Friday, July 8, 2011

Introduction to Cove Street Capital

(Disclaimer: The opinions included in the following posting belong to me and do not necessarily reflect those of Cove Street Capital “CSC” or any of its employees. The purpose of the post is to introduce the firm I will be working for as of July 1st, 2011. The information in this letter should not be considered as a recommendation to buy or sell any particular security or to encourage anyone to invest with CSC. Past performance of CSC is not a guarantee or indicator of future results.)

Dear Readers,

First, I wanted to thank everyone for the amazing response to my request for help in finding a full-time position in the investment management industry. I received emails from people from New York, Boston, and Chicago as well as Germany and Singapore (to name a few). I really appreciate the support and encouragement I received. What I have found is despite the fact that we are located all around the world, there is a cohesive group within the value investing community that is available to assist its members. I owe a special debt of gratitude to a gentleman in New York who enjoyed my notes from this year’s Markel Breakfast so much that he decided to recommend me to a friend of his, Jeff Bronchick.

Jeff Bronchick is the former CIO of a well-known asset manager in Los Angeles. After 22 years at the firm, Jeff left this firm to start up Cove Street Capital. For those of you interested in the name, Cove Street was the street that was home to Berkshire Hathaway’s original offices. However, unlike Berkshire, Cove Street has decided to locate its offices in El Segundo, CA, less than 2 miles from the Pacific Ocean. Thanks to a tip from the above-mentioned gentleman and my newly defined persuasion skills, I convinced Jeff to hire me to be one of two analysts that will help manage $400mm of assets for both institutions and high net worth individuals.

Jeff is a bottom-up value investor in the mold of Warren Buffett who runs a concentrated portfolio of stocks that he believes are trading below intrinsic value. He focuses on establishing a margin of safety in order to win by avoiding big losers. While Jeff pays attention to the macro environment and has written extensively about his top-down view of the world, he primarily relies on company fundamentals to make buy and sell decisions. Thanks to the wonderful Internet age we live in, Jeff’s strategy letters going back to the year 2000 are available at

Accordingly, I was able to perform a good deal of due diligence on Jeff and subsequently became comfortable that we approached investing from the same point of view. For example, what impressed me the most was how clear it was that Jeff views the money management process as a fiduciary responsibility. As such, he refuses to become an asset gatherer or chaser of short-term performance. Instead, he is willing to invest with a multi-year outlook and is comfortable assuming the role of a contrarian, both of which are important to me.

I also have a soft spot for people who like to write and who are articulate, as I have made myself a very minor star in the value investing world through my writings. Similarly, Jeff wrote for in the 1990s and for Grant’s Interest Rate Observer. It also doesn’t hurt that he is a Penn guy as well. Our relationship continues to build but my initial impression is that we have a lot in common, especially our passion for investing and love of security analysis. I have told everyone who has asked me about the position that this is a dream job for me and I am excited to start contributing.

I don’t think this is the place to talk much more about Cove Street’s strategies. That information is available on the firm’s website at However, I do want to say that we will be looking for value and market inefficiencies in both small and large companies and will not shun international opportunities that arise. If you are interested in learning more about me, Jeff or any of the other team members, please visit the “About Us” tab on the website. Additionally, if you are an investor capable of making the Cove Street minimum investment and would like to inquire about investing with the firm, please contact Daniele Beasley at

Finally, we are still contemplating precisely what will become of The Inoculated Investor blog but I assure you that I am not done writing. I have far too much to say. Most likely, my thoughts on stocks and the markets in general will appear on Cove Street’s site while this site will continue to be dedicated to unique content (event notes, interviews, etc.) that I hope people will find compelling.

Thanks again for your support and for making running the blog an extremely positive experience. I hope that you will continue to follow my career on this site as well as on that of Cove Street.


Ben Claremon

The Inoculated Investor

Cove Street Capital