Content area
Full Text
The founder of Mudrick Capital Management invests where others fear to tread: in unloved companies or sectors that Wall Street has long since abandoned.
Mudrick Capital's Jason MudrickBy Irwin Speizer
Jason Mudrick has a soft spot for corporate dogs, the mangier the better. He spends his days hunting for companies beaten down by business hardship, abandoned by Wall Street and left scrounging for financial sustenance. The rest of the world may love smartphones and digital media. Mudrick puts his money on pagers and yellow pages directories.
"We gravitate toward businesses that might be mispriced because the Street leaves them for dead," Mudrick says.
There is a distinct and profitable method to his seeming madness. As president and chief investment officer of Mudrick Capital Management, Mudrick is in the business of buying distressed securities, and he favors cheap leveraged loans of companies in steep decline. Through careful screening, he ferrets out firms -- often midsize companies that tend to merit less attention -- that either have more staying power than conventional wisdom suggests or have enough life left to pay down debt for several years even as their businesses shrivel. He has minimal competition. "A quarter of the companies we look at tell us we are the only potential debt investors who come to visit them," Mudrick notes.
The specialized form of distressed-debt investing that Mudrick practices has proven to be a winning formula. His one fund, the Mudrick Distressed Opportunity Fund, may still be relatively small, managing about $320 million in assets, but it has posted plus-size performance numbers, with annualized net returns of 12.4 percent from inception in July 2009 through December 2012, and with a Sharpe ratio of 2.6. Mudrick had a particularly strong 2012, with the fund up 22 percent for the year. By comparison, the Absolute Return index of distressed funds gained 11.78 percent.
Mudrick's performance has won him some accolades. Institutional Investor named Mudrick one of its "Rising Stars of Hedge Funds" in 2010, and Fortune magazine named him one of the top traders of 2011. Although his fund is only a few years old, Mudrick arrived with a solid performance record, having managed a fund for the much larger distressed hedge fund firm Contrarian Capital Management, and he...