Episode Summary
Executive Summary: David Marcos of Evermore Global argues that Europe is entering a renewed value-investing cycle driven by low yields, policy stimulus, deconglomeration, activism, and rising pressure on companies to improve operations. He traces his approach to Michael Price’s discipline, emphasizes deep networks and bottom-up research, and highlights Europe’s blend of cheap valuations and growth catalysts.
Main Topics: David Marcos’s investing formation at Mutual Series: Marcos recounts learning value investing under Michael Price, absorbing ideas by watching, listening, and pitching through a flat, tough-but-fair organization. The crash of 1987 reinforced his belief in disciplined buying during dislocation. Europe as fertile ground for value investing: The central thesis is that Europe offers unusually rich opportunities because of lower valuations, structural inefficiencies, and pressure to close the performance gap with the U.S. Marcos argues the opportunity is in Europe-specific catalysts, not simply buying the region. Catalysts: restructurings, spin-offs, and deconglomeration: Marcos favors cheap stocks only when paired with a catalyst such as breakups, spin-offs, restructuring, or management change. He sees European conglomerates simplifying and markets rewarding focus. Activism, management quality, and networks: He stresses that investing is a bet on people, not just assets. Understanding owners, boards, and managers is essential, and successful European activism often requires board-level engagement and local relationships. Blending public, private, and operational investing: Evermore’s process combines lessons from public equities, private equity, venture capital, and family-office/operating experience. Marcos says this helps evaluate turnarounds more realistically and source better ideas. Risk management and avoiding costly mistakes: The discussion closes with Marcos’s focus on downside awareness, leverage, and macro shocks such as pandemics or political upheaval. He says teams must continually test theses and avoid repeating errors. Value and growth can coexist in Europe: Marcos highlights that Europe offers cheap stocks with real growth, especially in mid- and small-caps, post-spin-offs, and digital/tech-transition businesses such as gaming and streaming.
Key Arguments: Europe is not just cheap; it is cheap with catalysts, including stimulus, restructuring, activism, and deconglomeration. Low yields and policy shifts force companies to improve operational performance, making Europe especially attractive for value investors. Good investing in Europe requires knowing the controlling families, boards, and local managerial culture, not just CEOs or financial metrics. The best ideas often come from looking beyond the obvious, using keyword searches, off-the-radar research, and specialized networks. Successful activism in Europe is often inside-out rather than outside-in, with board involvement and operational engagement. Management quality is critical because some executives perform only in good times, while others can navigate crises and restructurings. Europe’s mid- and small-cap universe contains situations where value and growth overlap, such as spin-offs and transformed businesses. Leverage and macro risks must be tracked at the portfolio level, but investors should still focus on company-specific upside paths and catalysts.
Data Points: Crash of 1987 one-day decline: 22.8% - Marcos recalls watching Mutual Series buy through the 1987 market crash. Assets managed at Mutual Series/flagship complex: over $14 billion - He co-managed or helped manage the firm’s major portfolios after rising internally. Marginal tax rate in Sweden: 90%+ - Marcos notes this when describing Swedish families’ incentives and value creation potential. Stenbeck seed capital: $100 million - Jan Stenbeck seeded Marcos’s new venture after a weekend meeting in the Bahamas. Rapidly built AUM at Markston: about $500 million - He says the business grew quickly after launch before Stenbeck’s death. Family office / current firm AUM: just under $600 million - Marcos states Evermore had grown to this size at the time of the interview. European stimulus / transformation plan: about 2 trillion euros - He cites the EU’s planned spending on modernization, digitalization, infrastructure, and the Green Deal. MTG market cap at spin-off: $675 million - He describes MTG as a post-spin-off opportunity with cash on the balance sheet. MTG net cash at spin-off: $185 million - Used to illustrate that value and growth can coexist in one business. MTG current market cap: about $1.1 billion - He notes the appreciation after the spin-off and subsequent developments. MTG net cash currently: about $170 million - He highlights continuing balance-sheet support despite acquisitions. Fagron stock move: €5 to €20 per share - Example of a turnaround identified after an investment banker revealed what he disliked. Fagron equity decline before involvement: lost €1 billion in equity market cap - Marcos cites this as a distressed opportunity that later recovered. GameSys valuation at purchase: barely 5x free cash flow - Used to show value investors can own growth at a cheap price. GameSys current valuation: a little over 9x free cash flow - He says the stock rerated after operational improvement and strong management.
Pivotal Quotes: "We don't screen on numbers. We screen using words, key words: spinoff, breakup, restructuring, turnaround." — David Marcos: Explaining how Evermore sources ideas and finds mispriced situations with catalysts. "We're not just buying assets, we are buying into people." — David Marcos: On why management, families, and owners matter as much as valuation. "Europe has been a tomorrow story for many years. But at the same time, within that, there have been wonderful runs of opportunity." — David Marcos: Summarizing his view that skepticism about Europe is often overdone.
Implications: Listeners should view Europe as a multi-year stock-picking opportunity, not a macro trade. The best returns may come from operational change, activism, and underfollowed spin-offs where cheap valuations meet real catalysts.
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Value investing is more than an investment strategy — it's a fundamental way of thinking about finance. Value investing was developed in the 1920s at Columbia Business School by professors Benjamin Graham and David Dodd, MS '21. The authors of the classic text, Security Analysis, Graham and Dodd were the very pioneers of their field and their security analysis principles provided the first rational basis for investment decisions. Despite the vast and volatile changes in the economy and securities markets during the last several decades, value investing has proven to be the most successful money management strategy ever developed. Value investors' success over the second half of the twentieth century proved not only the validity of the value approach, but its preeminence over even the most widely taught and practiced modern investment theory, which was developed in the 1950s and '60s and remains dominant even today. Our mission today is to promote the study and practice of Graham & Dodd's original investing principles and to improve investing with world-class education, research, and practitioner-academic dialogue. In this podcast you will hear from some of the world's greatest investors, their views on the investment management industry, how they developed their investment process and how they see the field changing over time.