Herb Wagner advises young professionals to focus on learning and joining a high-growth industry over immediate compensation. Being in a nascent, expanding space like early distressed debt provides accelerated responsibility, learning opportunities, and ultimately greater long-term rewards.
Instead of trying to have a view on everything, Herb Wagner's team embraces not knowing. They actively avoid complex situations, like Chinese property developers, where risks are opaque and dependent on government action. This discipline of knowing what you don't know is central to their strategy.
Experience taught Herb Wagner that great leaders consistently surprise on the upside. He now weights leadership quality far more heavily, assessing CEOs not by interviews or charisma, but by their verifiable track record and through trusted backchannel references who have worked with them directly.
While acknowledging the benefit of having mentors, Herb Wagner has found that the process of being a mentor is even more educational. Teaching and guiding others forces a deeper understanding of one's own principles and provides fresh perspectives from the next generation, offering greater personal and professional growth.
Wagner found a derivative in an Asian market trading at 10-20% of its intrinsic value. This extreme mispricing is a direct result of huge, persistent, and structural shorting demand from quant funds and pod shops, creating a rare asymmetric opportunity for those willing to take the other side.
For years, Japan was a value trap: cheap companies with poor governance hoarded cash. The game changed when Prime Minister Shinzo Abe introduced stewardship and governance codes, creating a top-down, government-backed catalyst for companies to finally improve capital allocation and unlock shareholder value.
Wagner's strategy shifted from buying statistically cheap companies to requiring a clear catalyst for value realization. He found that without a catalyst, even correctly underwritten cheap stocks would continue to decline due to factors like technological disruption, making the old "cigar butt" approach obsolete.
Investors fixate on Japan's high sovereign debt. However, Wagner points out that the central bank owns a large portion. More importantly, the corporate and household sectors are net cash positive, making the overall economy far less levered than the single headline number suggests.
Following events like Hurricane Ian, the reinsurance market has repriced risk dramatically. Wagner explains that a risk historically priced to pay out 15-20% (implying a ~1-in-6 year event) is now priced to pay out over 50% (implying a 1-in-2 year event), creating a significant opportunity from the dislocation.