Best Idea Show - David Marcus, Evermore Global Advisors - Do You Sell Things That You Like To Buy Things That You Now Love? | #285

Episode Summary

Executive Summary: David Marcus, co-founder/CIO of Evermore Global Advisors, explains how crisis-tested value investing in Europe can create outsized returns through special situations—spin-offs, restructurings, breakups, and family-controlled compounders. He argues Europe is shifting from a “tomorrow story” to a “today story” as stimulus, M&A, activism, and valuation gaps converge, creating a compelling opportunity relative to the U.S.

Main Topics: Career origins in crisis investing: Marcus recounts starting at Michael Price’s shop during the 1987 crash, learning not to panic and to use selloffs to buy high-conviction names at better prices. How Evermore was built: He traces his path from mutual fund analyst to running family-controlled businesses and restructuring boards, then forming Evermore to combine public equity, private equity, and operating experience. Special situations framework: Evermore focuses on cheap stocks with catalysts—spin-offs, breakups, restructurings, activism, and management changes—rather than passive mean reversion. Family-controlled compounders in Europe: Marcus argues that aligned owners with long time horizons can create superior compounding, citing examples like Exor and the value of shareholder-friendly capital allocation. European opportunity and policy backdrop: He believes EU stimulus, green transition spending, digitalization, and rising M&A/activism will unlock re-ratings across European equities. Examples from the portfolio: He discusses holdings such as MTG, Atlantic Sapphire, Scorpio Bulkers, MagnaChip, KKR, Vivendi, and others to illustrate how hidden value and catalysts work in practice. Lessons from recent volatility: The 2020 pandemic created losses in shipping and commodity exposures, but also allowed him to rotate into higher-conviction names and sharpen the portfolio around stronger catalysts.

Key Arguments: Crisis periods are the best time to learn investing discipline because they force investors to stay calm and act rationally rather than panic. European markets are especially attractive because many companies are cheap, underfollowed, and in the early stages of breakup/restructuring cycles. Value investing should not rely on mean reversion alone; the better approach is to buy cheap assets with identifiable catalysts that can make them less cheap. Family-controlled businesses often outperform because owners think long term, have skin in the game, and can optimize capital allocation across decades. Spin-offs and conglomerate breakups create opportunities because markets often misprice new securities and fail to assign natural shareholder bases immediately. Europe’s policy mix—stimulus, green investment, and digitalization—should accelerate corporate change and drive earnings growth in selected sectors. Activism in Europe works best when adapted to local rules and governance structures rather than imported in a U.S.-style confrontational way. Investors should own the operating company or management company when possible, not just the underlying assets or funds, to capture compounding economics. A global investor should not dismiss Europe just because of headlines; a curated, bottom-up selection of businesses can produce better risk-adjusted returns than a blanket region bet.

Data Points: Michael Price tenure: ~14 years - Marcus says he stayed with Michael Price’s group for close to 14 years, including the 1987 crash period. Crash-year phone coverage: June to December 1987 - He worked as a phone rep while in school during the 1987 market crash. European portfolio mix: ~70% Europe / ~20% U.S. / ~10% Asia - He describes Evermore’s global fund and managed accounts exposure. Fund capacity: $100 million commitment - Jan Stenbeck committed this amount to seed Marcus’s Europe-focused fund. MTG cash position: $185 million net cash - He notes MTG’s esports spin-off had substantial cash relative to market cap. MTG market cap at spin: ~$680 million - He cites this as the market cap when the esports business emerged. MTG post-breakup market cap: ~$1.1 billion - He says MTG’s value rose after the breakup and subsequent re-rating. MTG streaming stock performance: +140% - He says the streaming side rose this much after the breakup. Atlantic Sapphire U.S. facility: 13,000 tons initial capacity - The Homestead, Florida facility opened with this production capacity. Atlantic Sapphire long-term capacity: 200,000 tons - He says future buildout could expand capacity substantially. Atlantic Sapphire stock performance: ~3x - He says the stock tripled since they first bought shares a few years earlier. KKR AUM: ~$300 billion - Used to illustrate scale and recurring revenue in a compounder. KKR ownership by insiders: >40% - He notes founders and employees own a large stake in the firm. European stimulus package: €1.5-2.0 trillion - He cites the EU’s planned spending on green transition, digitalization, and support programs. Vivendi stake sale to Tencent: 20% sold for €6 billion - Used to show how a stake sale helped reveal UMG’s value. Vivendi market cap: ~$37 billion - He describes Vivendi as a large French holding company with hidden assets. General Growth Properties return: >30x - He cites this as a major crisis-era investment success. Bill Ackman report length: 85 pages - He references Ackman’s detailed research on GGP during the financial crisis. Third Point NAV discount: ~50% - He mentions closed-end fund discounts during the financial crisis as an example of opportunity.

Pivotal Quotes: "If you start in a crisis, you're just going to learn a lot more than you are in a normal period of time." — David Marcus: Explaining what he learned working through the 1987 crash at Michael Price’s firm. "We're looking for things that are cheap, but we're looking for something that's going to make them less cheap." — David Marcus: Summarizing Evermore’s special-situations investing philosophy. "The tomorrow story is finally the today story." — David Marcus: His thesis that Europe is entering a new phase of policy-driven opportunity and investor recognition.

Implications: Listeners should think of Europe as a selective, catalyst-driven opportunity set rather than a generic allocation. The best gains may come from catalysts, aligned owners, and policy shifts—not broad index exposure.