, so you probably have a good knowledge of what’s going on. But if an individual investor wants to get started, just sifting through this myriad of companies, how would you recommend that they go about it?

Craig: Well, screening is one of the key tools that you can use, that anybody could use. And if you do a screen for, say, the highest average return on capital over the last five or 10 years, and sort by that, I think in the vast majority of the screens that I've done, RightMove comes up as -- I think it's the highest return on a vested capital company, maybe in the world, on average, over the last 10 years, so things like that.

When you have these really powerful business drivers, they oftentimes will result in financial characteristics that jump out at you. And so that’s maybe a good place to start, I would say, is doing screens for companies that have generated, on average, very high returns on invested capital. That would be one good place to start. But obviously, we have a number of different screens to look for to try to find those kinds of companies. And being an institutional investor, we also have relationships with the sell side. So we're traveling around, going to different conferences, and seeing a lot of companies, and talking to a lot of people. So things can come at you from a lot of different ways, but screening is one thing I think that just about everybody could use to their advantage.

Holly: And whenever you locate a company that you're very interested in, how do you decide when is the right price to buy? How do you determine its intrinsic value?

Craig: Yeah. We spend less time trying to come up with a precise estimate of intrinsic value. I mean, everybody's definition of intrinsic value might be different. And in a way, if you just say intrinsic value, there's an implicit assumption there that tells you what the return is, what return assumptions you're making to come to that intrinsic value. And so we kind of invert that problem. And the way we look at it is, from the current price, what return do we think that we'll get from owning this security over time, and where is that going to come from? And we'll make some explicit assumptions, in terms of what we think is going to happen with the top line, what's going to happen with margins, and therefore earnings, what kind of dividend are we going to get, and then what kind of multiple do we think that the company's going to trade at in the future. And from that, we'll come up with an estimate, or a range of estimates of what we think the expected return on the company would be.

Another way of looking at it, which I find useful [inaudible], if I want to get, say, a 10% return on this investment, what needs to happen? If I'm buying it here, what would need to happen at the company in order to generate a 10% return? So that's kind of how we look at it. And when we find something that we think we don't have to make heroic assumptions about what the company has to do, and if things play out as we expect, are we going get a good or better return? That's more of how we look at it, versus trying to, like I said, come up with a specific estimate of intrinsic value.

Holly: Also, your portfolio is more concentrated than the index, and most other managers. Do you think that that makes you have to take -- or does that feel riskier? Or how do you handle having a concentration in small-caps, because don't most managers -- they're going to spread it out so that they lower their risk. But you're doing concentrated, so how do you go about that? Or how do you think about your concentration in your portfolio?

Craig: Yeah. I mean, you're right, most of our peers do diversify much more than we do, particularly in the small-cap space. I'm very comfortable with 40 to 50 names, in terms of the level of diversification. I think that if you look at it from either an empirical standpoint or a theoretical standpoint, that the amount of diversification that happens, industry-wide, in the investment management industry, is massive over-diversification. And it almost guarantees, on average, average results. If you own hundreds of companies, you’re going to get average results, minus the fees that you charge.

So if you're going to do something different than the benchmark, you have to be different than the benchmark, and we're comfortable with that. And we think that 40 to 50 names is certainly appropriately diversified. In my opinion, personally, even 40 to 50 might be a little bit of over-diversification, but we're comfortable with that. And certainly, it's not anything that we worry about, and we've been doing this for decades. In our domestic portfolios, we invest in 25 to 35 names in the small-cap space, and even with that increased, quote-unquote, concentration, we exhibit much less risk, in terms of downside capture, versus the benchmark, and versus peers. So it's a model that we're very comfortable with. And if you make the right investments, then having only, quote-unquote, only 40 to 50 of them is certainly not something that we think is risky.

Holly: Yes. It does seem like it's working out well for you, judging by your returns. And how do you decide when a company is a bust? When do you give up on a company? Or when do you decide to sell it, it's just not right for the portfolio?

Craig: Yeah. Well, the most important thing is what I alluded to in the beginning, which is, when we start to have questions about the long term future of the company, we think that either we were wrong about what the competitive advantage was, or that something has upended or eroded that competitive advantage over time, and so we have a diminished view of the strength of the business. And in that case, we're going to be pretty quick to sell.

And we try to avoid the trap that a lot of people fall into. If that's happening to a company, it's generally going to be down, and the knee jerk reaction, oftentimes, is to say, oh, well, the stock's down too much, it's all reflected in the price now, so we're going to hold on, and wait for things to get better, and sell it. And we don't take that approach. When we have a diminished view of the quality of the business, we take a pretty draconian stance on that, and we'll just sell because that's just a belief that we have. If we have, say, questions about the fundamentals of the business, that it's better for us to concentrate our investments in companies where we don't have that concern because we've found that to be a better place to invest over time.

Obviously, if valuation becomes extended to an extreme extent, and we just have a hard time penciling out returns that we think are acceptable, then we'll also either [inaudible] our exit position, as well. But by far, the one that we want to focus on the most is on the fundamentals.

Holly: Great. Well, you're certainly giving us a great overview of the space, and how you invest. And I wanted to move onto, what are some of the difficulties and challenges of investing in international stocks? And you've touched on some of them, but what would you say is the hardest part of working in this space?

Craig: I think, in international, just in general, I would say the language issue is there. That's something that we think that we can overcome. I think, more important -- we have accounting differences in accounting, once again, I think that's relatively easy to overcome. I mean, people talk about those two things, but I would view those are relatively easy to overcome, for us.

The part that's more difficult is, say, just different attitudes about corporate governance and shareholder protections, and what is the role of the shareholder, in the grand scheme of a company. And in places like Japan and Korea, just in general, you get a much wider range, and I would say, overall lower quality from the standpoint of the outside, passive, minority shareholder. The management in places like Japan or Korea are not as friendly to people like us. And so that makes investing in those areas more of a challenge. And you don't have the same, say, activism that you have in the U.S. If you buy an underperforming company in the US that maybe has assets that are valuable, or it has a lot of cash somewhere, then there will be people that will be agitating for change. And that just doesn't really happen as much in some of these other countries. And so you could buy something that you think has a lot of value, but that quote-unquote value, I guess I would say, would just sit there for many years, and it's not going to be compounding, or whatever. So that makes it, I guess, more challenging in some of the markets that we play in.

Holly: Yeah. I remember several years ago, it was either Bill Ackman (Trades, Portfolio) or Daniel Loeb (Trades, Portfolio) who were launching a campaign because of what you mentioned, that there's less shareholder involvement, and there’s a lot of value that hadn't been unlocked because activism was virtually unheard of there. And I don't know how that ever panned out because I haven’t heard of it since. But I remember that he was saying that he thought there was a big opportunity in Japan because of that.

Craig: Yeah, I think it was Dan Loeb. And I think the company was maybe -- well, there might have been a number of companies. I think Sony might have been one. And then there was another company, IHI, which I don't think has worked out very well, because I remember looking at that one. Yeah, I think there's been mostly failures on that front. And that's obviously not a game that we're going to even attempt. Yeah, we're not going to try to change the minds of Japanese [inaudible]. We want to invest in situations where the status quo makes us happy.

Holly: Okay. It does seem like a tall order to change a country.

So in the interest rate environment, going forward, will that also -- that it's a tightening cycle now, will that also be posing a challenge, going forward? I read in The Royce Funds, another small-cap investor, they said in November that it would be positive for their companies, because they focus on higher quality businesses, as you do. So it will just put their lower quality competitors out of business. Is that a picture that you agree with, or do you see that as being a challenge?

Craig: Yes. Certainly, on a relative basis, we welcome anything that makes it difficult on companies that use leverage, because our companies don't. And so rising interest rates have very little impact on the companies. And for the companies that have cash, I guess they’ll earn more interest on that cash. So it might be a slight positive. But yeah, the bigger benefit is that if it puts a strain on competition, which oftentimes is using more leverage, that could provide a benefit to high-quality companies. So that's certainly something that we would welcome.

Holly: And looking at your country allocation within your portfolio, you have the largest allocation, at 45.3%, to Europe. What do you see there? And is Brexit causing you any fear, or just creating more opportunities? How do you look at that?

Craig: Yeah. Well, our largest weight is in the U.K., and I don't think that's a coincidence. It's all of those fears about Brexit. We've made Auto Trader, say, in the last couple of years, one of our largest positions. And Auto Trader is very similar to RightMove, which I described earlier, except instead of properties, it's automotive. They're the largest marketplace of used cars in the U.K. by far. So they have the same competitive dynamics going on, the same network effects, the same lack of capital intensity. Everything that is great about RightMove is very similar with Auto Trader.

But they do play in used cars. And with Brexit and a lot of macro fears surrounding the U.K., people have been worried about car transactions declining. And in fact, car transactions have declined. New car transactions have declined substantially, and used cars transactions have declined to somewhat less of an extent. But that's been a big fear at Auto Trader. And so this really phenomenal business was trading at a valuation that we thought was very attractive for the characteristics of the business that we were buying. So we made that a large position. We own a large position in RightMove, which we've had for some time. We've added a couple of other names in the U.K.

But I guess in general, we don't take a macro view on, say, Europe versus Japan versus Asia, or anything like that. It’s really, where are we finding the best investment ideas? And like I said, I don't think it's a coincidence that there's a lot of fears around Brexit, and that's where we’ve been finding a lot of value. We own a number of, say, these online classifieds, and there’s a number of them in Europe. So that's probably part of the reason that we have our largest weighting there. We also own Scout24, for example, in Germany, which has an automotive and real estate portal in their business model. So we're really just driven by bottom-up, where we’re seeing opportunities. And we've been seeing more opportunities there over the last year or two.

Holly: I see. So I know you are looking more at bottom-up factors. But in China, that is just really interesting right now because for years it's been such a growth engine. But now, I hear a lot about the slow down and the economy, and the injection of 560 billion yuan into the banking system. Is that a sign of a slow down? Will you be allocating money out of the country, or what do you think about that?

Craig: Yeah. Well, similar to what I said about Europe, or the U.K., we're not trying to be macro predictors. Is there a slowdown in China? Yes, it does appear that the Chinese economy is slowing down. But we own a couple of, say, Chinese ADRs listed here in the U.S. One of them is Autohome. Another one is Sina (SINA). Their largest asset is Weibo (WB), which is one of the largest social networking platforms in China. And Autohome is similar to the companies that I mentioned before, like Auto Trader, where it's the largest marketplace for, in this case, new cars in China.

So these business models, we think, are really phenomenal business models, and we think there's many years of strong growth ahead for these businesses. And so we think it's a mistake to sit here and say, oh, well, the Chinese economy might be slowing, so let's get out of a phenomenal business because the Chinese economy might climb down. I mean, if you look back at 2007, and you got out of Google because you were worried about-- we had the greatest recession since the Great Depression, and yet, Google (GOOG)'s gone from 250 in 2007 to 1,000 today. Do you want to get out of Google at 250 because there might be a slowdown in the US economy? I would argue that that's going to lead to bad decision making if you're getting out of great businesses because you think a country might be slowing down, or even going into a recession. Because those things are very hard to predict.

Holly: So you're very much not a macro investor. And even with trade tensions between China, those don't bother you?

Craig: Well, they do bother me to some extent. It's going to create some headwinds for the economy, say, in China, and probably in the U.S., as well. But we're taking a really long view. And I don't think that anything is happening, as it relates to trade tensions, that is going to materially alter the trajectory of the business of, say, Weibo or Autohome over the next five years. We think it'll be largely noise, as these things ultimately play out.

Holly: Wow. Okay. Well, that eliminates a few of my other questions about China. So I am going to move toward just some final questions here. So what is your outlook for small-caps, going forward? I know they've had a resurgence, year to date, outperforming large-caps. And do you see that continuing, going forward? What do you think?

Craig: Well, I think, specifically as it relates to international small-cap, if you look at, really, any longer time period, whether it's five years, 10 years, 15 years, 20 years, they seem to have always outperformed their large-cap peers internationally by two to 3%. I certainly don't see any reason to think that that's going to change, and that's just looking, broadly speaking, at the asset class.

We think that it is still an inefficient place to invest. And then if you go with a skilled manager that can identify great investment opportunities in international small-cap, that the opportunities to outperform large-cap are still there over the long term. So I'm somewhat biased, obviously, investing in international small-caps. But I think it's an attractive place to invest right now.

Holly: And in the fourth quarter, there was kind of a downturn. Was that a big buying opportunity for you?

Craig: Yeah, it was a buying opportunity. We added a handful of names in the fourth quarter, some of them ones that we've looked at for many years, and got a great valuation opportunity in the fourth quarter. So we are price sensitive. And we're looking for great businesses, prices that we really like. And so when prices come down, we like that.

So the fourth quarter was an opportunity for us. And I think the benchmark for international small-cap was down 14% in the fourth quarter, which is quite a drop. But there are many names that dropped much more dramatically than that. So there were some significant opportunities, I would say, in the fourth quarter.

Holly: So it's a good time to be investing there right now?

Craig: We think so. Yeah.

Holly: And what sectors do you like, particularly?

Craig: Well, we're not sector focused, really. Each sector encompasses a number of different business models, and types of businesses, so we're really bottom-up. I guess something that you could call a theme would be classifieds. Globally, we think that that's a great business model, and we have a number of large investments there. So companies like Auto Trader (LSE:AUTO), RightMove (LSE:RMV), Scout24 (FRA:G24), Caresales.com (ASX:CAR) in Australia. We think those are all great businesses, and we think the prices right now are attractive.

Holly: Okay. Great. I was going to ask some recommended stocks, but those will work. Also, last question, have you been reading any good books lately? Or what would you say your favorite books are on investing that you would recommend?

Craig: I recently finished "Skin in the Game" by Nassim Taleb. I'm not sure if I'm pronouncing his name correctly. But I've been a big fan of his work over time, and I think that that is a very -- it's much more readable than "Antifragile," which was his last book that he released. And I always find his ideas to be very interesting because he really likes to challenge conventional wisdom with a lot of gusto. And I think that that plays an important role, challenging your-- I think Munger talked about, every year, “Try to destroy one of your most deeply held beliefs.” And I think that Nassim Taleb plays a good role in helping you identify areas where you might be weak in your thinking. And so I think that that's a really interesting -- he's an interesting author, and I think that "Skin in the Game" was an interesting read.

Holly: Great. Yes, I follow him on Twitter, and I do find that he offers a lot of challenging thoughts. It’s great. Well, Craig, this has been really fascinating. I learned so much about this space. So thank you so much for joining us, and we'll look forward to meeting you at the Value Investing Conference.

Craig: Okay, sounds good. Thank you.

Holly: Okay, have a good afternoon. Bye bye.

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Podcast Episode: International Small-Cap Investing With Craig Thrasher

Ask Investor Craig Thrasher Your Investing Question

GuruFocus Interview: David Rolfe of Wedgewood Partners

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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shadowstock
Shadowstock premium member - 4 weeks ago

If its possible going forward having a transcript of all podcasts would be a big win for gurufocus traffic and value to members now and in the future. Thanks.

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