Ryan Batchelor – Clifford Capital Partners (Manager Meetings, EP.11)

Episode Summary

Executive Summary: Paul Black explains why WCM invested in Ryan Batchelor’s Clifford Capital: shared values, strong people, and complementary styles. Ryan traces Clifford’s contrarian value roots from accounting and auditing, through Morningstar and Wells, to a blended core-value/deep-value process built on moats, catalysts, margin of safety, patience, and culture. The conversation emphasizes temperament, concentration, and small-team advantage as drivers of long-term alpha.

Main Topics: How WCM Came to Invest in Clifford Capital (Priority: 5/5): Paul Black describes the relationship’s origin through Mike Trigg’s Morningstar connection and why WCM favored investing in a good person with aligned values over an exhaustive due-diligence process. Ryan Batchelor’s Path Into Investing (Priority: 5/5): Ryan recounts moving from accounting and auditing into stock research, then portfolio management, with formative experiences at KPMG, BYU, Morningstar, and Wells Capital. Clifford’s Blended Investment Philosophy (Priority: 5/5): Ryan explains Clifford’s mix of core-value wide-moat businesses and deep-value situations, with concentration, bottom-up research, and margin of safety at the center. Catalysts, Reward/Risk, and Contrarianism (Priority: 5/5): A major theme is that cheap stocks alone are insufficient; Clifford seeks identifiable catalysts, asymmetrical reward/risk, and the willingness to buy when others are selling. Case Studies: GameStop, Abercrombie & Fitch, American Express (Priority: 4/5): Ryan uses specific investments to show how Clifford identifies underappreciated changes in fundamentals, store rationalization, balance-sheet strength, and hidden upside. Culture, Temperament, and Small-Team Advantage (Priority: 5/5): Both speakers stress culture as a competitive edge, citing freedom to succeed, camaraderie, patience, humility, and the belief that small, high-quality teams outperform. Personal Lessons and Values (Priority: 3/5): Ryan shares mistakes, family influences, and lessons on abundance, humility, and not becoming stubborn when an investment thesis breaks.

Key Arguments: WCM invested in Clifford primarily because Ryan and Wayne are good people with similar values, and the relationship was backed by trusted introductions rather than a purely mechanical process. Ryan’s investment career was shaped by hands-on work identifying accounting red flags, which taught him conviction, skepticism, and the importance of understanding what really matters in a business. Clifford’s strategy combines two alpha-rich areas: high-quality wide-moat businesses bought at attractive prices and deeply out-of-favor value stocks with clear catalysts. Cheapness alone is not enough; the market can screen for low valuation, but it cannot easily identify the most important catalysts or determine position sizing and portfolio weighting. Contrarian investing works because markets are often driven by emotion and herd behavior, but it requires the temperament to look wrong before being right. Patience is a structural edge: Clifford thinks in three- to five-year horizons and keeps turnover relatively low, which fits its bottom-up, high-conviction style. Culture is not a soft issue but a long-term performance driver; Clifford seeks people who are skilled, humble, and energized by their work, and gives them freedom to operate in their area of genius. Small teams can outperform large organizations because investment success depends more on focused judgment and accountability than on analyst count. Deep value requires catalysts and a favorable reward/risk profile, not just statistically cheap stocks; the goal is to ensure that far more can go right than can go wrong. The core sleeve provides defense during difficult markets, while the deep-value sleeve provides offense when bargains appear, creating a complementary portfolio structure.

Data Points: WCM ownership stake duration: 3 years - Paul says WCM took an equity stake in Clifford three years ago. Clifford assets under management: $320 million - Described in the intro as Clifford Capital Partners’ AUM. WCM investor tenure in strategy: 5 years - Paul notes he has invested in WCM’s international growth strategy for the last five years. University cohort start date: September 21 - Capital Allocators University live online course start date mentioned in the ad read. GameStop position exit: December 2020 - Ryan says Clifford sold GameStop before the Reddit-driven frenzy. GameStop store closures estimated: 20% to 25% - Ryan believed this portion of stores could be shut down and remain cash-flow positive. GameStop valuation target: Mid-teens to $20/share - Ryan’s conservative fair value estimate for GameStop at the time. Abercrombie stock reactions: More than 25% decline each of 3 quarters - Ryan cites three consecutive earnings misses in 2017. Abercrombie share turnover: More than a third of shares outstanding each time - He notes heavy volume during those earnings disappointments. Abercrombie e-commerce mix: 25% of sales - Ryan highlights e-commerce as a growing channel for the company. Abercrombie downside estimate: About 20% - Worst-case scenario using a low valuation multiple on Hollister alone. Abercrombie reward/risk: 5-to-1 - Ryan summarizes the upside versus downside on the thesis. Clifford portfolio size: 25 to 35 names - Ryan describes portfolio concentration for the firm’s stock portfolios. Core value sleeve weight: 50% to 75% - Core value is the majority of the portfolio. Normal deep value weight: Around 30% - Ryan says 30% is the normal deep-value weighting. Deep value overweight threshold: Above 30% - Any weighting above that is considered an overweight. Portfolio turnover: About 30% - Ryan says historical turnover has been roughly 30% or a bit lower. Investment horizon: 3 to 5 years - Clifford’s typical time frame for evaluating investments. Morningstar IPO coverage year: 2007 - Ryan covered MasterCard ahead of its IPO in a first-ever Morningstar pre-IPO analysis. Wells hire year: 2007 - Ryan joined Wells Capital Management after Morningstar. Clifford founding year: 2010 - Ryan and Wayne launched Clifford Capital Partners in April 2010. Managed money start: August 2010 - Ryan says they began managing money in August 2010. Time since Clifford strategy start: 17.5 years - Ryan references managing the strategy since end of 2003 for the legacy account. Capital Allocators University launch: September 21 - Promotion for the course on the podcast. AlphaSense Alpha Summit dates: October 6-8, 2025 - Ad read for Alpha Summit in Brooklyn.

Pivotal Quotes: "We met with him in person in our office... my telltale sign is, I always want to invest with really good people, with decent people." — Paul Black: Explaining why WCM invested in Clifford Capital based on character and cultural fit. "The danger is not knowing what you don't know." — Ryan Batchelor: Reflecting on an early mistaken stock recommendation and the importance of humility and risk awareness. "The freedom to succeed." — Ryan Batchelor: Describing Clifford’s core cultural principle of letting people work in their area of genius.

Implications: For investors, the episode reinforces that durable alpha comes from process plus temperament: concentration, catalysts, patience, and culture. It also suggests small, aligned teams with clear philosophies may outperform larger, more bureaucratic organizations.