TIP770: Mastering the Markets w/ Andrew Brenton

You're listening to TIP. On today's episode, I'm joined by Andrew Britton to discuss the inefficiencies he's seeing in today's market. Andrew's the CEO and cofounder of Turtle Creek Asset Management. Since its inception in 1998, Turtle Creek has achieved an average annual return of 18.8% versus just 8.7% for the S and P five hundred. Dollars 10,000 invested in their fund at inception would have grown to over $1,000,000 today. And had that money been invested in the market, it would have been worth around $95,000 During this conversation, we'll cover Cliff Asens's recent paper on the efficiency of markets, whether today's market resembles the 1999 tech bubble, and Andrew also gives an overview of his investment thesis on floor and decor in Kinsale Capital. So with that, I hope you enjoy today's discussion with Andrew Britton. Since 2014 and through more than 180,000,000 downloads, we've studied the financial markets and read the books that influence self made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Today, I'm pleased to be joined again by Andrew Brenton from Turtle Creek Asset Management. Andrew, welcome back to the show. Andrew Bartol (3one zero three): Great to be back, Clay. Matthew Piepen (3one zero three): So you've been a guest a few times on the show now, and I'm thrilled to have you back. We're going to be chatting about today's market, as well as a couple of your holdings a bit later. Let's talk by talking a bit about the efficiency of markets. So, as you know, value investors will shun the efficient market hypothesis and pride themselves on trying to spot the market's biggest inefficiencies. How about we start by discussing why having efficient markets are important and something that we should even care about? Whit Gibbs (3nine thirty seven): Sure. I mean, if you believe the purpose of the capital markets, and I'm now talking private markets, the debt markets, the public stock market, if you believe the purpose is to allocate capital to the deserving groups at the right price or cost, then I think it's absolutely critical. It's a foundation of, well, it's the definition of capitalism, and it's the foundation of the success of the Western world since the Middle Ages, or even predating that. So I think that foundational idea of how do you get information, that messy, messy process of figuring out what a company is worth and therefore what you should pay for shares when that company needs to issue equity is absolutely a critical component of the modern world, and I think very important. Clay Finck (3five thirty seven): So Cliff Asness wrote this great paper titled the less efficient market hypothesis, and he actually believes that markets are becoming less efficient over time. And he points to three different factors here. So first, he mentioned the driver that everyone's familiar with, which is index funds and passive flows. The second is very low …