Sep 22, 2022 · 33m · capital-allocators
Adam Wyden - ADW Capital (Manager Meetings, EP.37)
Adam Wyden · 22m spoken Ted Seides · 4m spoken Savneet Singh · 3m spoken Disclaimer Reader · 21s spoken
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Manager Meetings, PAR Technology CEO Savneet Singh interviews ADW Capital founder Adam Wyden on his evolution from micro-cap activist investing to concentrated, high-quality small-cap compounding. Wyden details his intensive primary research methodology, the turnaround of PAR Technology, and the macroeconomic case for active small-cap equity investing.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 15.7% of the talking time here. How this is scored →
Ted as informed peer 3.0 Guest teaching 3.3 Guest disagreement 1.1 Ted pushing back 0.9
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:36 Calling out intellectual dishonesty
Adam forcefully expresses his disdain for people who accuse others of hostility when they realize they are losing an analytical debate.
Hardest push from Ted ▶ 11:38 Probing reason for strategy shiftSavneet directly challenges whether Adam's shift away from net-nets was driven by weak returns or merely an inability to deploy larger AUM into microcaps.
Biggest teaching moment ▶ 26:13 84-year small-cap cycle breakdownAdam provides an extensive macro comparison of small versus large cap annualized returns since 1927 to prove structural inefficiencies will mean-revert.
Ted holds their own ▶ 16:38 Illustrating aggressive activist diligenceSavneet showcases his insider view of Adam's operational style by detailing how Adam cornered the board at an obscure upstate New York shareholder meeting.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Manager Meetings Show Overview and Format | 2 | 1 | 0 | 0 | Ted Seides opens with sponsor reads and introduces guest host Savneet Singh, who asks Adam Wyden open-ended questions about his early background and founding ADW Capital with sub-$500k. | |
| Strategic Evolution: Shifting from Net-Nets to Quality Compounders | 4 | 4 | 1 | 2 | Savneet pushes Adam on whether his shift from net-nets to compounders was forced by growing AUM or driven by performance. Adam clarifies that it stemmed from realizing the difficulty of timing exits in mediocre businesses versus letting compounding work. | |
| Discovering PAR Technology and the Brink SaaS Thesis | 3 | 3 | 1 | 1 | Adam explains discovering PAR Technology through value screens and recognizing that its high-margin SaaS asset, Brink, was being starved of capital by legacy hardware operations. | |
| The Verona Shareholder Meeting and Board Confrontation | 4 | 4 | 2 | 1 | Savneet recounts when Adam crashed an annual meeting in Verona to confront the board. Adam outlines his forensic research process, explaining how he tracks down obscure historical sources like original IPO prospectuses. | |
| Technology Underwriting, Technical Debt, and Terminal Value | 3 | 4 | 1 | 1 | Adam discusses underestimating technical debt and how tech markets penalize imperfection far more than traditional value situations, leading him to appreciate the importance of terminal value over activist intervention. | |
| Portfolio Characteristics: Recession Resistance and Statutory Demand | 3 | 5 | 1 | 1 | Adam explains his criteria for statutory demand and recession resistance, then breaks down 84 years of historical small cap versus large cap performance data to argue that massive mean reversion is imminent. | |
| LP Alignment: Targeting Tax-Conscious, Long-Term Capital | 2 | 2 | 2 | 0 | Savneet guides Adam through rapid-fire closing questions covering LP alignment, pet peeves like executive punting and intellectual dishonesty, and lessons learned from past mistakes in Fiat. |
Statements from this episode (20)
Wyden: ADW Capital launched with under $500K, finishing year one at $8M–$9M
“The fund was a little under 500,000 dollars. I lived at home, kept costs low and distractions low. And I finished year one at about eight or nine million dollars.”
Wyden: ADW bought Lorex at ~25¢ in 2011 before a ~5x buyout
“We bought this company, Lorex Technologies. It was one of our first investments in 2011. We bought it at like 25 cents, and I think it ended up getting sold a year and a half later for like a buck 40 or 20 or something like that.”
Wyden: Timing exits is hard, so invest where time is your friend
“What we have found is that knowing when to buy things is super obvious, knowing when to sell isn't. And so if you're not going to get the sell methodology perfect, then you got to be in a situation where time is your friend.”
Wyden: ADW published activist letters on almost all holdings in 2018–2019
“In 18 and 19, people say, oh, you had an activist letter out on every single one of our companies, and we basically did.”
Wyden: PAR was one of few turnaround investments worth the activist effort
“Par was one of the few companies in that era where you can categorically say the juice is worth the squeeze.”
Wyden: I wrote PAR's John Sammon had a 'PhD in value destruction'
“I think it was hard for John Salmon to go and sit face to face with someone who wrote a public letter saying, you have a PhD in value destruction, but actions speak louder than words.”
Wyden: Competing with Tiger Global and Coatue on Apple is functionally impossible
“I'm never going to beat Tiger Global or KOTU or anyone on Apple because they're going to have Yippit data and they're going to have robots and AI and credit cards and all of this stuff that's just going to make it functionally impossible for me to beat them.”
Wyden: PAR was ignored due to illiquidity and poor CEO capital allocation
“No one is spending time on par. It's in upstate New York. The CEO has a terrible history of capital allocation, and it's a liquid and it's small. If I can actually get a variant view on the company, on their products, I know I'm going to be the only person doi…”
Wyden: Tech investors demand operational perfection, unlike traditional value investing
“In technology, investors need everything to be perfect. And as a value guy, I've always said, it's so cheap. If it's 85% right, you'll get 85% of the multiple or the value. And I think in technology, that's not the case. People want everything perfect.”
Wyden: ADW focuses on rehabilitating fixable 'scratch and dent' assets
“When you think about what we do, our business model is scratch and debt inventory. We want to find the Porsche that's sitting in the garage, and we want to go and replace the tires and give it a car wash, and then we're going to drive it really, really hard. T…”
Wyden: High terminal value in growing businesses forgives operational execution errors
“The takeaway from all this, the major lesson in PAR and all this is that terminal value matters. Ultimately, when you have a business with a high terminal value that's growing, it creates a lot of room for execution errors.”
Wyden: ADW Capital will never make an investment purely for activism again
“I will never make an investment again solely under the auspices of activism. I don't ever see that happening.”
Wyden: Activist investing distracts from other portfolio holdings even when successful
“I look at companies where the reason why you own it is for activism, and I've found that that strategy, even when you win, distracts you materially from your other investments. There is a psychological cost to that, not just financial.”
Wyden: Restaurant software demand is counter-cyclical in economic downturns
“I'd make arguments that people would actually want to buy more software in the downturn because they want to lower their costs. That's a secular growth industry in a business that's arguably counter-cyclical.”
Wyden: Small-caps outperformed large-caps by ~400 bps annually from 1927 to 2010
“From 1927 to 2010, which were the years prior to the launch of these strategies, the small, that's growth and value, outperformed large by about 400 basis points.”
Wyden: Large-caps outperformed small-caps by 500–600 bps annually since 2011
“Since we started our strategies in 2011, The S&P or large cap indices have outperformed the small cap indices by 500 or 600 basis points.”
Wyden: Tighter private capital will force earlier IPOs and boost small caps
“The availability of private capital is going to be less readily available, so companies are going to go public earlier, which means the quality of the indices are going to improve, which means people are going to buy small caps more.”
Wyden: Meaningful mean reversion and inflows will return to small-cap stocks
“I can't tell you whether it's six months or 12 months or 24 months, but what I can tell you is that there will be meaningful mean reversion in small cap stocks. What has happened over the last 11 years where money's getting sucked out, money's going to go in.”
Wyden: Volatile 5-to-10-year public equity strategies are challenging for institutional allocators
“Most of the institutions are non-taxable, so this idea of owning things for the long term and trading off volatility for after-tax return, I think, is less relevant for them. They've got current funding needs. Looking at a public equity strategy with a five or…”