Are You An Inside or Outside Zebra?

A favorite value-investing book of mine goes by the title “A Zebra in Lion Country”. It was written by Ralph Wagner who formerly managed the Colombia Acorn Fund where he put together a solid track record of 16.5% CAGR over a 20-year period.

The book gets its title from this metaphor on investing that Wagner shares early on. It goes:

Zebras have the same problems as institutional portfolio managers like myself.

First, both have quite specific, often difficult-to-obtain goals. For portfolio managers, above-average performance; for zebras, fresh grass.

Second, both dislike risk. Portfolio managers can get fired; zebras can get eaten by lions.

Third, both move in herds. They look alike, think alike and stick close together.

If you are a zebra and live in a herd, the key decision you have to make is where to stand in relation to the rest of the herd. When you think that conditions are safe, the outside of the herd is the best, for there the grass is fresh, while those in the middle see only grass that is half-eaten or trampled down. The aggressive zebras, on the outside of the herd, eat much better.

On the other hand-or hoof- there comes a time when lions approach. The outside zebras end up as lion lunch. The skinny zebras in the middle of the pack may eat less well but they are alive.

A portfolio manager for an institution such as a bank trust department, insurance company or mutual fund cannot afford to be an Outside Zebra. For him, the optimal strategy is simple: stay in the center of the herd at all times. As long as he continues to buy the popular stocks, he cannot be faulted. On the other hand, he cannot afford to try for large gains on unfamiliar stocks that would leave him open for criticism if the idea failed.

Needless to say, this Inside Zebra philosophy doesn’t appeal to us as long term investors.

There are three edges available to investors.

    1. Informational
    2. Analytical
    3. Behavioral

The majority of people fail to beat the market because they consume the same information that everyone else consumes. They think about that information in the same way everyone else thinks about it. And they behave just like all the other punters. Put another way, they’re inside zebras; slowly starving on trampled scraps within the warm confines of the herd.

There’s nothing wrong with that I suppose. But to me, that’s just no way to live…

I mean, if you’re devoting time and energy to the game of investing then I’d think you’d want differentiated returns — or I should clarify —  you’d want positively differential returns. You know, get paid for your hard work.

Since you’re reading this then I assume that describes you. You prefer being an outside zebra. Going to where the grass is lush and plenty.

But, of course, this raises the risk that we get ripped apart by a lion. That’s why we need to go back to our three edges and work diligently to stack them in our favor. This way we can fill our bellies while not raising the risk that we end up being someone’s meal.

Enter our resident value investor, Brandon.

Brandon’s been informally working with us for a few years and he’s been formally with us since he left his job at a large fund a few months ago.

We’re lucky to have him.


The dude is a crazy outside zebra.

He’s always finding the weirdest misvalued stocks.

One month it’s a polish tech firm servicing Fortune 500 companies growing its top line in the double digits annually yet trading for basement level multiples of free cash flow. The next month he’s telling me about a tiny US microcap ammunition maker that has tons of interesting IP, is run by a serial entrepreneur with a looong history of outsized success, and is working on inking major deals with the DoD… Oh, and it’s trading for pennies on the dollar because it’s so small it flies under the radar.

Brandon’s the kind of people I like to surround myself with. He gets way out there, and I mean way out there, far from the herd. It’s like he can’t even help himself. It’s just in his blood to take in different information, look at things from a variant perception, and just all-around approach markets in a way that most others don’t.

And you know what the best part is?

He’s good at it. I mean, really good at it.

Does that mean he hits every single pitch out of the park? Absolutely, not. He’s no trading Jesus. But he is insanely good at uncovering wildly asymmetric investments that you won’t read about anywhere else.

If that sounds like the kind of thing you’d be interested in reading about on a regular basis then go ahead and sign up for his monthly letter, Value Ventures.

Jump in and kick the tires a bit and see if that style of investing is for you. See if you feel comfortable traveling way off the beaten investing path.

He does a great job of not only sharing his research but also his process each month. Which is a grossly neglected topic that’s left out of most newsletters. That actually reminds me of a great quote from Joel Greenblatt who said once that: “Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”

I love that.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.