The Fed's rate hikes fail to address the root causes of inflation in housing, education, and healthcare. These sectors suffer from structural issues like regulation and bureaucracy. Higher rates can even be counterproductive, for instance, by stifling new housing construction, which restricts supply.
A tender offer, where a company buys a large block of its stock in a set price range, signals higher conviction than a typical buyback program. It forces management to put a stake in the ground, indicating they believe the shares are significantly undervalued at a specific price.
Pilecki argues that classic value investing fails by ignoring momentum. He waits for a stock's chart to form a base before buying and lets winners run past initial price targets if momentum is strong. This avoids buying "falling knives" and cutting winners short.
Pilecki's rule of thumb—seeking stocks that can double in three years (26% IRR)—acts as a strict filter. This high hurdle prevents him from tying up capital in ideas with only marginal upside, forcing a focus on truly substantial opportunities.
Despite managing a financials fund, Derek Pilecki is bearish on the average bank. He argues that intensifying competition from online banks and giants like JP Morgan will continuously compress margins and lower returns over the long run, making passive bank investing a poor strategy.
Derek Pilecki initially shorted Robinhood due to its speculative valuation. After it collapsed to near its cash-per-share value, he re-evaluated, saw product improvements, and went long. This flexibility to reverse a thesis based on new price and fundamental data led to a 14x gain.
Beyond "buy and hold," Pilecki highlights two overlooked Buffett insights. First, high portfolio turnover can yield massive returns on a small capital base. Second, Buffett's greatest self-critique was being insufficiently optimistic and not taking enough risk, urging a "permabull" mindset.
After nearly two decades of poor performance, European banks have become a compelling deep value opportunity. Pilecki highlights French banks trading at just 35-60% of tangible book value, viewing new CEO appointments as a key catalyst for a potential re-rating in the long-hated sector.