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Community Spotlight: Voss Capital
Finding value in special situations.
Good morning, investors!
Today, we’re exploring another financial newsletter within the Substack community: Voss Capital.
Voss Capital is a hedge fund in search of “value-oriented special situations.” The firm manages a couple of funds, the Voss Value Fund (VVF) and the Voss Value-Oriented Special Situations (VVOSS) fund, which are overseen by Chief Investment Officer Travis Cocke. More importantly, at least for our purposes, the firm also shares its unique perspective on individual stocks, markets, history, psychology, etc. via its eponymous newsletter.
Most people don’t consider economics to be a fascinating subject. If you fall in that camp, I urge you to make an exception for the story of Japan’s bubble economy from the mid-1980s to the early 1990s — it’s a classic tale of greed, large-scale collusion, and blissful delusion, sponsored by the Japanese government. To give you an idea of the bubble’s scale, in 1970, the Japanese stock market comprised about 3% of global equity values; by 1988, that figure had ballooned to almost 29%; today, it’s around 6%.
And if that little tidbit doesn’t sell you, here’s an excerpt from Voss’ newsletter, emboldened for emphasis:
Euphoric speculation during periods like this are often demonstrated in the IPO market and Japan was no different. First day returns for Japanese IPOs averaged 32% from 1981 – 1991 and in 1988 the average first week return was 74%. In February 1987, the government launched the IPO of Nippon Telephone and Telecom (NTT) with 10 million people applying to get shares (of a 200,000 share issue) before the valuation was even announced. NTT’s share price shot to 200x earnings and the market cap was $376 billion, larger than the stock market value of Germany and Hong Kong combined.
Here’s another fascinating excerpt just for good measure:
The Japanese tendency to defer to authority and exhibit herding were exploited by banks who pushed certain themes on them that they blindly followed. They hyped untried technologies like cold nuclear fusion and miracle cancer cures. When a Kobe prostitute died of AIDS, a condom maker Sagami Rubber Industries quickly quadrupled. An investment bank advised clients: “A herd instinct is a sound survival instinct in an environment of excess liquidity.”
If you’re pressed for time, just scroll down to the section, “The Roaring 80s (Absurdities at the Top),” and admire a jaw-dropping list of absurd yet factual statements.
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