The trio of Murray Stahl, Peter Doyle, and Steven Bregman met while managing money at the Bankers Trust, and, although somewhat different in academic backgrounds, they quite instantly recognized their common belief in general value-orientation and long-term investing.
In 1994 the three of them co-founded Horizon Asset Management in NYC and today their team manages over $4 billion (closer to $10 billion with the new merged entity Horizon Kinetics).
We just finished writing a detailed Profile on this hedge fund, the core of which is indeed fundamental value – they thrive on the myopia of momentum investors that are dumping shares of companies with sound business fundamentals that are undergoing temporary turbulence or their strategic initiatives not fitting in with the expectation of the investment community. They tend to latch on to such positions for about five years – they call this ‘extension of the time horizon’, and hence the name of the hedge fund.
Akin to other value-oriented hedge funds, Horizon is also focused on fundamental research. Yet, their dedication to research goes a lot further than most hedge funds: they are fiercely focused and quite a powerhouse in research. The research team has composed more than a thousand research reports and, at present, this team comprises ten analysts authoring six different periodical reports for institutional investors.
Under the umbrella of the merged Horizon Kinetics, their teams diligently examine many aspects of history, economics, sociology, and philosophy to understand the markets. Next, the analysis of quantitative data through mathematical models is integrated with the qualitative dimension developed through the study done from the point of view of social sciences.
Such a synthesis ensures that the conceptual, long term picture is always remembered during the implementation at the tactical level. This creates a holistic background to comprehend price movements, and while common in macro-funds, is quite the exception in a stock-picking strategy.
Despite the attention paid to the theoretical forces that guide the markets, the management seems to be grounded. As Mr. Stahl said in a 2011 interview with Barron’s, “When I went to college, I was interested in economics because as a very naïve person I thought I would learn to make money from the masters. I was absolutely aghast when I learned most of the masters were broke.”
(Benjamin Franklin being one of the exceptions – a financially successful master. In case you are curious, the broke master Mr. Stahl uses as an example in the interview is Karl Marx.)
So what are these Masters of Research buying? Looking at their holdings, two stocks stood out immediately: Leucadia National Corporation (LUK) and Berkshire Hathaway (BRK-B), the mini and mega value masters of financial success.
This blog is part of a series where we are highlighting our new profile write-ups of hedge funds along with their current holdings or other notable news. In case you have missed our recent posts in this series: