GreenWood Investors, LLC’s Q2 2019 Investor Letter

GreenWood Investors, LLC is a New York-based collaborative investment company that invests in global transformations and business builders. This value-oriented firm has a collaborative network that is composed of business owners, entrepreneurs, and investors. It recently released its quarterly investor letter, a copy of which can be downloaded below.

Steven Wood, CFA founded Greenwood Investors, LLC in 2010. As an experienced Research Analyst, Wood is an expert when it comes to deep value, distressed, and special investment strategies. This Tulane University alumnus worked at Asian Capital, Kellogg Capital Group, and Carr Securities before founding GreenWood Investors, LLC.

In GreenWood Investors, LLC’s recent investor letter, Wood reported that the fund underperformed in the past quarter, as well as in the past 6, 8, and 12 months.

“An Insider’s View on Inefficiency

During the quarter, we took a seat on the board of our largest position, installed a new CEO and accelerated investments in growth and restructuring immediately. As we have made very encouraging progress on a transformational plan behind the scenes, we have watched the market continue to sell or short the stock. In the month of May alone, insider purchases represented nearly half the trading volume while increased short interest represented over a quarter of the volume. We have witnessed market irrationality from a whole new perspective. Excluding the value of two strategic assets our company owns, the market is giving a negative valuation to a company that produces over €100 million in EBITDA. New management has flipped the EBITDA result from a contraction in the first quarter to modest growth in the second quarter. We have confidence that cash flow will continue to accelerate in the coming quarters and years. And we hope the company can clear a few legal hurdles in the near future so that it will soon join us on the bid side of this deeply irrational market.

Eugene Fama and Ken French developed the Efficient Market Hypothesis, which suggested that stocks always trade at fair value and reflect perfect information. While the two economists pointed to investment funds underperforming indices as proof their hypothesis was a rule, their beliefs about the cause of the effect was deeply naive and has largely been discredited by well known super-investors and behavioral economists. Perhaps Fama and French should have studied European stocks, or served on the board of one and watched the market do a very poor job of reflecting the information at their fingertips. Yet, their hypothesis, for which they won the Nobel Prize in Economics, has become a popular illusion that continues to be taught at business schools today.

If the efficient market hypothesis were correct, then a stock should be priced at the present value of its future cash flows. That concept, if correct in practice, would have been fantastic had it had rippled through our investment returns over the past year.

Unfortunately it did not.”

You can download a copy of Greenwood Investors, LLC’s Q2 2019 Investor Letter here:

Greenwood Investors, LLC’s Q2 2019 Investor Letter

You can also see the list of our 2019 Q2 investor letters and download them on this page.