Bear Cave, Sunday’s Idea Brunch
There are risks associated with investing in emerging companies. The technologies seem disruptive, the markets appear to be immense and the management teams seem invincible. However, not all promising companies are worthy of your hard-earned dollars (or shekels).
Edwin Dorsey, editor of the Bear Cave, does a wonderful job of discussing some of the due diligence that investors should conduct on early-stage companies. Everything from obtaining and understanding customer complaints filed with Attorneys General to deciphering SEC comment letters is explained. Learn how to determine when executive resignations are red flags as well as what the quality of auditing firms and auditing partners portends.
Edwin talks about questionable revenue recognition practices as well as how to access the quality of board members. We discuss what investors should look for in terms of a company’s patents, the turnover of retained law firms and the role of influencers as revenue generators.
Edwin Dorsey, Editor, Bear Cave
Edwin Dorsey is the editor of the Bear Cave and Sunday’s Idea Brunch newsletters. His research is impeccable and his writing is crisp. Edwin’s work is invaluable to the investment community.
00:00:59 – I spend a lot of time looking at bad companies
so the barricade newsletter is a newsletter devoted to exposing to corporate misconduct so i look deeply at companies that are misleading investors or harming customers the core of the newsletters two things every sunday i published a recap of that week’s events
so i’ll recap new activists short reports like notable resignation or resignation i find a little suspicious and share links and tweets to interest in content and then twice a month for the paid subscribers to the news newsletter are i’ll do a mini deep dive on a company that i believe has some issue shoes that aren’t being appreciated by the market so these aren’t necessarily short reports but i’m highlighting problems that i think investors might be missed six so it might be a lawsuit it might be a suspiciously high number of resignation it might be
some issues consumers are having with their products stuff like that and then my second newsletter which is more of a side project is called idea brunch and then that every every twice a month i’ll do a written interview with an emerging edge fund manager i find interesting and i’ll ask them a few questions about there research process why they love what they do and maybe ask them to share an idea or too but the barricade is my heart and soul and i spend a lot of time looking at bad companies
00:09:48 – It’s very hard to manage a company the way it is.
I think it depends on the quality and the characteristic of the investors who are joining around. If this is like many angel investors with very small added value, it’s a recipe for a problem down the road.
There are three or four good funds that have enough money to support the company downtown or in a good town. The first thing I would check is the previous investments of the kind partner who’s joining the board or investing because a bad investor could ruin a company regardless of the quality of the company. And if he insists to micromanagement to replace the CEO in a way and tell him all the time what to do. It’s very hard to manage a company the way it is. We need to let the founders that we pick run the business and help them where we can. But once we tried to replace them or if we need to, we can replace them. But this is not why we invest in the company. We invest in the company because of the management. And so we need to let them run the company the way they look at it and they want to.
00:28:23 – I rolled out paid subscriptions and within a month it was like at a hundred grand a year in revenue
i have a kind of quirky history i’ve always been really passionate about stocks from like a really young age second grade that’s was all about the stock mark and very passionate about it freshman year of college is when something changed for me just by coincidence fresh near i got introduced to two of the biggest short sellers in the country one was mark who used to run a fund and now does a lot of active is a mono trying to expose fraud and the second person
i was really lucky to meet was jim k savannah hedge fund called so that was a short only hedge fund that’s was pretty large and i intern there on and off for all four years college they really taught me the ropes how to research companies you know introduce me to everybody a short world so that that was a great internship as a young person but then when i was graduating into the pandemic they were shutting down
so i wasn’t gonna be working for them and i was talking a lot of big hedge funds and i’m just not a suit tie type of guy i didn’t wanna work like crazy hours do a lot of modeling and do what a boss would tell me to do
so i thought i could start my own newsletter and maybe get a good job if people read it and thought i was smart or maybe would take off on its own and that’s exactly what happened the newsletter became pretty popular pretty quickly in september twenty twenty
i launched it in march twenty twenty in september twenty i rolled out paid subscriptions and within a month it was like at a hundred grand a year in revenue and i was just growing like crazy and i’ve basically been doing that for the last two years and it’s kind of a dream job for someone my age along the way i had some cool experiences
00:34:47 – If you’re criticizing companies if you’re putting research and writing out there it can make a difference
i kept writing about them and to make a long story short i called email around the hundred journalists about all the safety issues out the platform and nine months later the wall street journal published a front page story about how care dot com babysitter who had criminal histories have killed eight kids they found through the platform and then not that was the downfall the ceo cfo and general counsel
all resigned the dean that investigated we got fired and the company fell a lot and they were ultimately acquired by ia see at a big discount and that that then they fixed the safety issues ultimately
and for me you know it showed a lot of things first the world’s a little corrupt second a lot of times companies are just lying about what they claim to be doing so you can’t take everything management says it face value and it also showed like you know at its best if you’re criticizing companies if you’re putting research and writing out there it can make a difference it’s not always but this is like you know on the long side it’s a little bit like trading pieces of paper but if you’re writing something and criticizing something you can and you get lucky
you can make a difference that make the world maybe a spike for better place so care dot com didn’t own the company that did the background checks right and were they supposed to outsource that or did they have their own department that was disclose the check so so at the time they they claim to be doing it themselves and then you could pay more to outsource then i and from what i could tell they weren’t doing them the themselves or i don’t know what they were doing they improved
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