KKR, MCFT and The CLCT/NLAB Saga w/ Yaron Naymark, 1 Main Capital

Episode Summary

Executive Summary: The episode features One Main Capital’s portfolio manager discussing his path from banking/private equity into launching a sub-scale hedge fund, his lessons on portfolio construction, and several high-conviction investments (RCI Hospitality, MasterCraft/Malibu/Brunswick, KKR). He emphasizes understanding business quality, alignment, capital efficiency, and avoiding short-term trading mistakes. He also analyzes contentious takeout situations in Collectors Universe and N Labs, highlighting governance, process fairness, and opportunity cost.

Main Topics: Career path and founding One Main Capital: Yaron Neymark explains how childhood exposure to entrepreneurship, experience at Citi, HIG Capital, and Altalis Capital shaped his desire to start his own fund in 2018. Portfolio construction and sizing discipline: He discusses sizing based on risk/reward, downside, factor exposure, and why he prefers gradual adjustments rather than large swings in position size. Learning from investing mistakes: He recounts mistakes like selling Expel too early and not sizing COVID beneficiaries larger, stressing the importance of conviction, business understanding, and avoiding reactionary sells. Special situations: Collectors Universe and N Labs: He critiques the fairness of buyout processes, especially when minority shareholders may be squeezed out below intrinsic value, and notes the tax and opportunity-cost burden of forced monetization. High-conviction compounders: RCI Hospitality: He outlines the thesis for RCI as a cash-generative, capital-light business with strong management, a wide moat, and a long runway for acquisition-led compounding. Consumer cyclicals benefiting from COVID: MasterCraft, Malibu, Brunswick: He argues ski/wake boating benefited from pandemic-driven demand shifts, dealer restocking, and secular share gains in a concentrated industry. Alternative asset managers: KKR: He presents KKR as a long-term beneficiary of capital flowing to private markets, with fee growth, carry upside, and countercyclical investment advantages.

Key Arguments: Starting a sub-scale hedge fund can work if expenses are kept low and the manager can survive long enough for performance to attract assets. Great investing requires deep understanding of the business, its product, and its competitive position, not just reacting to quarterly noise. Position sizing should reflect upside, confidence, and downside; avoiding oversized exposure can improve rational decision-making under stress. Selling Expel after a temporary quarter of weakness was a mistake because the long-term thesis remained intact and the stock later rose much higher. Collectors Universe had a strong moat and was undervalued relative to its cash flows and strategic optionality, making a small-premium sale appear unfair. N Labs’ takeover at little or no premium may reflect a confusing board-level decision, but it risks forcing shareholders to redeploy capital and realize short-term tax gains. RCI Hospitality is attractive because it combines high returns on capital, capital-light operations, a long reinvestment runway, and disciplined management. MasterCraft/Malibu/Brunswick benefit from secular demand growth, brand power, negative working capital, and strong margins in a concentrated market. KKR benefits from structural growth in alternative assets, increasing allocation from institutions, and scaling economics as successor funds get much larger without proportional headcount growth. The biggest risks to KKR are regulatory changes and sustained underperformance that would impair fundraising and long-term economics.

Data Points: One Main Capital launch: Early 2018 - Neymark founded his own fund after his previous fund shut down. Prior experience: ~10 years - He spent about a decade across private equity and public equity investing roles before launching One Main Capital. Citi tenure: 2 years - He worked in Citi’s leveraged finance group during the financial crisis. HIG Capital tenure: ~3 years - He learned diligence and private equity boardroom dynamics at a mid-market PE firm. Altalis role: Pre-launch / day negative one - He joined a startup long/short fund before launch and helped with portfolio construction. Position sizing framework: Full / 3-quarters / half / quarter - His preferred sizing buckets for portfolio construction. Expel stock move after sale mistake: ~6x to 7x higher - He sold too early after a temporary China-related issue and missed substantial upside. Suggested fund AUM threshold: Sub-$50 million - He defined sub-scale as below this level when discussing startup hedge funds. Collectors sale price: $75.25 per share - Takeout/tender price discussed for Collectors Universe. N Labs deal minimum approval: 90% - He said N Labs needed 90% to get the transaction done. RCI current stock price (discussion period): ~$40 per share - He referenced the stock around the time of the interview and tied it to low FCF multiple. RCI free cash flow per share: ~$4.00 to $4.50 - He estimated normalized free cash flow per share at full occupancy/recovery. RCI market valuation: Single-digit free cash flow multiple - He argued the stock was cheap versus cash generation. RCI long-run FCF per share potential: ~$10 per share - He projected strong compounding if execution continues. MasterCraft/Malibu industry share: ~75% to 80% - He said the top three ski/wake boat players dominate the market. MasterCraft/Malibu industry volume growth: ~2% to 3% annually - He described the ski/wake boat market as a secular grower. Malibu growth rate: ~15% to 20% EPS growth - He cited high earnings growth for Malibu. KKR revenue growth: Teens clip - He expects top-line growth to continue at a high-single/teens pace. KKR valuation: ~11x owner’s earnings - He said the stock still looks inexpensive on his estimates.

Pivotal Quotes: "If you just, at this valuation, just do nothing, let the cash pile up on your balance sheet, and your stock will start to work." — Yaron Neymark: Explaining RCI Hospitality’s capital allocation philosophy and why management should avoid empire-building. "The trick to doing it when you start that small is don't get ahead of yourself." — Yaron Neymark: Advice on launching a sub-scale hedge fund and keeping expenses low enough to survive. "I like being on a boat where the management team is rowing in the same direction as me." — Yaron Neymark: His preference for aligned management teams over activist-style conflict.

Implications: The episode reinforces a disciplined, business-first investing style: buy durable compounders cheaply, size positions thoughtfully, and avoid reflexive trading. For listeners, the key lesson is to focus on alignment, capital allocation, and multi-year cash flow power rather than short-term headlines.