Bares Capital spent eight years manually analyzing micro-cap stocks without computer screens
Brian Bares · Brian Bares – Qualitative Concentration at BCM (Capital Allocators, EP.191) · Apr 26, 2021 · at 24:43
Brian Bares discusses Bares Capital Management's purely qualitative research method and rejection of quantitative screening.
0:00 / 0:11exact quote · 11.8s
720p mp4 · rendered on demand · StarZero watermark
“We actually do, despite the quantitative aspects of my old firm and my math background, we do no computer screening or filtering. Like we started from A and went to Z and microcap. It took us eight years, but we did it.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Brian Bares
The fiftieth portfolio stock exists purely to gather asset-based management fees
“The evidence is that after eight stocks, you're 80% diversified, right? So the 50th name in your portfolio is doing nothing to get you more of the free lunch, right? I mean, it's just a exercise in gathering assets to get more asset based fees for a manager.”
Top institutional allocators underwrite people and processes over five-year track records
“The best allocators, especially in, I grew up in the institutional community, like the best allocators They underwrite people philosophy process. They're not looking for the best five year track record. If they were doing that, they'd be performance chasers an…”
Multi-manager portfolios with hundreds of stocks yield passive returns for active fees
“I mean, 10 equity managers, each holding a hundred stocks, charging one percent, you're charging active fees and getting passive results. It's ridiculous. And so everybody should be concentrated.”
Bares Capital pre-qualifies investment candidates without looking at historical stock prices
“So everything that we pre-qualify for purchase is done without any knowledge of what the stock price is or has been.”
Investors should hold exceptional compounding businesses even at 120 percent of value
“Whether it's something, 60 cents on the dollar, 80 cents, or even 120 cents on the dollar, if it's the right business run by the right people with great growth prospects, the default setting here is just to hang on to it.”
Assuming qualitative equivalence among cheap stocks is the biggest asset management mistake
“This idea of qualitative equivalence among your opportunity set is the biggest mistake that most managers make. ABC at 80 cents on the dollar is not the same as XYZ at 80 cents on the dollar. They're different qualitative businesses. They're different competit…”