Paul D. Sonkin is the Portfolio Manager of The Hummingbird Value Fund and the Tarsier Nanocap Value Fund. Paul is currently an adjunct professor at Columbia University Graduate School of Business, where he teaches courses on security analysis and value investing. He is a member of the board of several public companies including Meade Instruments Corp. He was previously a senior analyst at First Manhattan & Co., a firm that specializes in mid and large cap value investing. Before that he was an analyst and portfolio manager at Royce & Associates, the investment advisor to the Royce Funds. Royce & Associates practice small and micro cap value investing. Prior to receiving an MBA from Columbia University, he worked at Goldman Sachs & Co. and at the U.S. Securities and Exchange Commission. He is a co-author of Value Investing: From Graham to Buffett and Beyond (Wiley Finance)
Mr. Sonkin was nice enough to offer over an hour of his time for our interview. In fact he was prepared to offer even more time if I had more questions for him. It was a pleasure conducting the interview with Mr. Sonkin.
Below is our conversation:
Jacob Wolinsky: I always love asking this question to value investors. Value investing is contrary to human nature. Every value investor has a story how they got started in value investing. What was your catalyst?
Paul Sonkin: I was in the Columbia Business School and I knew I wanted to get into money management. And there was this class by someone of the name of Bruce Greenwald and they only taught it for a year and it was called Value Investing. And it must have been the first or second class where a Bruce Greenwald quoted a study that had come in 1993 by Eugene Fama and Kenneth French that small cap outperformed over time and value outperformed over time. And it was a really eppithany for me that if that is where the money is I should do small cap value.
Jacob Wolinsky: I am just curious if Fama and French are strong believers in the efficient market theory and value stocks have lower beta and are therefore “less risky” how does this conform with their theory?
Paul Sonkin: I don’t remember exactly what is, but I think there is basically a liquidity premium and you are paid to take on that risk.
Jacob Wolinsky: So basically they changed their definition of risk just to make it fit with their theory?
Paul Sonkin: Exactly, and I don’t remember if it was in that study I don’t remember exactly what the specifics were. But that is really what got my start.
There was an article in Barron’s titled The Most Patient Man on Wall Street and The Second Most Patient Man on Wall Street and they interviewed someone from First Chicago. He did a lot of pink sheet investing. The second guy was a person by the name of Ed Mcgoocklin who also did a lot of pink sheet investing. He spoke about a company called Park Lexington Corporation they owned about three buildings in New York City. I did an analysis on the company and it turned out it was cheap. I called up Ed Mcgoocklin and sent him my report and told him I had some questions for management. He flew up to New York City to meet me.
On Wednesday I went to listen to Mario Gabielli but I got the flu and I could barely walk out to get home. The meeting with Ed was on Friday and I had 104 fever but we had our meeting. He presented my report to the company and six months later the company went private at a pretty rich premium.
So I thought this is pretty cool. You can look at a company, talk to the management pretty easily and have an influence on the outcome.
I got a job working for Royce and Associates and I was on the microcap team and I was doing what I really loved doing. They were a lot smaller back then they had about $2 billion under management. Today they have something like $20 billion under management.
Jacob Wolinsky: There are many different styles in value investing ranging from Benjamin Graham's net-nets to Warren Buffett's purchase of companies with wide moats? What style do you must subscribe to? I assume you will have more of a Benjamin Graham style net-net approach due to the size of companies you invest in?
Paul Sonkin: If you read the book Value Investing: From Benjamin Graham to Benjamin Graham I talk about three different types of value investors: traditional value investors, value investors with a mixed approach and contemporary value investors. I consider myself to be much more of a traditional value investor looking at Benjamin Graham’s net-nets and things of that nature.
Jacob Wolinsky: So what else do you look for besides net-nets? Would that be your ideal investment?
Paul Sonkin: In the book Bruce Greenwald talks about the three traunches of value you have your asset value, your earnings value, and earnings power with growth. So we do the first two which is look at buying companies below their asset value, below book value, net-net value, working capital value etc. What your buying mostly is companies that is low priced to book stocks, companies that aren’t earning a lot of money but have a lot of assets. So they are asset rich but earnings poor. What we do is find out what is wrong with the company and understanding why their earnings are done and if they might recover.
The second company we buy is a company that is at a discount to its earnings power value. Those are the low P/E stocks. Those are companies that are trading at 5x, 7x or 10x earnings. These companies might be trading low because of a perception that their earnings will decline further in the future. What you are trying to do there is prove why the earnings will not decline in the future.
Jacob Wolinsky: You invest in micro-cap stocks. Can you give me a number of the average market capitalization of a stock you invest in?
Paul Sonkin: According to the classic definition micro cap stocks are stocks below $500 million or $250 million. We operate our Hummingbird fund with an average market cap of $40 million and our Tarsier fund with an average market cap of like $8 million.
Jacob Wolinsky: Can you clarify for the readers regarding the two funds you run?
Paul Sonkin: We have two funds; the Hummingbird Value Fund and the Tarsier nano-cap value fund.
Jacob Wolinsky: I assume due to the tiny size of the companies you invest in you are forced to take a large stake in the company?
Paul Sonkin: Yeah sometimes we own 5 to 10% of a company. In one case we own over 20% of shares outstanding and 65% of the float.
Jacob Wolinsky: Are you forced to take an activist role due to this?
We have taken an activist role in the past but it is something I shy away from. We focus on companies that are shareholder friendly. Being an activist investor takes up an enormous amount of time.
If you look at Bill Ackman and Michael Price who I both know and think are phenomenal investors what they do when they take an activist role is they will take a very large position. Like Bill Ackman had his Target Target fund, so they have much more concentrated portfolio.
Jacob Wolinsky: And in general you have a more diversified portfolio?
Paul Sonkin: Yes we have a diversified portfolio.
Jacob Wolinsky: Is that due to the forces of circumstance or do you prefer having a diversified portfolio?
Paul Sonkin: Its really both. By default I don’t like positions more than 5% of the portfolio. And in both funds around 10-20 positions will be about 50% of the portfolio while another 100 stocks will make up the remainder. But we have quite a few 5% positions.
Jacob Wolinsky: You are a professor at Columbia University and you run a limited partnership. Do you see your future as more of a value investor or a value thinker like Bruce Greenwald and Roger Lowenstein? Or both?
Paul Sonkin: I would say both. What I really enjoy about teaching it gives me time to research on the research process. A lot of the materials I have start as lecture. It is hard to know where the money manager starts and the teacher begins. I really try to integrate them both and I really try to bring a lot of live theses into my class.
Jacob Wolinsky: A lot of the current value investors are stepping back from their roles or will be in the future due to their age. Charlie Munger, Warren Buffett, Martin Whitman and David Dreman are all getting older. Other than yourself, who do you see as the current rising stars of value investing to lead the next generation?
Paul Sonkin: I see a lot of great money managers who all run small funds now. I don’t think these investors will come from big organizations. I think it will be small guys you never heard of, and they will remain below the radar screen for a long time. So I don’t know if that old guard is really going to be replaced.
You do have people like Bill Ackman, Rich Rubin of Hawkeye, David Einhorn, maybe Dan Loeb. I don’t really know. I think in doing what I do it is not going to make you rich and a lot of guys want to get rich. Because in the small cap world you can only get so big. There are very few people in the micro cap and small cap world making millions of dollars.
So I don’t know who the new guard will be.
Jacob Wolinsky: Other than newspapers, what analysis tools do you subscribe to? Value Line, Moodys, 52 week lows list etc.
Paul Sonkin: I would say primary use the 52 week low list. I use capital IQ. Frankly, I like to use pinksheets.com website, and 10K wizard, and a news service Knobois.
I have access to Bloomberg and use that from time to time. I think there are three areas where I add value.
Jacob Wolinsky: So as opposed to many other value investors such as Ben Graham and Warren Buffett who have repeatedly said it is bad to watch the market every day, in the micro cap value world you are forced to constantly monitor the market?
Paul Sonkin: We have to because it adds value. But when we look at a stock we look for a stock that will double in two years. If it doesn’t have those types of return characteristics we don’t look at it. But many times it will take more than two years so I say that we have a holding period of about five years. I haven’t calculated our turnover ratio so I couldn’t tell you that, but I guess if you keep doubling your money every five years I think that is a pretty good return.
If you look at Walter Schloss he had about 15% returns versus about 10% for the S&P 500, and for every dollar you put in the S&P you would have $2 and for every dollar you gave to Walter Schloss you would have $6 or $7. The returns were just astounding.
Jacob Wolinsky: What is your view on one of your largest holdings Fortress international group(FIGI) since the stock price/balance sheet assets value plummeted from you purchase? Do you think the management is doing a reasonable job?
Paul Sonkin: I think management is doing a reasonable job. I think the mistakes we made with a lot of the SPACs. With Fortress they bought and sold this type of business or two or three times before so you had an extremely experienced management team.
Where I think we got it wrong with lots of SPACs and with Fortress in particular is in two different areas.
Jacob Wolinsky: Do you own any foreign securities? If so how hard is it to get information especially with different accounting rules overseas?
Paul Sonkin: We own some micro and nano-cap companies in Canada. So they accounting standards there are not so different so this is not a real issue for us.
What I have said also is that small companies are not affected as much by accounting rules.
We are finding enough bargains of companies in the USA and Canada that we do not need to look elsewhere. There are a lot of tiny companies in Canada that are cheap and very interesting. Canada has always been a good source of ideas for us.
Jacob Wolinsky: Southpeak Interactive, Avantair, and Rand Logistics are all companies that you have have been discussed in the past has your analysis changed since you last discussed in the fall of 2009, and if so why that is?
Paul Sonkin: No my thoughts are still all very positive. Those are still larger positions. We think they are executing very well in a not so good macro economic situation.
Jacob Wolinsky: In a August 2009 Forbes interview,you mentioned a lot of pump and dump schemes are common in the micro cap arena. What are some measures you take in avoiding them?
Paul Sonkin: You want to stay away from companies that appear to be very promotional. I guess the pink sheet website does a pretty good job they have a section called caveat emptor where they have a skull and bones next to some companies. But it is not that difficult to stay away from the real schemes.
However, occasionally we do get caught in a fraud. We got caught in a fraud in 2008 and I think it was like a 3% position and we lost our money. We did all our due diligence but the guy was a crook and it happens from time to time.
Jacob Wolinsky: Also, do you ever check in on other investors in the space to see what they're investing in for idea sourcing, etc?
Paul Sonkin: No, never. For better or for worse we have a a not made here attitude. If it is not made here we do not buy. We are not in this whole Wall Street whisper network. Some investors do it, and some do it successfully but we don’t
Jacob Wolinsky: If he had one piece of advice for future fund managers, what would it be?
Paul Sonkin: My advice would be rule number 1 don’t lose money, and rule number 2don’t forget rule number 1. I am quoting Warren Buffett there. What our clients want is to preserve their capital and for it to grow it. They are absolute investors in down markets and relative investors in up markets.
So work hard write those letters, be open with your clients and treat them fairly. And don’t lose money that is the advice I would have for them.
Jacob Wolinsky: What kind of risk management do you practice?
Paul Sonkin: We are buying cheap stocks. We diversify the portfolio. So those are the best ways to control risk buy cheap and diversify.
Jacob Wolinsky: What is your highest conviction pick at the moment?
Paul Sonkin: The stocks we have discussed in past interviews are still our highest conviction pick. Southpeak, Avantair, Rand, Steinway.
Jacob Wolinsky: What is the significance of the name Hummingbird?
Paul Sonkin: When I was working on the fund I read an article in Businessweek in March 1999 titled The Sparrows of The Market are Flying Again referring to micro cap stocks. And I thought about naming it the sparrow fund but someone thought that Hummingbird would be more poetic.
Jacob Wolinsky: The Joel Greenblatt approach of high Returns on Capital and Low earnings yield has worked very well. As opposed to Benjamin Graham’s approach?
Paul Sonkin: Well I guess what you would have to do is recreate Ben Graham’s investment approach and then compare it to Joel Greenblatt’s. There was a guy by the name of Henry Oppenheimer of the University of Rhode Island who recreated Ben Graham up until the mid 80s. But I don’t think it has been updated until today.
I think what Bruce Greenwald is going to do at the Heilbrunn Center is update Ben Graham’s net-nets and see how they have done.
A lot of these formulas like Joel Greenblatt work best with small cap companies I think the reason they don’t do it with micro cap companies is because they are too illiquid.
Jacob Wolinsky: What do you think of JAKKS Pacific (JAKK)
Paul Sonkin: I am not all that familiar with them. But they are a toy company which is really hit or miss. With a lot of toy companies if they have a hot toy they will do really well, but if they can’t follow it up they will not be able to keep up earnings.
Paul Sonkin coauthored Value Investing: From Graham to Buffett and Beyond (Wiley Finance). In addition there is a chapter in the book that discusses Sonkin's investment style.
http://www.hummingbirdvalue.com/
Mr. Sonkin was nice enough to offer over an hour of his time for our interview. In fact he was prepared to offer even more time if I had more questions for him. It was a pleasure conducting the interview with Mr. Sonkin.
Below is our conversation:
Jacob Wolinsky: I always love asking this question to value investors. Value investing is contrary to human nature. Every value investor has a story how they got started in value investing. What was your catalyst?
Paul Sonkin: I was in the Columbia Business School and I knew I wanted to get into money management. And there was this class by someone of the name of Bruce Greenwald and they only taught it for a year and it was called Value Investing. And it must have been the first or second class where a Bruce Greenwald quoted a study that had come in 1993 by Eugene Fama and Kenneth French that small cap outperformed over time and value outperformed over time. And it was a really eppithany for me that if that is where the money is I should do small cap value.
Jacob Wolinsky: I am just curious if Fama and French are strong believers in the efficient market theory and value stocks have lower beta and are therefore “less risky” how does this conform with their theory?
Paul Sonkin: I don’t remember exactly what is, but I think there is basically a liquidity premium and you are paid to take on that risk.
Jacob Wolinsky: So basically they changed their definition of risk just to make it fit with their theory?
Paul Sonkin: Exactly, and I don’t remember if it was in that study I don’t remember exactly what the specifics were. But that is really what got my start.
There was an article in Barron’s titled The Most Patient Man on Wall Street and The Second Most Patient Man on Wall Street and they interviewed someone from First Chicago. He did a lot of pink sheet investing. The second guy was a person by the name of Ed Mcgoocklin who also did a lot of pink sheet investing. He spoke about a company called Park Lexington Corporation they owned about three buildings in New York City. I did an analysis on the company and it turned out it was cheap. I called up Ed Mcgoocklin and sent him my report and told him I had some questions for management. He flew up to New York City to meet me.
On Wednesday I went to listen to Mario Gabielli but I got the flu and I could barely walk out to get home. The meeting with Ed was on Friday and I had 104 fever but we had our meeting. He presented my report to the company and six months later the company went private at a pretty rich premium.
So I thought this is pretty cool. You can look at a company, talk to the management pretty easily and have an influence on the outcome.
I got a job working for Royce and Associates and I was on the microcap team and I was doing what I really loved doing. They were a lot smaller back then they had about $2 billion under management. Today they have something like $20 billion under management.
Jacob Wolinsky: There are many different styles in value investing ranging from Benjamin Graham's net-nets to Warren Buffett's purchase of companies with wide moats? What style do you must subscribe to? I assume you will have more of a Benjamin Graham style net-net approach due to the size of companies you invest in?
Paul Sonkin: If you read the book Value Investing: From Benjamin Graham to Benjamin Graham I talk about three different types of value investors: traditional value investors, value investors with a mixed approach and contemporary value investors. I consider myself to be much more of a traditional value investor looking at Benjamin Graham’s net-nets and things of that nature.
Jacob Wolinsky: So what else do you look for besides net-nets? Would that be your ideal investment?
Paul Sonkin: In the book
Bruce Greenwald talks about the three traunches of value you have your asset value, your earnings value, and earnings power with growth. So we do the first two which is look at buying companies below their asset value, below book value, net-net value, working capital value etc. What your buying mostly is companies that is low priced to book stocks, companies that aren’t earning a lot of money but have a lot of assets. So they are asset rich but earnings poor. What we do is find out what is wrong with the company and understanding why their earnings are done and if they might recover.The second company we buy is a company that is at a discount to its earnings power value. Those are the low P/E stocks. Those are companies that are trading at 5x, 7x or 10x earnings. These companies might be trading low because of a perception that their earnings will decline further in the future. What you are trying to do there is prove why the earnings will not decline in the future.
Jacob Wolinsky: You invest in micro-cap stocks. Can you give me a number of the average market capitalization of a stock you invest in?
Paul Sonkin: According to the classic definition micro cap stocks are stocks below $500 million or $250 million. We operate our Hummingbird fund with an average market cap of $40 million and our Tarsier fund with an average market cap of like $8 million.
Jacob Wolinsky: Can you clarify for the readers regarding the two funds you run?
Paul Sonkin: We have two funds; the Hummingbird Value Fund and the Tarsier nano-cap value fund.
Jacob Wolinsky: I assume due to the tiny size of the companies you invest in you are forced to take a large stake in the company?
Paul Sonkin: Yeah sometimes we own 5 to 10% of a company. In one case we own over 20% of shares outstanding and 65% of the float.
Jacob Wolinsky: Are you forced to take an activist role due to this?
We have taken an activist role in the past but it is something I shy away from. We focus on companies that are shareholder friendly. Being an activist investor takes up an enormous amount of time.
If you look at Bill Ackman and Michael Price who I both know and think are phenomenal investors what they do when they take an activist role is they will take a very large position. Like Bill Ackman had his Target Target fund, so they have much more concentrated portfolio.
Jacob Wolinsky: And in general you have a more diversified portfolio?
Paul Sonkin: Yes we have a diversified portfolio.
Jacob Wolinsky: Is that due to the forces of circumstance or do you prefer having a diversified portfolio?
Paul Sonkin: Its really both. By default I don’t like positions more than 5% of the portfolio. And in both funds around 10-20 positions will be about 50% of the portfolio while another 100 stocks will make up the remainder. But we have quite a few 5% positions.
Jacob Wolinsky: You are a professor at Columbia University and you run a limited partnership. Do you see your future as more of a value investor or a value thinker like Bruce Greenwald and Roger Lowenstein? Or both?
Paul Sonkin: I would say both. What I really enjoy about teaching it gives me time to research on the research process. A lot of the materials I have start as lecture. It is hard to know where the money manager starts and the teacher begins. I really try to integrate them both and I really try to bring a lot of live theses into my class.
Jacob Wolinsky: A lot of the current value investors are stepping back from their roles or will be in the future due to their age. Charlie Munger, Warren Buffett, Martin Whitman and David Dreman are all getting older. Other than yourself, who do you see as the current rising stars of value investing to lead the next generation?
Paul Sonkin: I see a lot of great money managers who all run small funds now. I don’t think these investors will come from big organizations. I think it will be small guys you never heard of, and they will remain below the radar screen for a long time. So I don’t know if that old guard is really going to be replaced.
You do have people like Bill Ackman, Rich Rubin of Hawkeye, David Einhorn, maybe Dan Loeb. I don’t really know. I think in doing what I do it is not going to make you rich and a lot of guys want to get rich. Because in the small cap world you can only get so big. There are very few people in the micro cap and small cap world making millions of dollars.
So I don’t know who the new guard will be.
Jacob Wolinsky: Other than newspapers, what analysis tools do you subscribe to? Value Line, Moodys, 52 week lows list etc.
Paul Sonkin: I would say primary use the 52 week low list. I use capital IQ. Frankly, I like to use pinksheets.com website, and 10K wizard, and a news service Knobois.
I have access to Bloomberg and use that from time to time. I think there are three areas where I add value.
- Primarily by just getting data from the financial statements. But sometimes micro and nano cap companies don’t file with the SEC so it can be pretty hard to get the information.
- Second area is through taking that data and analyzing it.
- The third area we add value is through trading. When dealing with micro and nano cap stocks the spreads can be quite large. If there is a 100% bid/ask spread you don’t want to have to absorb all those costs. So you want to buy on the bid instead of buy on the offer and it gets to be pretty trading intensive. The reason being that you don’t know when your going to get the liquidity so you have to be in the market every day.
Jacob Wolinsky: So as opposed to many other value investors such as Ben Graham and Warren Buffett who have repeatedly said it is bad to watch the market every day, in the micro cap value world you are forced to constantly monitor the market?
Paul Sonkin: We have to because it adds value. But when we look at a stock we look for a stock that will double in two years. If it doesn’t have those types of return characteristics we don’t look at it. But many times it will take more than two years so I say that we have a holding period of about five years. I haven’t calculated our turnover ratio so I couldn’t tell you that, but I guess if you keep doubling your money every five years I think that is a pretty good return.
If you look at Walter Schloss he had about 15% returns versus about 10% for the S&P 500, and for every dollar you put in the S&P you would have $2 and for every dollar you gave to Walter Schloss you would have $6 or $7. The returns were just astounding.
Jacob Wolinsky: What is your view on one of your largest holdings Fortress international group(FIGI) since the stock price/balance sheet assets value plummeted from you purchase? Do you think the management is doing a reasonable job?
Paul Sonkin: I think management is doing a reasonable job. I think the mistakes we made with a lot of the SPACs. With Fortress they bought and sold this type of business or two or three times before so you had an extremely experienced management team.
Where I think we got it wrong with lots of SPACs and with Fortress in particular is in two different areas.
- They all got killed in the carnage in 2007-2008
- They all underestimated their public company costs and that really hurt us. After Sarbanes–Oxleyit has become much more expensive to be a public company. Legal expenses were higher, and board of director costs was higher. So I would say with a lot of the SPACs that they underestimated these costs.
Jacob Wolinsky: Do you own any foreign securities? If so how hard is it to get information especially with different accounting rules overseas?
Paul Sonkin: We own some micro and nano-cap companies in Canada. So they accounting standards there are not so different so this is not a real issue for us.
What I have said also is that small companies are not affected as much by accounting rules.
We are finding enough bargains of companies in the USA and Canada that we do not need to look elsewhere. There are a lot of tiny companies in Canada that are cheap and very interesting. Canada has always been a good source of ideas for us.
Jacob Wolinsky: Southpeak Interactive, Avantair, and Rand Logistics are all companies that you have have been discussed in the past has your analysis changed since you last discussed in the fall of 2009, and if so why that is?
Paul Sonkin: No my thoughts are still all very positive. Those are still larger positions. We think they are executing very well in a not so good macro economic situation.
Jacob Wolinsky: In a August 2009 Forbes interview,you mentioned a lot of pump and dump schemes are common in the micro cap arena. What are some measures you take in avoiding them?
Paul Sonkin: You want to stay away from companies that appear to be very promotional. I guess the pink sheet website does a pretty good job they have a section called caveat emptor where they have a skull and bones next to some companies. But it is not that difficult to stay away from the real schemes.
However, occasionally we do get caught in a fraud. We got caught in a fraud in 2008 and I think it was like a 3% position and we lost our money. We did all our due diligence but the guy was a crook and it happens from time to time.
Jacob Wolinsky: Also, do you ever check in on other investors in the space to see what they're investing in for idea sourcing, etc?
Paul Sonkin: No, never. For better or for worse we have a a not made here attitude. If it is not made here we do not buy. We are not in this whole Wall Street whisper network. Some investors do it, and some do it successfully but we don’t
Jacob Wolinsky: If he had one piece of advice for future fund managers, what would it be?
Paul Sonkin: My advice would be rule number 1 don’t lose money, and rule number 2don’t forget rule number 1. I am quoting Warren Buffett there. What our clients want is to preserve their capital and for it to grow it. They are absolute investors in down markets and relative investors in up markets.
So work hard write those letters, be open with your clients and treat them fairly. And don’t lose money that is the advice I would have for them.
Jacob Wolinsky: What kind of risk management do you practice?
Paul Sonkin: We are buying cheap stocks. We diversify the portfolio. So those are the best ways to control risk buy cheap and diversify.
Jacob Wolinsky: What is your highest conviction pick at the moment?
Paul Sonkin: The stocks we have discussed in past interviews are still our highest conviction pick. Southpeak, Avantair, Rand, Steinway.
Jacob Wolinsky: What is the significance of the name Hummingbird?
Paul Sonkin: When I was working on the fund I read an article in Businessweek in March 1999 titled The Sparrows of The Market are Flying Again referring to micro cap stocks. And I thought about naming it the sparrow fund but someone thought that Hummingbird would be more poetic.
Jacob Wolinsky: The Joel Greenblatt approach of high Returns on Capital and Low earnings yield has worked very well. As opposed to Benjamin Graham’s approach?
Paul Sonkin: Well I guess what you would have to do is recreate Ben Graham’s investment approach and then compare it to Joel Greenblatt’s. There was a guy by the name of Henry Oppenheimer of the University of Rhode Island who recreated Ben Graham up until the mid 80s. But I don’t think it has been updated until today.
I think what Bruce Greenwald is going to do at the Heilbrunn Center is update Ben Graham’s net-nets and see how they have done.
A lot of these formulas like Joel Greenblatt work best with small cap companies I think the reason they don’t do it with micro cap companies is because they are too illiquid.
Jacob Wolinsky: What do you think of JAKKS Pacific (JAKK)
Paul Sonkin: I am not all that familiar with them. But they are a toy company which is really hit or miss. With a lot of toy companies if they have a hot toy they will do really well, but if they can’t follow it up they will not be able to keep up earnings.
Paul Sonkin coauthored Value Investing: From Graham to Buffett and Beyond (Wiley Finance)
. In addition there is a chapter in the book that discusses Sonkin's investment style.http://www.hummingbirdvalue.com/
