Kevin Byun's Q3 2009 Letter to Denali Investors
Up-and-coming value investors Kevin Byun continued his record of outperformance in the third quarter. In a letter to investors, Byun writes, among other things:
"As we consider our opportunity set, one of the most important factors remains investor psychology/behavior. The investment fishbowl that we inhabit contains limited examples of behavior to emulate but many more of what to avoid. Current market stress has revealed more than investors realize about their true temperament. With many burned quite badly in 2008, they are hoping against hope that a healing process will result in full recovery of assets, despite lingering emotional damage from broken promises and misplaced trust. These once trusting investors are looking for answers, solutions, and peace of mind. Not without irony, they are seeking ever more certainty in an increasingly uncertain world (rather than trying to understand and manage the uncertainty that is inherent in it)."
"So while the market gyrations and machinations have rendered many market participants unable to think and act clearly, we must maintain a stable internal compass, and make full use of our practical sensibilities. It is critical, regardless of our recent performance or legacy positions, that we maintain a steady temperament, consistent research process, and clear thinking about the current opportunity set before us."
"Given the erratic nature of the market, I have become increasingly optimistic about our opportunity set. The uncertainty and dislocation are a blessing to value investors, not because we enjoy uncertainty or dislocation, but because of the opportunities they create. Our strategy has remained consistent throughout and I am selectively employing our flexible and tactical approach congruent with our investment framework."