John Durkin

John is former Head of Operations for Equity Research at Baird Kailash and Knight Capital Group. He has been running the day-to-day operations at L2 Asset Management since 2014 and is currently head of Operations. He is also an integral part of the Equity Research team. John received his BA from Stonehill College and has passed his CFA level I. He has an overall experience of 13 years in the industry.

December 10, 2023

The Cheap, Expensive and Unfortunate (Stocks > 10x P/S)

December 7, 2023|

History rhymes. Doesn’t repeat. Valuation doesn’t matter until it is all that matters. Stocks valued at 10x price to sales (P/S) are difficult to justify. The CEO of Sun Microsystems made the merciless math of 10x P/S easy to understand after the bubble imploded. We have reprinted his quote here again for the sake of convenience.

Everything AI: An Update on Machine Learning & Multiple Expansion

November 17, 2023|

In our June piece External Obsolescence: Tech Investors’ Newest Nightmare, we explained how the consensus view on AI stocks might simply be misplaced confidence that had sent multiples soaring. We highlighted that investors had anointed Microsoft, Apple, Google, Nvidia, and Amazon as the “sure-fire” winners of all things AI.

The Anxiety Opportunity from FOMO Sufferers

November 2, 2023|

FOMO includes both the perception of missing out, which triggers anxiety, and compulsive behaviors … it is closely related to the fear of social exclusion or ostracism, which existed long before social media. -Natalie Christine Dattilo, Ph.D, Harvard Medical School, 2023 Recall that the second line of defense of the efficient markets theory is that the irrational investors,

The Refinancing Wall Looms Large: When Algebra & Optimism Collide

September 21, 2023|

In our August piece, The Solvency Debate Continues, KCR updated our 2021 missive Junk Stocks Funded by Junk Bonds. We observed that 2023 had seen speculators return with a ferocious appetite for low-quality stocks. Our focus in that piece, and again today, will be on a group of companies that failed the Federal Reserve’s test for financial fragility as defined by interest coverage ratios (“ICRs”).

Equal Weight S&P 500 Indexes: A Panacea for Concentration Risk?

September 7, 2023|

KCR has written a blizzard of material on the increasingly dire investment implications of market capitalization weighted index funds due to the outsized performance of large stocks that now sit at brutally high multiples. This is hardly a new topic for us. In 2014, as “smart beta” strategies became wildly popular, we penned Indexing Dilemmas, which laid out the following facts:

The Solvency Debate Continues: A Quick Tour of the Financially Fragile

August 17, 2023|

In August of 2021, we published Junk Stocks Funded by Junk Bonds, which noted that high-yield spreads had hit record lows. Our view was that record low-spreads on record-low nominal yields were a recipe for ruin. Using the Fed’s definition of financial fragility, we highlighted a group of equities that scored poorly on the Fed’s durability test and ranked poorly in our models.

Warren Buffett: Bond Investing, Private Markets & Complacency

August 3, 2023|

"The private credit market has grown to the size where there is no edge other than the fake attraction of not having to mark their assets accurately and showing artificially low volatility. The space is competing for the same deals as the public market. So, the original concept where it was smaller specialty deals and the lenders had to pay up and give special terms is simply gone.

AI, Oil and Gas: Misadventures in Capital Allocation

July 6, 2023|

Our recent pieces, How to Value Tech Companies and External Obsolescence: Tech Investors’ Newest Nightmare?, discussed how AI algorithms, big data, and machine learning could be undermining the moats of tech stocks that now sport multiples last seen during the mania. We noted that our empirically