Hedge Funds that Value Invest

I only interviewed with one fundamental investing hedge fund (Lehman Equity Strategies), which was fundamental-based long/short. They were very big on valuation of stocks and that kind of thing. I know for all the other people I've met who also interviewed with them at Wharton, all of us had banking/PE type experience. Only one guy at Penn who i kno interviewed with them had S&T experience(and his GPA was 3.95+)

While @aachimp may not exactly be spot-on, I'm afraid your post is misleading as well. What you described, that of operationally-oriented funds unlocking value on the financial statements of companies, sounds more like Buffett than Graham (the idea of applying strategic enhancements and building that classic, competitive enduring moat around portfolio companies). This notion resembles deep-value activism even less, since you name-dropped that. The entire premise of the deep-value strategy is simply purchasing companies at major discounts to their liquidation value which itself is dictated ideally by the most ultra-conservative of valuation methods such as Net Net Working Capital. Graham actually purchased Geico way before Buffett and that was his entire reasoning. He even historically told Walter Schloss at the time:

"Walter, if this thing doesn't work out ... we can always liquidate (& get tenfold our money back)."  or something along those lines.

Basically, the only rationale behind a deep-value purchase is you are getting a dollar for at least 66 cents or cheaper, and more importantly, have the option to realise that arbitrage via. the liquidation of the company, akin to the traditional corporate raider's practice. A prime example that no one points out are the evil tactics employed by Paul Singer with distressed debt and the resulting 'liquidation'  of sorts which he achieves by litigation, asset seizures etc. all to receive the face value of the debt he bought up severely below par value. Icahn built his entire thesis around the niche of Graham's deep value. These types of guys will buy anything if it's cheap enough, and are willing to do anything (for the most part, such as confiscating a Prime Minister's private jet and capturing a warship vessel) to collect. You also went from financial engineering to suddenly mentioning strategic & operational improvements, don't see how you made that jump. Additionally, you have to note that Graham never even really believed in intrinsic value in the way you are likely referring to it (discounting estimated future cash flows, finding strong businesses or reliable hens to count your eggs before they've even hatched which is what Warren did); Graham believed in hard facts and the current (e.g. assets, earnings, dividends, definite prospects.), that the future was something to be guarded against (as did legends like Mario Gabelli who, in reality, possessed far more flexibility is his use of takeover data than Buffett did with his modern value approach). Indeed, the fact that he could liquidate was what gave him the most confidence, as it continues to with vulturists, raiders, profiteers and reinvented shareholder activists today. He was willing to buy firms in bankruptcy; he wasn't out scouting for business models which had potential, running DCFs on them, buying up controlling interest then putting in that diligent work to make that nascent potential a viable operation. Same with Icahn - he would either let the market have its way with his criminally discounted investment up to a point - but more often than not he would have its way with the company instead, firing middle management, reshuffling boards, forcing asset sell-offs or outright mergers (same with Singer and Cabela's) all to service the slow but inevitable liquidation of the company's assets for profit, an idea he conceived from the concept that companies could be arb-ed the same way he had done with options. As for Jana, I'd say they remain the most aggressive of this new breed of activist engagers, masquerading to unlock shareholder value but ultimately pushing for profit off the market's inefficiencies over the cost of a company's current assets. Look how quickly they got involved with Mercury Systems then forcefully pushed for an acquisition. Your post was just kind of jumbled all over the place and not very cogent is all I'm saying. Of course you are right in saying greenmailing and extortion shakedown rackets are a bygone era (giving way to new scams like SPACs), but asset seizure, liquidation and raids are still a very real thing and Rosenstein's firm does fit that bill rather well.

stevenbn:

aachimp: I disagree with your post. I didn't say that they always go hand in hand, but yes often times they do. Activist investing doesn't mean always mean they meat nasty letters, demand greenmail and threaten to bust up the company. The fund I work for is an activist/value shop and we work with many other funds that use similar investing strategies. Many times we take a position in a company and get a board seat in order to help speed up the time line on an investment. The original post also included Eddie Lampert, are you saying that he is not an activist investor?

...probably not.

Someone traveled in time from pre-2008… GS doesn’t even have a recognizable public investing practice anymore. At least 2-3 of the firms you mention went the way of do-do birds

.

ESL Investments, 3rd Avenue, Lone Pine, Oakmark.

Ruane Cunniff.

Knock yourself out, go for ESL or Lone Pine. Good luck on ESL.

These funds don't even have websites. They're way out of my league anyways. I need to start small...

How could you even contact these funds?

you need a contact, they have 12 investment professionals on staff (they have 3 core investments, and then some random ones)--Lampert really just puts on his ideas and everyone else works on Sears mostly, a few on Autozone. They don't really hire, kind of run like an early version of Berkshire in some ways I guess. Lone Pine does recruit, but not necessarily annually, and they are pretty lean. Recruiters or friends have to put you in touch (true for almost all major HF's)

A few others include: SPO, Sageview, TPG-Axon, any of the Tiger Cub funds, and many others (I guess some of these blur the lines of traditional long/short and value funds)

Napoleon,

These Value hedge funds, where do they tend to recruit their talent from ? And is there a comprehensive list of these types of funds out there ?

some come from prop groups in banks, others from B-school, many from other HF's and a few from random backgrounds. It really depends on the fund, but generally speaking the 2-3 people they hire a year can really come from anywhere. ESL and Lone Pine generally don't hire many people, they're just incredibly lean organizations. Some of the others will hire every year junior guys from banks and consulting firms, just depends

Probably the most popular strategy is Event Driven because it involves more risk/return for short term gains, which is what the filthy rich are concerned about.

Baupost Group Greenlight Capital Berkshire Hathaway Pershing Square Capital Third Point

Most value driven funds/investors that arent event driven... are mutual funds. Just fyi.

Sequoia

Oaktree (altho they deviate a little from classical G&D because they also put a lot of emphasis on "the cycle")

GF,

That was very insightful. Thank you.

In the west coast... SPO Partners, Farallon, Route One, etc would qualify as value oriented. These are very long term, concentrated investing shops.

Gray Fox grubs SB's like a beast.