My full interview with Martin Braun of JC Clark Adaly Trust originally appeared in my national bestselling book, Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca.
You know that saying, “Don’t judge a book by its cover”? I was reminded of that adage when I met Martin Braun for the first time. As I walked into the colourless JC Clark offices, Martin greeted me with a somber hello, wearing jeans and a pressed shirt and sporting a beard. Martin walked me over to the room where we would hold our interview. Before we started our conversation, he opened a can of Dr Pepper and ripped open the wrapper of a granola bar. I don’t know many adults who drink Dr Pepper these days. Was this his lunch? Martin was cool as a cat, to the point that it almost seemed as though he had checked out of work. But again, don’t judge a book by its cover. Instead, judge Martin by his returns.
The JC Clark Adaly Trust, which Martin runs, has achieved 15.83% compound annual returns since inception in 2000. Clearly, he’s beat the TSX by a wide margin. Martin’s cumulative return since 2000 is 875%. If you had invested $100,000 with him in 2000, he would have made you a millionaire by 2015. In his best month, Martin achieved a 21% return. In his best year, Martin achieved a 57% return. And in 2015, a year that was
marred by market volatility, Martin was already up 17% by June. In other words, don’t underestimate Martin. It’s true that he makes investing look easy. But don’t be fooled — the market is a very complex and treacherous place, and Martin has found a method that works for him.
Early in his career, in 1988, Martin joined Gluskin Sheff + Associates, where he spent 10 years being responsible for the analysis and management of the Canadian and U.S. equity portfolios. But Martin struggled. That may seem surprising in light of his current returns, but it’s because, as Martin explains it, “I started out as a value investor.” It was only when he found himself sitting on the sidelines and not participating in the spectacular gains others generated during the bull market that Martin converted to a GARP (growth at a reasonable price) investor. After his epiphany, Martin decided to leave Gluskin Sheff + Associates and strike out on his own, co-founding the Strategic Advisors Corp.
Over the next seven years, as Strategic Advisors’ president and portfolio manager, he managed the Adaly Opportunity Fund (now rebranded the JC Clark Adaly Fund). In those early days, Martin’s core strategy was purely risk arbitrage. He explains in the interview that during the early 2000s, merger and acquisition spreads in the market were often overlooked, and so one could capture 20% spreads on a consecutive basis. Once the market became more efficient, though, and squeezed those spreads, Martin shifted to what remains his strategy today: growth at a reasonable price. Martin is a high-conviction investor, so his hedge fund is usually limited to under 20 stocks. Those stocks can be described as highgrowth, small- to mid-cap companies that are on the verge of making it
to the big leagues. Martin has a knack for finding and then investing in companies before they make rapid price advancements in the market.
Martin Braun’s 21 Investing Lessons:
1) “I’ve learned that being a value investor is very often a bad idea because a lot of value stocks are value traps; they lure you into the position because they’re ‘cheap.’ But in actual fact they’re cheap for a reason.”
2) “Growth is the key driver in the markets. [But] it’s the combination or synthesis of all three — growth, value, and catalysts — that create, for me, the investment thesis that I’m looking for.”
3) “You have to make some concessions to the fact that the market’s much bigger than you and that you need to figure out the market; the market doesn’t have to figure out you.”
4) “Every time a company announced it was being acquired it would go into that database and we’d just go trolling through the database looking for the best spreads with the least risk.”
5) “It didn’t take me very long to figure out that I didn’t just have to trade on announced deals. I could also trade rumoured deals or theoretical deals.”
6) “A good hedge fund manager is not limited by those little boxes where you need to play within a specific sandbox. You can do whatever the spirit moves you to do.”
7) “In the mid- to late nineties and then after the crash, I couldn’t just sit there and say, ‘This is what I do and I can’t do anything different.’ Something works for a while and then it doesn’t work. Then it works again, and then it doesn’t. We adapt.”
8) “I invest in a handful of businesses, not a whole bunch of them, and get to know them really well. . . . ‘Just put a few eggs in the basket but watch the basket very closely.’ I’m looking for 20 good stocks.”
9) “Once you’ve learned so much about that business don’t put just a couple bucks in — put a lot of bucks in. If one of those stocks goes off the rails then you’ll be one of the first ones to realize that it’s coming off the rails, and push it out the door before everyone else.”
10) “I want to invest in a company that most people don’t appreciate how good it is or how good it’s going to be. Sometimes it’s already achieved something special but people don’t realize how good it truly is.”
11) “It takes a certain skill to be able to execute. It’s one thing to say, ‘I’m going to do this,’ and it’s another to actually do it. The stocks that I didn’t make money on or I lost money on was because I misjudged management.”
12) “Don’t invest on the basis of a tip. Do your own research. Even if someone tells you that you should go buy some shares, don’t just go, ‘Okay!’ and buy some shares.”
13) “Try to get as close to the business as possible. Maybe it’s a consumeroriented
business and as a consumer you can check it out and see if it makes any sense to you as a consumer.”
14) “I think that, generally speaking, the research and the commentary from media is very bad. You generally don’t want to do what they tell you to do.”
15) “Reading the paper thinking you’ll find some good stock ideas is very treacherous. By the time those stocks make it to the mainstream media they’ve probably been largely exploited and there’s not much money left for you.”
16) “You might get lucky the first time or the second time, but you’ll get wiped out by the third time. It’s like a guy who goes to Vegas and gets ‘hot.’ Day One at the table he cleans up. Day Two he breaks even. Day Three he gives it all back to the house, plus some.”
17) “I always think about the risk first. If I can deal with the risk side then I find that the return side tends to take care of itself.”
18) “There’s a lot of cheap optionality embedded in stocks. In other words, you’re not paying for this happening, and you’re not paying for that happening; you’re paying maybe a little teeny bit for a third thing and maybe a little bit more for a fourth thing happening to the stock. If any of those four things were to happen you’d make good money because the market’s not really paying for them.”
19) “If the market was paying for 75 cents and the company makes 90 cents, then, ‘Oh. The market’s happy.’ and the stock goes up.”
20) “I figure my upside is at least three to one of my downside. That’s all you want to do when you put together a portfolio: make sure the ratio of the upside to the downside is in your favour.”
21) “The best money managers are quite whole-brained in their approach. They can somehow synthesize the analytics side with the intuitive side of the brain.”
Robin Speziale is the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.