June 9, 2025<\/p>\n\n\n\n
Welcome to the inaugural issue of *The Dinosaur*, a value-investing newsletter for those who believe that fundamentals still matter. The name isn\u2019t self-deprecating\u2014it\u2019s earned. I\u2019ve been in this business for decades, identifying growth companies trading at deep value discounts.<\/p>\n\n\n\n
During a lecture to young investors a few years ago, one attendee confidently told me I needed to \u201cget with the times\u201d and called me, yes, a dinosaur. He and his peers were infatuated with meme stocks and moonshot narratives. Three years later, their picks were down 80%. <\/p>\n\n\n\n
But truthfully, it’s been a tough stretch for value investors. The market zeitgeist has favored AI buzz, speculative ETFs, and stocks with social media momentum. Anything under a $500 million market cap is ignored by the mainstream. Yet if scientists can revive the woolly mammoth, surely value stocks can stage a comeback too.<\/p>\n\n\n\n
Let\u2019s begin with a brief economic history lesson.<\/p>\n\n\n\n
Governments and central banks are charged with managing monetary policy to maintain economic stability. Some might argue that the modern approach leans toward printing as much money as possible without triggering hyperinflation\u2014an approach that, not so long ago, was tested to its limits.<\/p>\n\n\n\n
Back in 1980, interest rates hit 20% amid an oil crisis and a hawkish Fed. When I was finishing college in 1984, municipal bonds and money market funds yielded over 10%. Stocks were cheap because safe, high-yielding alternatives existed\u2014why take equity risk?<\/p>\n\n\n\n
That era ended with Reagan\u2019s \u201cTurn the Bull Loose\u201d proclamation, which launched a multi-decade decline in interest rates and redefined investing. Mediocre brokers and real estate speculators were turned into heroes by a tide of falling rates. Few college finance programs teach that all streams of income\u2014stocks, bonds, real estate\u2014rise in value as rates fall.<\/p>\n\n\n\n
The path wasn\u2019t smooth. We had crashes in 2002 and 2008, corrections in 2011 and 2018, and several global shocks. But each time, global leaders coordinated to backstop markets through fiscal and monetary stimulus. Crisis was met with capital.<\/p>\n\n\n\n
Let\u2019s talk about the less-discussed drivers behind small-cap underperformance.<\/p>\n\n\n\n
The 2008 Madoff scandal didn\u2019t cause the crisis, but its aftermath triggered a loss of faith in boutique managers and opaque investment strategies. Investors began favoring ETFs and cryptocurrencies\u2014not necessarily for performance, but for perceived safety and transparency.<\/p>\n\n\n\n
We predicted this shift back in a 2010 letter, where we discussed the Rollerball Effect\u2014a reference to the dystopian film where 24 corporations control the world and fear any figure (or stock) outside their control. Sound familiar?<\/p>\n\n\n\n
As the FAANG names took over, we bet on the smaller players with novel products poised for acquisition. And while we\u2019ve had our share of wins, we underestimated how long the mega-cap momentum trade would persist.<\/p>\n\n\n\n
Fast forward to 2015: regulators allowed Citadel to build the world\u2019s largest market-making operation. Goldman had previously absorbed Spear, Leeds & Kellogg, another step in centralizing power. Now, a few hedge funds command an outsized influence, posting returns reminiscent of Madoff\u2019s\u2014except this time, it\u2019s legal.<\/p>\n\n\n\n
This consolidation likely explains the historic dislocation in valuations between large- and small-cap stocks. Small-caps have been shaken out, suppressed, and overlooked\u2014but they haven\u2019t disappeared.<\/p>\n\n\n\n
So what does all this mean for you?<\/p>\n\n\n\n
It means that if you believe the world will keep turning, there is a compelling opportunity in small-caps. The valuation gap between large- and small-cap equities is at a historical extreme. Whether you believe the system is manipulated or simply inefficient, it doesn\u2019t matter. What matters is this: these stocks are cheap.<\/p>\n\n\n\n
Yes, I\u2019ve been sounding this horn for a while. But if recent political shifts trigger a \u201cTrump Bump\u201d akin to 2016\u20132018, small-cap equities may finally have their moment in the sun. Ideally, it lasts three years\u2014not three months.<\/p>\n\n\n\n
PLEASE NOTE: <\/p>\n\n\n\n
DigitalOcean (DOCN)<\/p>\n\n\n\n
A developer-focused cloud platform serving small- to mid-sized businesses. Solid recurring revenue, attractive margins, and reasonable valuation.<\/p>\n\n\n\n
Lyft (LYFT)<\/p>\n\n\n\n
Long overshadowed by Uber, Lyft trades at a fraction of its former valuation. Potential turnaround play with upside if the company executes.<\/p>\n\n\n\n
Universal Electronics (UEIC)<\/p>\n\n\n\n
This overlooked electronics firm holds a portfolio of valuable patents and IP in a changing consumer tech landscape.<\/p>\n\n\n\n
Ilika plc (IKA.L)<\/p>\n\n\n\n
A UK-based innovator in solid-state battery technology\u2014still speculative, but interesting in the right allocation size.<\/p>\n\n\n\n
*The Dinosaur* doesn\u2019t roar, it rumbles quietly, patiently, confidently. When the tide turns\u2014as it always does\u2014those who held to discipline, valuation, and patience will be well rewarded.<\/p>\n\n\n\n
Until next time,<\/p>\n\n\n\n
\u2014The Editor<\/p>\n","protected":false},"excerpt":{"rendered":"
Old-Fashioned Stock-Picking for Modern Markets June 9, 2025 From the Editor: In Praise of Persistence Welcome to the inaugural issue of *The Dinosaur*, a value-investing newsletter for those who believe…<\/p>\n","protected":false},"author":1,"featured_media":28,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-39","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uncategorized"},"featured_image_src":"https:\/\/leviticuspartners.com\/wp-content\/uploads\/2025\/07\/Screenshot-2025-06-20-184029-600x400.png","featured_image_src_square":"https:\/\/leviticuspartners.com\/wp-content\/uploads\/2025\/07\/Screenshot-2025-06-20-184029-600x600.png","author_info":{"display_name":"levit","author_link":"https:\/\/leviticuspartners.com\/?author=1"},"_links":{"self":[{"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/posts\/39","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39"}],"version-history":[{"count":0,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/posts\/39\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=\/wp\/v2\/media\/28"}],"wp:attachment":[{"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/leviticuspartners.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}