The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Meli: Public equity markets may be growing less efficient due to indexing
“I have a sneaking hypothesis that I'm hesitant to say out here because there's a high probability I'm wrong, but I will say it. I feel like the market's becoming a little less efficient in certain areas, and I'll explain it.”
Meli: Talent across PE, hedge funds, and long-only firms is identical
“One of the funny things about the industry is everybody looks at somebody at a private equity firm or Citadel or a hedge fund or long-only and thinks they're so different. They're the same people. They're just moving around seats.”
Meli: Annual bonus models create acute, distracting short-term focus
“The way it actually works is you get your base salary, you wait all year long for your bonus, and you're thinking you can't focus on anything else at the end of the year, and then you get your bonus, and for one or two days, you're like, okay, I got my bonus, …”
Meli: AI CapEx infrastructure will be overbuilt
“The CapEx will be overbuilt. Infrastructure, highways, all these things, you ultimately in a CapEx cycle, you just don't know if today you're in the third inning or eighth inning.”
Meli: Many perceived obvious AI winners will become obvious losers
“There will be a lot of companies that look like obvious winners of all this that I think will be obvious losers.”
Meli: Small-cap universe deteriorated due to acquisitions, PE, and fewer IPOs
“The problem is that asset pool is not as rich as it used to be. If you looked at the small cap index today, it's a lot of biotech, a lot of unprofitable companies. A lot of the big conglomerates took out a lot of the best franchises there. Private equity owns …”
Meli: Mega-Cap Tech Outperformance Impaired Active Fund Performance
“I basically think mega cap technology killed a lot of the active management world.”
Meli: S&P 500 is less attractive due to high multiples and AI
“So today I would look at that same asset and I'd say, okay, higher multiple. Less diversified. More of a factor bet on AI and power. We've run the economy hot, tons of fiscal deficit problems. If I just look at that, and you didn't tell me the name was the S&P…”
Meli: Heavy capital inflows and high fees will depress LBO returns
“In the same way the hedge fund world was a great opportunity set 25 years ago, but the fees came in, too high of fees and too much capital, the LBO world had a great opportunity set too. They had less capital there, they had lower multiples, and rates came dow…”
Adrian Meli: The best investments are rare great assets on sale
“What was important to learn along the way is the best deals aren't those unsellable, teal crocodile loafers at the designer outlet on Black Friday that everybody is tempted to buy once or twice. It's those scarce few great assets that come on sale very seldoml…”
Meli: Best historical hedge fund returns occurred from late 1990s to 2010
“What I took from it is, look, it doesn't seem like a coincidence to me that a lot of the best hedge fund returns in history were created from the late nineties to 2010 when that alpha pool was really big.”
Meli: Influx of capital compressed hedge fund gross returns despite high fees
“There's very low barriers to entry in the investment world. So big alpha pool, highly, highly remunerated profession. Hedge funds on the front page of the newspapers, TV shows about them, houses in the Hamptons, all this great stuff. What happens? People come …”
Meli: Spinoffs and special situations have become priced more rationally
“You didn't used to have dedicated distress funds of the size you have today. The special situations were really interesting. The Joel Greenblatt stuff. You could see a spinoff, a big fund house would get a stock, sell the stock, Indiscriminately. And you could…”
Eagle Capital pays investment analysts salary without bonuses
“On the investment side, none of the analysts are paid bonuses. They're all paid salary. We want them to be focused on duration.”
Meli: Long-only analyst seats will decline as capital moves to indexing
“Capital has gone to indexing. It's flowed out of a lot of the long-only space. There's less hiring there in general. Fewer seats are going to be there over time, and it's gone to systematic strategies and more pot-oriented strategies.”
Meli: Capital Has Shifted Away from Broad Opportunistic Hedge Fund Mandates
“That doesn't really exist anymore in broad strokes. It's been diced up. You've got the distress funds, you've got the pods, you've got some single managers left, but there's not so much capital going to broad opportunistic mandates. It's become more specialize…”
Meli: SaaS multiples collapsed from 40-60x revenue five years ago
“Five years ago, SaaS companies, all these trading at 40 to 50 to 60 times revenue at one point. Today, it's hard to give away a lot of SaaS companies.”
Meli: Purely generalist analyst teams are very hard to build today
“It would be very hard to build a team if you started from scratch today of 10 very great senior analysts with just generalist frameworks because they're coming from single manager hedge funds often or pods where they've had a specialization.”
Meli: Home building and building products will recover in three to five years
“I think there are things in that space that if you close your eyes three to five years, the home building industry, the building products industries, there will be a better day ahead.”
Meli: Portfolios should not be sized purely on highest IRRs
“And the portfolio isn't sized based on the highest IRRs. A lot of times the highest IRRs have the fattest tails to them.”
Meli: Eagle Capital holds 25-35 securities with six-year holding periods
“We have 25 to 35 securities. We have eight people on the analyst team, and you hold the security for six years. That would mean you only really need to buy four, five, or six new securities a year.”
Meli: Eagle Capital Models Equities 5-7 Years Out for Double-Digit IRRs
“The starting point is, can we generate Absolute double digit returns over a long period of time. Think of us as absolute return investors living in a relative return world. We're modeling companies out five, six, seven years, looking at normalized free cash fl…”
Meli: Eagle Builds Portfolios Resilient to Macro Cycles and Geopolitical Shocks
“What we're trying to do is have a portfolio of return streams that play out at different periods of time, different parts of their life cycle with different factors involved. So that we're not reliant on whether interest rates go up or down or the economy stre…”
Eagle avoided investments after Google X meeting convinced them of self-driving
“We met with Astro Teller, the head of Google X, over 10 years ago, we were talking about self-driving cars, and we thought self-driving cars were going to happen. So we avoided a lot of things thinking self-driving cars were going to happen.”
Eagle tracks where internal models diverge 5-7 years from consensus
“We have a dashboard internally. And what we do is we pull through all of our companies and we look at the earnings models that we have internally and compare them against analysts sell side. We look where we're out of consensus out five to seven years.”