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We welcome Scott Fearon for the 14th episode of Read The Bull. Host Stefan Prelog talks to Scott about his "Dead Companies Walking: How a Hedge Fund Manager Finds Opportunity in Unexpected Places," published by Palgrave Macmillan in 2015.
Scott's a long-short hedge-fund manager, running a $180 million with a 30-year track record of investing in small and midsize companies.
When he started to write "Dead Companies Walking," he looked back at the 200 companies he'd shorted and gone bankrupt and found they all made the same strategic mistakes. Scott distilled those mistakes into six themes for why a company fails and he shares stories of his exploits - visiting companies and meeting with management - as he determines which are companies worth investing in or which are likely to fail and go to zero.
Some of the stories in the book are well known - Blockbuster's failure to recognize the shift to digital streaming or JC Penney's CEO Ron Johnson ignoring its customers by shifting to a no-sale strategy and bringing in more fashionable merchandise. Others are not as well known - Quokka Sports - a company that wanted to bring immersive viewing to Yacht Racing or First Team Sports, a company that went all in on inline skating. Scott also discusses some of his recent company visits and reveals a couple that he believes will ultimately go to zero. He also talks about why short selling is good for markets and notes that highlights three categories - fads, frauds and failures.
Scott's not immune to failure himself, and he walks Stefan through mistakes his made, including what led to the demise of his first restaurant. Scott's not your typical hedge fund manager. He speaks truth to power and pulls the curtain back on some of the things that are wrong with the industry.
"Dead Companies Walking" is a timeless classic and there are lessons here for everyone - whether you own a business, work for one or are investing in them.
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