Yaron Naymark: Reflecting On Six Years At 1 Main Capital

Episode Summary

Executive Summary: Yaron Neymark of One Main Capital reflects on six years of running a concentrated, long-biased public equities fund, emphasizing patience, conviction, and learning from mistakes. He explains how his process evolved from timid position sizing and high cash to larger, more focused bets on high-quality businesses trading at low valuations, with Dental Corp serving as a detailed example of his framework.

Main Topics: Starting and scaling an emerging hedge fund: Yaron discusses founding One Main Capital in 2018, building a track record from a small base, and the practical realities of launching without a traditional pedigree or institutional backing. Concentration, position sizing, and portfolio evolution: He explains how his portfolio shifted from smaller positions and heavy cash balances to more concentrated, higher-conviction allocations as his confidence and process improved. Learning to distinguish temporary problems from structural issues: A major theme is how he evaluates whether market fears are transient or permanent, and how reframing a business can unlock better investment decisions. Mistakes, downside protection, and valuation discipline: Yaron details the sources of his losses—overly optimistic assumptions, weak alignment, or changing business dynamics—and argues that capital preservation comes from durable businesses or deep value with real liquidation support. Portfolio management process and idea generation: He describes a daily routine centered on owned positions, watchlist names, management calls, filings, customer/supplier checks, and filtering out bad ideas quickly to focus on true opportunities. Dental Corp case study: Yaron walks through why he believes Dental Corp is mispriced: temporary margin pressure, debt structure issues, low liquidity, and a path to double-digit free-cash-flow growth as margins recover and acquisitions continue. Long-term goals and Hall of Fame aspirations: He frames the next six years as a push to improve idea velocity, add team support, stay disciplined, and keep compounding for LPs over decades.

Key Arguments: Emerging managers often have to start before they feel ready; for many, there is no perfect time, only a personal decision based on finances, conviction, and life obligations. A concentrated portfolio works better as conviction rises; he now sizes best ideas at 20%+ versus 8%-10% early on because he believes the highest-quality opportunities are rare. Good performance comes from buying strong businesses at low multiples and letting earnings/free cash flow growth do the work, rather than relying on leverage or multiple expansion alone. His best investments are easier to monitor because the core question becomes whether earnings per share and free cash flow per share are rising, not just whether the market mood changes. Big mistakes usually came from overestimating growth, sacrificing on management quality/alignment, or misreading business dynamics—not simply from valuation. Downside protection comes either from asset/liquidation value or from durable, growing businesses bought at a discount to the market multiple; otherwise, the investor is effectively trading. The biggest gains often come from businesses the market misunderstands as structurally impaired when the real issue is temporary or simply poorly framed. Patience improves with experience: older, more seasoned portfolio managers can wait for the right setup and let strong holdings compound rather than constantly force new ideas. Dental Corp fits his framework because temporary inflation, leverage, and IPO-related capital allocation issues depressed the stock even though the underlying business remained resilient. He views the business as capable of growing free cash flow per share at 15%-20%+ while the market may eventually re-rate it toward a much higher multiple.

Data Points: Years running One Main Capital: Nearly 6 years - Founded in early 2018; discussed as approaching six years at the end of January. Starting fund size: Less than $2 million - He said the fund began with a little over $1 million, mostly personal capital. Current AUM: Over $30 million - The business grew from a tiny base to more than $30 million in assets. Early biggest position size: High single digits to about 10% - Initial portfolio sizing was intentionally timid. Current biggest position size: 20%+ - He now allows significantly larger concentration in his best ideas. Early cash balance: About 40% - He used to run a very high cash balance to preserve flexibility and buy dips. Preferred cash balance today: Below 10%-15% - He now dislikes excess cash and prefers deploying into strong ideas. Business valuation target: Around 10x earnings - His ideal entry point is quality businesses at roughly 10 times earnings. Dental Corp leverage: About 4x - He cited this as high for his portfolio but acceptable given the stability of dental practices. Dental practice acquisition multiple pre-2021: About 6x EBITDA - Historical acquisition level before pandemic-era froth. Dental practice acquisition multiple in 2021-2022: About 11x EBITDA - He said prices temporarily spiked to silly levels during 2021-2022. Dental practice acquisition multiple now: About 7x EBITDA - Current market rates have normalized back down. Dental Corp annual free cash flow: $140-$150 million - He described current cash generation as strong and supportive of future acquisitions. Estimated liquidation value of Dental Corp: $9.50/share - He said the stock traded around $6 while liquidation value could be materially higher. Current stock price mentioned: Around $6 - Used to illustrate implied discount to liquidation value. Trading liquidity: $1-$2 million/day - He emphasized low float and limited daily volume in the stock. End-market growth assumption: 3%-4% same-store sales growth - He expects steady underlying growth in dental clinics. Potential FCF/share growth: 15%-20%+ - His base case for Dental Corp over time. Portfolio concentration: Top 3 holdings > half the fund - He said IWG, Dental Corp, and Limbach comprise well over half of assets.

Pivotal Quotes: "There’s a right time for the haves, and then there’s a right time, there’s a no right time for the have-nots." — Yaron Neymark: On when to start an emerging manager fund and the reality of launching without pedigree or scale. "When you really care about protecting your capital, I think it makes sense to start in a lower risk way." — Yaron Neymark: On why he began with smaller positions and high cash balances before gaining experience. "I want to ride alpha and beta together." — Yaron Neymark: On his preference for long-biased quality investing instead of leveraging up or hedging extensively.

Implications: The episode is a blueprint for disciplined emerging managers: start small, learn quickly, stay patient, and concentrate capital only when conviction is earned. It also shows how misunderstood, high-quality businesses can create outsized returns when temporary issues obscure durable economics.