Steve Tananbaum, the founder and manager of Goldentree Asset Management, recently sat down with Gary Kaminsky and Skybridge Capital founder and co-manager Anthony Scaramucci for an episode of Wall Street Week (video embedded at the end of the article). Tananbaum, who founded Goldentree in 2000, briefly described his upbringing and early career in finance, including revealing the first stock he ever lost money in, which was a company called Robotics Vision. Tananbaum also discussed his time at MacKay Shields, and before that, at Kidder, Peabody & Co. While at MacKay Shields, Tananbaum was quickly elevated to leading the firm’s high yield group in 1991, with great success.
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Tananbaum was next asked to describe the unique partnership culture at Goldentree, which currently manages $24 billion in assets and had a public equity portfolio worth $447 million on June 30. As is apparent from the relatively small equity portfolio, the firm is primarily focused on the credit markets. We’ll look at some of Goldentree’s top equity picks later in the article, which it uses a bottom up value approach to select.
“So we’re a firm where…it’s unusual that we have 20 non-partners, and the majority of our partners are actually promoted from within, so it’s very much a meritocracy; it’s very much collegial. There are no special deals. In some places you’re paid off your group’s revenue, every partner is paid or is compensated from the top, on how the firm does,” Tananbaum said.
When asked why he decided to employ that model, Tananbaum said that it creates a culture where everyone is helping each other so that the firm and everyone in it succeeds. That certainly appears to have many benefits over a model that chiefly rewards individual performance.
Discussing the extreme volatility in the markets over the past two months, Tananbaum expressed that the markets don’t know how to digest all of the macro-economic factors in play and are not properly prioritizing issues such as the Fed’s interest rate hike (or lack thereof as it turned out), China’s slowing economy and the devaluation of the yuan, and the continuing instability in Greece. Tananbaum later added that the recent broad market selloff was most likely a bull market correction after the lengthy bull market run without one.
One of the many sectors caught up in that selloff was the traditional media sector, which Tananbaum threw his support behind, saying that at today’s prices the sector still offers strong value.
“Look at the media sector, it sold off. ESPN had some disappointing growth, and the whole sector basically sold off, and to us, we look at the trends and some of the secular changes and we don’t feel the selloff is justified and see some great opportunities. So broadly speaking, whether it’s a Time Warner, or even something like Tribune’s stock. […] We think it (Tribune) is a great value today relative to what it was a month or six weeks ago,” Tananbaum said.
Tribune Media Co (NYSE:TRCO) ranked as Goldentree’s seventh-most valuable long position as of June 30, with the firm holding a little over 510,000 shares worth over $27.24 million. Tananbaum was even more heavily invested in FairPoint Communications Inc (NASDAQ:FRP), a provider of cable television services, in addition to numerous other communications services such as broadband internet, telephone, and business communication services. Goldentree had the greatest equity exposure to the stock of any fund in our database at a little over 10%, holding over 2.50 million shares valued at $45.59 million as of June 30. The stock ranked as the firm’s second-most valuable long position.
American Capital Ltd. (NASDAQ:ACAS) and Ally Financial Inc (NYSE:ALLY) were the top and third-ranked equity investments of the firm respectively. While hedge funds were collectively selling out of Ally Financial during the first quarter, Tananbaum bolstered his position by 130%. Ally Financial gained nearly 7% in the second quarter before being hit by the market selloff in the third quarter and giving back those gains. Tananbaum did sell off 17% of his position during the second quarter on its strength, leaving with him just under 2.03 million shares at the end of it. In his top pick, Tananbaum held 4.10 million shares of American Capital worth $55.49 million, after having increased the position by 55% during the second quarter.
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