Barbara Ann Bernard, Wincrest Capital, interviewed

Barbara grew up in the Bahamas, where she enjoyed stints as an intern for Sir John Templeton. Later, she worked in investment banking at Goldman Sachs, followed by alternative asset management at Deutsche Bank, and as an investment analyst at Holowesko Partners, where she acquired a robust grasp of private market valuation and the hedge fund industry.

The Wincrest Contraria Fund investing strategy

Her Wincrest Contraria Fund is a global long/short equity fund of niche, esoteric investment ideas based on her bottom-up “Go-See” research. The Wincrest Contrarian Fund currently has USD 50m AUM.

In its latest investor letter, Barbara quoted Gandhi: “It’s better to walk alone than with the crowd in the wrong direction”.

Her benchmark is 56% allocation to US, but she is short the US.

The following is a whirlwind tour through her portfolio. It is mostly smaller companies, mostly not based in the US. At the end, she will also talk about ideas how newcomers might be able to raise capital faster and more efficiently.

Barbara believes that if you want to find value, you have to do things differently.

The US is a great place to live in, but a lot of the drivers of US value creation are unsustainable. E.g., Barbara was born in 1980, when bonds paid 15% p.a., and the S&P had a p/e of 8 and paid a dividend yield of 5%. The market is now up 2,700%. The 15% bond yield has turned into a 2% bond yield. The magnitude of the decrease of cost of capital is not sustainable.

“When I grew up, share buybacks were illegal. Now we have more than ever before. Companies can manipulate their earnings by carrying out buybacks.”

Barbara Ann Bernard

“We have a corporate debt crisis in the US. Corporate debt is 48% of GDP. 50% of that debt is BBB, one notch above junk.”

“As a result, we have to ask where value comes from? What sectors are vulnerable to decline?”

Barbara Ann Bernard on certain positions in her portfolio

Barbara has been shorting Conn’s, a retailer of furniture but they make a lot of money providing finance for consumers. Former CFO is the former CFO of Enron. Ticker symbol is CONN. She shorts companies that are in a vulnerable sector of the market.

Or she finds some themes, such as the media. Barbara has made a lot of money shorting the media. “Eyeballs are going away from TV. Will we still have TV news in two years? These companies have a lot of debt, and they are in an industry that is shrinking, and they are dependent on the economy.”

Barbara Ann Bernard is short certain Spanish media companies (names inaudible and we didn’t get a reply to a request for clarification).

“What is so interesting about shorts today is you speak to management and you see they are in denial about change happening at their company. Disruption is a great theme for companies that are levered, their business goes away and they are levered.”

“In 2000, 12% of money was managed passively. In 2010, 24%. Today, 50%. When you are buying, it’s great. On the way out it’s a scramble. It’s indiscriminate money. Is 100% of the money going into passive?”

“For the market cap of Apple I can buy all of the companies in Indonesia’s three markets: Indonesia, Philippines and Malaysia. One company has a better future than three countries combined? These are the discrepancies we are seeing.”

“The type of work we do is forensic.”

“This year has been painful, US market up 22%. Our return is still respectable. It has taken me years to build this portfolio and the portfolio is now in great shape.”

“My strategy is a private market approach to public markets. Extraordinary company led by extraordinary individuals. In 80% of our companies the CEO is the founder and major shareholder. Impeccable balance sheets. High ROE. We are willing to wait.”

“I can get twice the growth for half the multiple outside of the US.”

“In India, shoe ownership is 1.6 pair per person. Will show ownership double in America? No. Can it in India? Yes.”

Indian shoe producer – no name was mentioned at the conference, but the Mumbai Stock Exchange keeps a list available of listed shoe manufacturers.

“Every second house in the US has not one but two fridges. In Bangladesh every fifth house has one fridge. We own the BestBuy of Bangladesh.” But no name was mentioned.

Interviewer: “This year’s standout winners?”

“We have had a few. One that was a unique one was a company in Cape Town. 2 times EBITDA and 20% of the balance sheet was in cash. Lowest cost producer of platinum grade metals. Hydromining – water pressure to harvest scraps from the tailings of other mines. Platinum, Rhodium, Palladium. Little labour, just a centrifuge. Largest shareholder of the company was the host mine!! We made 250% on that one.

Just sold it, for three reasons – it was within 10% of our price target, and the host mine has been sold to China, and in South Africa I experienced a few things that we don’t get to read about in our newspapers. South Africa is now a short. But Rwanda is amazing.”

No company name was mentioned.

“Barbara Ann Bernard, what is your best idea for next year?”

Barbara Ann Bernard mentioned a specific company listed in London. Swen keep this particular idea for a potential publication on my own website, You can register for the free Weekly Dispatches or for the 10+ annual in-depth research reports to be informed about the upcoming ideas.

Interviewer: “How hard is it to raise money and to keep money?”

“It is REALLY hard. I have seen how it has changed. Consolidation has occurred in our industry, too. 90% of the assets are owned by 10% of the managers. Since 2009 the requirements for a manager have gone through the roof. My cybersecurity is more than my rent. Minimum viable AUM level has gone so high that it is challenging. Per Goldman Sachs, if you have less than 250m AUM your chance of survival is less than 1 in 2. We have seen only one 1bn fund launch this year.”

“90/10 and there is no alpha – what a surprise!”

Barbara Ann Bernard elaborated her thoughts on a potential platform that would enable smaller fund managers to get access to deeper pools of capital.

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Tilman is a very enthusiastic, long-term investor. Over the last years he has taught himself important investing concepts autodidactically. He tries to combine a positive climate and environmental impact with his investments.
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