Finding Value Investments with Patient Capital's Samantha McLemore

Episode Summary

Executive Summary: Samantha McLemore, founder/CIO of Patient Capital, discusses her path from chemistry student to Bill Miller protégé, her contrarian value-investing philosophy, and how her firm blends value, growth, and patience. She also weighs AI’s market impact, argues the current AI boom differs from the dot-com bubble, and emphasizes compounding, persistence, and mindset in investing and careers.

Main Topics: McLemore’s career path and apprenticeship under Bill Miller (Priority: 5/5): She describes pivoting from chemistry to accounting/business, landing at Legg Mason after cold-emailing Bill Miller, and learning investing through close mentorship over two decades. Patient Capital’s investing philosophy (Priority: 5/5): The fund seeks maximum flexibility, buying undervalued businesses across growth and value, including compounders, classic value names, and misunderstood early-stage companies. From co-manager to independent leader (Priority: 4/5): McLemore explains how she developed an independent track record, launched Patient Capital as a private fund, and maintained the same philosophy and process after Miller stepped back. Bitcoin and unconventional value opportunities (Priority: 3/5): She recounts initially dismissing Bitcoin, later embracing it as potential 'digital gold' during inflationary conditions, and describes the upside using gold-market comparisons. AI’s effect on markets, work, and investing (Priority: 5/5): McLemore says AI is transformational, will disrupt junior jobs and some white-collar work, and is already being used in her firm for research and productivity. Bubble comparisons and current market valuation (Priority: 4/5): She compares today’s market to the late-1990s but argues the AI rally is fundamentally different because leading firms are profitable, capitalized, and not trading at dot-com-era excesses. Mindset, Stoicism, and long-term compounding (Priority: 4/5): She emphasizes meditation, journaling, Stoicism, and patience as tools to stay disciplined through volatility and to capture the power of long-term compounding.

Key Arguments: Value investing should not exclude high-quality compounders; the best long-term values often have strong growth prospects and may not trade at low multiples. Patient Capital’s flexibility across styles and time horizons helps it perform across different market regimes, rather than forcing a narrow value definition. AI is real and transformative, but the most disruptive near-term effect may be on entry-level white-collar jobs rather than on long-term investing itself. The current AI boom differs from the dot-com bubble because leading hyperscalers are highly profitable, well-capitalized, and building to meet existing demand rather than speculative future demand. Fear of a bubble can itself limit excess because investors are more cautious and less uniformly positioned than in classic bubbles. Long-term compounding matters more than short-term job titles or quarterly performance; missing big winners is often more damaging than suffering normal drawdowns. Persistent outreach, preparation, and genuine interest can differentiate job candidates in competitive industries. Stoicism and a calm mindset help investors endure volatility and make better decisions when markets fall. Bitcoin’s investment case evolved from speculative asset to possible digital gold, supported by the idea of replacing a portion of gold’s market value over time. Economic forecasting is unreliable, so the process should focus on business fundamentals, valuation gaps, and time horizon rather than macro predictions.

Data Points: Podcast duration of relationship with Bill Miller: 20 years - McLemore worked closely with Bill Miller for two decades, first at Legg Mason and later at Miller Value. Year she joined Legg Mason: 2002 - She started as an analyst at Legg Mason right after college. Year she became assistant portfolio manager: 2008 - She moved into the assistant portfolio manager role for the Opportunity Trust in August 2008. Launch of independent track record: 2014 - She became co-manager with Bill Miller and began building her own track record. Launch of Patient Capital private fund: 2020 - The private fund structure was decided in 2019 and launched in 2020 during COVID. Bitcoin price reference at early mention: A couple hundred dollars per coin - McLemore described Miller getting involved in Bitcoin when she initially thought it would go to zero. Bitcoin price reference in 2018: Almost $20,000 - She noted Bitcoin’s rise from around $3,000 to nearly $20,000 before crashing back down. Potential future Bitcoin valuation: $1.3 million to $1.4 million per coin - She estimated long-term upside if Bitcoin captured a portion of gold’s market capitalization. Market valuation today: 22x next 12 months' earnings - She cited current overall market valuation as a comparison to late-1990s levels. Late-1990s market peak valuation: About 25x earnings - She compared today’s market multiple to the peak of the dot-com era. NVIDIA valuation example: 28x next year's earnings - Used to argue current AI-related valuations are not bubble-like relative to growth. NVIDIA growth rate example: 40%+ this year - She referenced NVIDIA’s growth as part of the case that fundamentals are strong. OpenAI revenue vs. spend example: Under $4 billion revenue; $1.4 trillion committed spend - She used this as an example of possible overreach in the AI ecosystem. Under-30 unemployment rate mentioned: In the nines - She cited elevated unemployment among college graduates under 30 and tied it to AI disruption. White-collar unemployment forecast by Anthropic CEO: 5% to 25% in one to five years - She referenced Dario Amodei’s warning about AI-driven labor displacement. Relative valuation low for healthcare: 50-year low - She said healthcare was trading at a multi-decade relative valuation low earlier in the year. Endowment returns vs. U.S. equities: 6.8% vs. 13%+ - She contrasted average endowment performance with U.S. equity market returns over the last decade.

Pivotal Quotes: "the best money are made in the big moves" — Samantha McLemore: She explained that investors should look for large winners and, just as importantly, have the patience to hold them. "we don't know what the best values in the market are today because it depends on the future and the future is unknowable" — Samantha McLemore: She summarized Bill Miller’s influence on her approach to value investing and why excluding growth stocks can be a mistake. "a bubble is characterized by psychological extremeness" — Samantha McLemore: She quoted Howard Marks to explain why widespread bubble talk can reduce the odds of a true speculative mania.

Implications: Listeners get a case for flexible, long-term investing: seek mispriced businesses, avoid rigid style labels, and adapt to AI-driven disruption. For markets, AI may reshape jobs and valuations without necessarily repeating dot-com excesses.