We have officially moved over to Substack! This is something I have had in the works for a while and I was just trying to figure out the best way to implement it. I think the ability to share notes on the Substack will be a good way for you guys to see my thoughts without being as overwhelmed with messages as X/twitter. Substack also has great community/audience building experience which I am excited for.
reached out to me to do a written interview and I figured it would be a great way for you guys to learn a little bit more about me and how the Fund operates (as well as a first post on the new platform). Jon is great and I highly suggest you check out . As always everything is free and don’t be afraid to reach out.Hi Jacob, thanks so much for taking the time out to do this interview.
Can you please tell readers about your background, and how you got involved in investing?
Hey Jon, Thanks for having me!
Surprisingly, I don’t have any background in the financial industry, and I am mainly self-taught. I began teaching myself to invest around freshman year of high school/8th grade of middle school and mainly learned through reading investing books, accounting books, financial instrument books, and financial history books.
The first investing book I read was “You can be a stock market genius” by Greenblatt and value investing immediately stuck with me and led me down the value investing rabbit hole. I was extremely lucky to have started out with such a great book that stuck with me immediately and still has a large impact on how I invest today. After watching “The Big Short” around 2015, I read the book and found a lot of interest in Michael Burry (especially once I found out about his connection to Joel Greenblatt). I basically went on a deep dive internet search around 2016 reading all of his old blog posts on the Silicon Valley investor forum and his MSN money articles which gave me a ton of insight into deep value opportunities in the modern investing environment. After that I just became addicted to reading anything I could get my hands on regarding value investing and financial history.
I graduated with degrees in mechanical engineering and quantitative economics, so another large chunk of my learning curve was through trial and error of investing my own capital combined with basic college economics and behavioral economics (any economics classes beyond intermediate econ classes felt like a waste to me as an application to investing but I squeezed out some value here and there).
My success in quantitative economics led to me getting a full ride my senior year of college which along with any cash/returns I had laying around was my base capital to start the hedge fund. I used my investing returns on the scholarship money and savings from my mechanical engineering job to start Rogue Funds in 2023 and we just completed an awesome first year at the end of April with returns of 66% net of fees (please view our marketing material on the website for more information on fee structure).
Why did you decide to set-up Rogue Funds and whom do you manage funds on behalf of?
I wanted to start a hedge fund almost as soon as I started investing in high school and I figured I could use a mechanical engineering degree to help get myself off the ground. My initial plan was to start the Fund extremely small and just build a track record managing other people’s money and as I built a long track record, I figured I could build an investor base slowly but surely. This is exactly how it is playing out. I built a long runway to do this and figured it would take an extremely long time to build my way to profitability as I proved a solid track record (the annual costs for a very small hedge fund range from $35k - $60k, not including bloomberg or other research tools).
I really didn’t have any one single backer but numerous investors that have believed in my process through my write-ups and letters. Right now I basically post through twitter/x and my blog but I am looking into options to create video form for my write-ups (~2m - 10m videos) and integrate a substack into my website. Marketing takes up quite a bit of time, but I expected it and that’s why I have given myself a massive runway to grow so that I can slowly build up my social presence to attract investors.
My very first investor was a friend's parents and so I started out with exactly 1 investor in May of last year and I have grown to over $1m now. Of course, in the finance world $1m in AUM is nothing but I am extremely excited about the growth I have had and the future of the Fund. Most investors in the Fund have been fantastic to work with and I try to throw out all of the risks (high concentration, my age, lack of industry experience, etc.) in front of my prospect investors immediately to ensure that they have the correct investor profile that matches the Fund. I love working with my investors and talking with them is definitely an aspect I enjoy. Overall, I am extremely happy about the future of the Fund and its current direction.
How would you describe your investing style and what type of business or situations do you like to invest in?
I tend to run a concentrated value portfolio of very mispriced growth opportunities, deep value/high debt equity situations, profitability inflections, and distressed debt opportunities. I have felt that having a diversified portfolio of these different value situations has really led to so many options and it really allows me to get extremely picky in what ideas I choose. Occasionally I will take long term option positions on what I feel are strong catalyst ideas that provide a ton of upside in a short time period. The concentrated positions, usually 8-12, create a volatile portfolio, which my investors are (thankfully) great at stomaching. Their ability to withstand volatility allows me to try to achieve a strong absolute return for the Fund. This is what allowed me to achieve the great returns we had last year, and I am super excited about the future.
I have taken an interest in very long-term macroeconomic trends which seem much more predictable. I usually try to position the portfolio to protect it from very large long-term (5-10 year) macroeconomic risks that I see while still remaining 100% long 90% of the time. Short positions are rare and only used as a hedge in the portfolio, but I believe in the long run trends and habits of global central banks to continue to inflate the economy at “controlled” rates which will continue to put upward pressure on asset prices. This long-term trend makes it very hard to bet against higher stock prices over time.
I rarely short outside of these small macroeconomic hedges as I believe the best/most consistent shorting strategies do not scale well above market caps above $100m and it isn’t a viable option over the long run for a hedge fund to scale. As a sidenote, I believe that individual retail investors can make outsized returns with minimal volatility running a long-short strategy on microcaps, but I believe the Fund will outgrow this dynamic quickly, so I never took it on as a strategy.
Once you find a company that interests you, what does your research process look like?
After I find a company that interests me, I tend to read basically anything I can on the company. First, I read through 10-K’s, most recent investors presentations, financials for the last 3-5 years, and my favorite thing is to read through the earnings transcripts. I then look for any CEO interviews and if it is a commoditized/highly competitive business whose thesis relies on them outcompeting then I try to get an in depth understanding of competitors. My main goal is to try to develop a story of this company/management that explains the stock price movement and financials. Everything tends to tie together very well into what I call a company’s “story” and it can give you an idea of where the company is going in the future.
After I’ve done all of that I’ll go ahead and read anything I can find online that has been written by other investors. I try not to “corrupt” a thesis by reading a biased report from someone else before I have made my own initial idea. I try to go into any investment with as neutral of a mindset as possible and build the thesis based on what I’ve read. Sometimes I struggle to do that when I read someone else’s thesis first. I do source ideas from people (I’ll write down a list of tickers that I see throughout the day) and look into them, but I try to read their thesis after I have already developed my own thesis.
If I don’t think a company can at least 3x - 5x my initial investment in a few years, then I throw the company out and move onto something else.
Your biggest position is Aware Inc - what were your thoughts on their recent update, and when do you think they will start showing a profit?
Their recent update was actually great in my opinion. Their revenue is always lumpy quarter to quarter which means that when it gets recognized it is irrelevant to the thesis (unless of course it’s over a longer term). They are beginning to cut down on costs, which is what I explained in my initial write-up and it was extremely likely to occur as the business is basically profitable but is in growth mode (they showed positive FCF in Q3 of last year).
The CEO is an award-winning biometrics executive who has a great incentive structure in place and you have board members who have huge insider ownership. The CEO has basically already done this exact type of turnaround before and has locked a huge percentage of their revenue into this strong recurring business model. This allows them to push their marketing expenses to acquiring new customers and adding their lumpy revenue model on top of their strong recurring revenue model.
The company doesn’t have a history of diluting and trades at an insane enterprise value of ~$10m and a very strong chance of producing $4m+ in FCF this year while growing top line at 15% with a ton of operating leverage. This is one of the most no-brainer opportunities out there. Usually, I don’t like to invest in companies this small ($38m market cap) to prove scalability of the Fund but this one has an extremely low downside of 30% with an incredible upside of 4x - 5x its current value.
Can you talk about two other companies in your portfolio you're bullish on? What was the thesis for investing?
I believe Achieve Life Sciences is an outstanding opportunity. The company owns easily the best smoking cessation drug on the market and will probably take over 30% of the current market. At its peak Chantix (which was the previous best smoking cessation drug from Pfizer) made nearly $1b in US sales. The company was hit with a surprise long term trial and this surprise FDA trial most likely came from the FDA’s previous failure. The previous failure was that in 2016 the FDA had to add a warning label to Chantix after it had already been approved.
Achieve’s drug is nearly 2 times more effective and has reduced side effects as compared to Chantix. The company has added investment bankers to its board (which pushes the odds of them being acquired) and we now have a complete idea of dilution, and the company has enough cash to get to the 2nd half of 2025. The NDA approval is expected sometime in the 1st half of 2025, and I expect a buyout no later than shortly after NDA which could be at 3-5x the current market cap. Dalrymple Finance has an even more in-depth write-up on this than I do that I suggest interested readers check out.
HAYPP Group is a rapidly growing nicotine pouch online retailer that has a market share of 55%+ in the United States and 85%+ in most other markets that it operates in. It is growing at an insane growth rate and is hitting an inflection point in its profitability where you will see its EBITDA margin expand from 2% to nearly 8% (or 4x) in the next year as the growth segments of its portfolio hit high single digit margins. Due to their asset light model their EBITDA to FCF conversion is very high so we should see them producing decent cash. Currently they trade around 14x EBITDA of their core market (which is basically just the Nordics) which I believe is an appropriate valuation for just their core markets, so the way I look at the trade is that you’re getting the US and the rest of Europe for almost nothing. I think the upside is 3x-5x+ their current price. Devin LaSarre has a great write-up on this as well as the rest of the nicotine industry that you should check out.
Where do you see Rogue Funds in ten years time - do you enjoy running solo, or will you look to build a team?
It’s so hard to see where the Fund will be in ten years because I am in such an early stage. I currently love running Rogue Funds solo but as I scale, I am sure the workload will become more intense and there are some great minds out there that I would love to utilize for my investors. The Fund is in a scaling AUM mode so I am not opposed to taking on new team members, but it will most likely be years from now. For now, my number one focus is to scale the Funds AUM to profitability by showing consistent outperformance year after year. Currently, I am having an absolute blast, and I would just love to see how far I can scale this while producing great results for my investors.
Where can readers go to learn more about yourself and Rogue Funds?
You can check out my Funds website where I have all of my marketing material for accredited investors and a blog, www.rogue-funds.com. I have a more in depth analysis of each investment I discussed in this interview at my blog. You can also follow me on twitter/X where I get a little more candid about various investment opportunities @jaro_rogue. If you would like to reach out to me/the Fund, please fill out the contact page on the Funds website.
Disclaimer: The author of this idea and his Fund have a position in securities discussed at the time of posting and may trade in and out of this position without informing the reader.
Opinions expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment adviser capacity. This is not an investment research report. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC and CSA filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication and are subject to change without notice. The author and funds the author advises may buy or sell shares without any further notice.
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