The Rabid Capitalist

Professor Glenn A. Okun

I, Professor Glenn A. Okun, am the Rabid Capitalist.  My purpose as a blogger and as a professor is to help my people to get rich.  Wealth can result from your investment of your time and talent as well as your capital.  My mission is to help you maximize your returns from both of these investments.

Why should you listen to me?

As it relates to providing insight and guidance, I hope that the following will suffice:

Glenn A. Okun is a Clinical Professor of Management and Entrepreneurship and an Adjunct Professor of Finance at New York University Stern School of Business where he teaches courses in entrepreneurship, private equity, venture capital, corporate finance and investment management.  Professor Okun advises corporations on financial and investment matters.  He was President of Mitchum, Jones & Templeton, a merchant bank and broker dealer headquartered in San Francisco, California, from 1998 to 2001.  He previously served as a Director of Allen & Company Incorporated in New York.  Professor Okun invested in early and later stage financings of private companies in various industries.  He also ran a small cap emerging growth stock hedge fund and a special situations portfolio.  Professor Okun has advised corporate clients on mergers, acquisitions and restructurings and has underwritten public offerings and private placements of securities.  Professor Okun began his investment career at the IBM Retirement Fund where he invested in mezzanine private placements, real estate, public emerging growth equities and oil and gas assets.  He holds JD and MBA degrees from the joint degree program at Harvard University and a BA degree from Wesleyan University.

The Rabid Capitalist looks for opportunity everywhere

The Rabid Capitalist seeks mispriced opportunities.  I also remain vigilant to avoid traps.  You should expect analysis and commentary of potentially attractive industries, markets, technologies and innovations.  Our individual opportunities exist in these contexts.  It is critical to understand the attractiveness of the landscape within which we seek our rewards in order to accurately assess the extent of our reward.

Special situations investment strategy

As a private investor for over thirty years, my focus has been on private and publicly traded special situations.  Special situations investments are event driven opportunities.  The events are typically unrelated to the fundamental value of the company.  These events disrupt market liquidity, creating the conditions for investments with unusual rates of return.  These opportunities take advantage of the predictable distortions created by the excesses of the capital markets. 

The Rabid Capitalist will bring these opportunities to you.  You can expect a healthy supply due to the reliable nature of our capital markets.

A capital market cycle of excess

Investing mania driven by euphoria creates special situations because most worm-seeking early birds become canaries in the coal mine.  Irrationally optimistic investment mania destroys capital when the euphoric become disillusioned.

Market excesses, both optimistic and pessimistic, distort stock prices.  Euphoria for an industry, firm, technology or market opportunity creates manic level irrational valuations.  An unexpected discovery, event, technological innovation or problem captures the popular imagination, leading to grand consensus expectations for business and financial opportunity.  The feeding frenzy that ensues creates irrationally optimistic valuations in the public and private markets.   

Once reality, a negative event of significance, occurs the euphoric become disillusioned.  The investments that were overpriced by mania are abandoned by the disillusioned.  Abandonment often causes firms to be valued at high discounts to their fair market value.

This pattern of euphoria and disillusionment creates my happy hunting grounds for anomalous excess return investments.  It should be your hunting ground as well.

The hunt for great investment opportunities

The Rabid Capitalist uses a variety of quantitative and qualitative methods to hunt for attractive opportunities.  They include screening the stock market using specific quantifiable investment strategies such as:

• Distressed firms (companies operating in bankruptcy);
• Turnaround candidates (firms that can be successfully rehabilitated without resorting to the bankruptcy system);
• Fallen angels (the previously popular IPO, spinoff or SPAC merger); and
• Orphans (the disappointments that have been abandoned and left for dead).

Special situations due diligence and analysis: the work

The complexity of these firms will require lengthy time-consuming due diligence and analysis.  It is critical to recognize that this work may not always lead to an immediate decision to buy or discard the candidate.  In many instances, ongoing monitoring is necessary in order to determine if the firm makes progress sufficient to warrant a purchase decision. 

Operationalizing the special situations investment strategy

The Rabid Capitalist identifies and monitors these opportunities using a variety of proprietary methods.  My universe of investment candidates, consisting of stocks in some phase of due diligence, analysis and monitoring, typically contains 250 to 500 firms. 

This universe must be monitored regularly.  The Rabid Capitalist has to be on the lookout for candidates that qualify for investment as a result of current developments.  These developments or trigger conditions can be financial performance targets, operational improvements, valuation levels or events. 

This is the work behind the financial investing component of The Rabid Capitalist newsletter.  I expect to find opportunities at least three to four times per year.  I expect most investments to be attractive for three to five years, at a minimum. 

BDCs: an example of the capital market cycle of excess

My recommendation of select business development companies resulted from an application of the special situations strategy. 

The financial sector, which includes BDCs, has been moving through this cycle of euphoria and disillusionment.  The euphoria stage was the result of an extended period of artificially low interest rates.  Aggressive lending to borrowers inflated firm and asset valuations.  The failures of a number of banks, including SVB, Signature and Republic initiated the disillusionment phase.  Underwriting standards tightened, reducing capital availability.  The devaluation will result from the corporate loan and commercial mortgage maturity wall occurring between 2023 and 2028, forcing write downs, write offs and liquidations.  Future interest rates, economic growth and creditor performance will determine the extent of the losses.

BDCs have been subjected to the negative market sentiment directed at the financial sector, unfairly punishing their valuations.  Investor animus is misdirected since BDCs are positioned to take advantage of the impending private credit investment opportunity.  Clean balance sheets with limited exposure to real estate ensure that well managed BDCs will emerge as victors in the upcoming credit drought.  Superior net investment spreads combined with a high volume of attractive borrowers will lead to double digit yields and total annual returns throughout the maturity wall.

The hunt for great uses of your time and talent

My activities outside of the classroom provide me with the information to have a perspective on the business landscape.  It is easy and convenient to provide this guidance during office hours.  It is difficult to do so otherwise.

In my twenty years at NYU Stern School of Business, I have taught more than ten thousand students.  There are not enough hours in the day for office hours to meet the needs of alumni.  My hope is that the Rabid Capitalist can help in this respect.

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