Over the past decade, hedge fund investor Adam Wyden has made his investors 11 times richer by uncovering hidden gems. His biggest concern? That his Democratic senator father will tax his winnings to death.
FROM The sunny house he rents in Miami’s posh enclave of Bay Harbor Island, Adam Wyden is furious at the news crossing his Bloomberg terminal. It’s April 22 and markets are sinking on a report that President Biden is aiming to raise capital gains tax rates to 39.6% for top earners, doubling the rate for wealthy investors.
“It’s anti-American!” Wyden’s bellows. âI am very disappointed with American governance at the moment. Do you think any of these guys really know what he’s doing?
For an answer, Wyden might ask his father, Senator Ron Wyden, a Democrat from Oregon and chairman of the powerful Senate Finance Committee. Elder Wyden is a wealthy tax advocate who called former President Trump’s corporate tax cuts a “partisan tax scam.” Her son, on the other hand, is not registered with any of the political parties, but is instead a card-carrying member of the Benjamin Graham party, with a stubborn dedication to finding undervalued stocks. And his record to date has been nothing short of astounding.
Over the past decade, young Wyden, 37, has turned his bar mitzvah money and personal savings into a $ 350 million hedge fund in which his stake is now worth $ 100 million. Through its Miami-based ADW Capital Partners, Wyden has proven his mettle as a high-value investor buying companies full of understated assets. It hunts away from the retained S&P 500, preferring micro and small cap stocks, mostly overlooked by analysts and large hedge funds. Since its inception in January 2011, Wyden’s ADW has earned nearly 28% annualized after fees, roughly double the S&P 500, making investors about 11 times their money in a decade.
Adam Wyden moved his operations from New York to sunny, tax-advantaged Florida beaches last July. He is not the only money man in the business. Almost 2.7 million people – including a handful of billionaire investors – have moved to the Sunshine State in the past decade.
Wyden isn’t a shrinking purple when it comes to making big bets. His fund is the largest shareholder of RCI Hospitality of Houston, operator of over 40 gentlemen’s clubs and parent company of Rick’s Cabaret. Wyden built its 10% position from the end of April 2020, when the coronavirus led investors to believe that in a world of masks and social distancing, a business built on drunken stag parties and lapses. dances was a toast. But Wyden estimated that as the pandemic subsided, there would be pent-up demand for RCI’s clubs, many of which would be located in Florida and Texas, and that they would quickly reopen. Another plus: Getting a strip club license is extremely difficult, which means the company has a deep divide around its business.
RCI shares have increased fivefold since Wyden invested. Other recent winners include Par Technology, which sells cash register software to restaurants, waste management company GFL Environmental, and construction conglomerate API Group, all of which helped its fund achieve a 119% net gain in 2020 and an additional 36% gain so far. from 2021 to April.
Wyden bought a significant position in Fiat Chrysler in 2014 after learning that investors were becoming the property of its subsidiary Ferrari at virtually no cost. The supercar maker split in 2016 and is now trading at a market value of $ 50 billion, several times the total market cap of Fiat when Wyden first invested. He calls these investments âRussian dollâ shares because inside they contain valuable hidden assets.
âThis is the golden age of active investing,â says Wyden. “Companies worth $ 1 billion to $ 10 billion are under-researched and underestimated.”
Raised in Washington, DC, Wyden caught the investment bug early on from his grandmother Nancy, who ran an investment club with members of a local synagogue in Portland, Oregon, where he spent time. summers. As a teenager, to earn extra money for investments, Wyden started a car retailing business. He also bought the parts for the Tamiya remote control cars and sold them as finished goods on eBay with a four-fold markup. In 2002, Wyden was admitted to Penn’s Wharton School and, as a junior, he interned at the DE Shaw hedge fund. But rather than return to seek full-time employment in the quantitative firm after graduation, he became an analyst at a small merchant bank, where he was introduced to value investing. He was particularly impressed with the methods of Joel Greenblatt, a legendary value investor and best-selling author who studied fallout and hidden assets.
In 2008, as the stock market crashed, Wyden enrolled in Warren Buffett’s alma mater, Columbia Business School, and began investing his savings aggressively, looking for bargains. He focused on cash-rich, undervalued microcap firms like low-level brokerage firm Rodman and Renshaw, which was trading between 10 and 30 cents, but profited by arranging dubious Chinese reverse mergers for a high fee. The stock went from 10 cents to over $ 6 in 90 days, and Wyden sold off. He then found an even better opportunity at IDT Corporation, a prepaid phone card and comic book seller, which was trading at $ 2 per share but carried $ 10 per share in cash on its books and an additional $ 10 in tax loss carryforwards. . Wyden invested more than half of his growing savings in the business, which reached $ 30.
At the end of his studies in May 2010, Wyden’s “stack” was a few million dollars, and in January 2011 he decided to start ADW, raising over a million dollars in his first month, mainly with friends and family. (Senator Wyden is not an investor.)
ADW generated a 91% net return in its first year and continued to score uninterrupted gains for seven years. Even after the fees, the fund’s value increased six-fold. But big bets on illiquid small businesses come with big risks – and in 2018, Wyden failed.
EVI Industries, a commercial laundry equipment distributor, which had climbed to $ 47 from $ 6 in 2016 when Wyden invested, has lost almost half of its value. Wyden went on a rampage, accusing the company of misalignment. When the other stocks in his portfolio started to underperform, he became an activist.
He pilloried the management of PAR Technology, which was a family business. âObviously the market has to award a ‘reduction of the Sammon family’ given the family’s total disregard for minority shareholders,â he growled in a letter to the founders. “[O]The question is whether Sammon has spent the past 30 years writing his doctorate. thesis on “how to destroy shareholder value”. Wyden won: PAR’s leadership was replaced in 2018, and it became one of Wyden’s top performing stocks.
Wyden was even tougher on Select Interior Concepts of Atlanta, which manufactures flooring and tiles. âIn Yiddish we call these people gonifs,he says. “It’s easier to steal value than it is to create value.”
In 2018, ADW lost 33% and a further 6% in 2019 as the market climbed 30%. Then came the pandemic, which initially criticized his wallet, but ended up with the reboot he needed.
Holding 50% cash before the calamity, Wyden estimated that the ten-year bull market would pick up, especially for value stocks and real economy-linked companies that had missed the rally fueled by tech stocks.
âThe market needed a reset,â he says. âNow we have it, and everyone is miserable in their house, and everyone wants to go to strip clubs, go to Vegas, and travel and eat in restaurants. . . . I am really optimistic. ”
“If I never raise another dollar again, I’m going to be a billionaire,” he predicts.
As for tax increases on the rich, Wyden is a realist. âI don’t think I have any influence on my father,â he says. As a cover, it moved its entire New York-based operation to Florida tax-free on income last July, spending $ 4.1 million on a dismantling on the exclusive island of La Gorce in Biscayne Bay. He has already flipped the property for a profit of $ 1.4 million and is now under contract to purchase a larger brand new mansion.
âWe are happy Floridians,â he says with a smile.