Kenneth Orr - CIO, KORR Acquisitions and KORR Value L.P

Activist investors often grab big headlines as they publicly put pressure on both boardrooms and executives of well-known companies. Famous activists like Bill Ackman of Pershing Square Capital, Dan Loeb of Third Point, Carl Icahn of Icahn Enterprises, and Jeff Smith of Starboard have all gained notoriety and personal fortunes by extracting concessions from CEOs like buybacks, board seats, and sometimes even sales of entire businesses. However, one little known active investor may be out-performing all his famous peers. His name is Kenneth Orr. Living in Old Westbury, New York, Kenneth is the CIO of KORR Acquisitions and KORR Value L.P. Kenneth attributes much of KORR’s success to being constructive with management rather than attacking management or fighting for board seats.

In addition to his educational background, having earned his Bachelor of Science degree from Tufts University in 1988, case studies from Harvard Business School, as well as completing Columbia Business School’s Value Investing, Kenneth Orr credits much of his success to finding opportunities with raw determination, desire to learn, and a desire to discover. When asked why his stocks go higher without bloody proxy battles, Kenny explains that he is not targeting troubled businesses that require the heavy lifting of a turnaround.

All of KORR’s investments follow Kenny’s belief that the markets are both efficient and inefficient at different times. Kenny looks for stocks that are down for a reason, either incorrect or temporary, and eventually, the shares will return to a fair value. One example is Kenneth’s investment in Medallion Financial (MFIN). Medallion was beaten down because it had a concentration of loans to taxi medallion owners. Kenny looked at the company and saw that even if the medallions were discounted to 10% of their current price, the stock was tremendously undervalued.  Kenneth Orr saw the value in the industrial bank that was still making $60 million per year, which was more than the entire market cap of Medallion Financial. This is good for his investors, who have seen net returns above 50%. Not bad for a little-known market guru.

How did you get started in this business? What inspired you to start this business?

I have always been interested in value investing. Since the crash of 1987, I have looked for opportunities in the stock market. As far as activist investing, I got interested in it after watching the movie “Pretty Woman”, about 29 years ago. While I took a leave, while investing in venture type deals for a period, I always came back to value investing. I just enjoy reading the public filings and learning about different businesses and I appreciate the purity of numbers.

How do you make money?

We make money by charging a percentage of profits we make for our clients, above their preferred rate of return. Unlike other fund managers, we do not charge management fees.

How long did it take for you to become profitable?

We made money on our first partnership and each one since.

When you were starting out, was there ever a time you doubted it would work? If so, how did you handle that?

I think everyone has some doubts when starting something new. However, it is like jumping into a swimming pool. Sometimes it is best to just close your eyes and jump in.

How did you get your first customer?

I called and presented our ideas to a few good friends. They gave us a shot.

What is one marketing strategy (other than referrals) that you’re using that works really well to generate new business?

Exchanging ideas with people without asking for anything in return. People remember that and often will ask me if they can join us as a client.

What is the toughest decision you’ve had to make in the last few months?

To pull an investment idea. It wasn’t that the underlying business changed, but it was outside forces, debt holders, and the largest shareholders that had the ability to affect the outcome of the investment, so I decided it was just too risky.

What do you think it is that makes you successful?

Admitting that I don’t know everything. Knowing what my weaknesses are…and mostly by learning patience.

What has been your most satisfying moment in business?

Advising some people who themselves are considered the brightest on wall street and sending investors profits, even when markets for the same period were down.

What does the future hold for your business? What are you most excited about?

I think there will continue to be compression on management fees (which is why we don’t charge any) and more use of quantitative oriented managers. This itself excites me because it means that machines will dismiss some very good opportunities and therefore create bargains for us and our investors.

What business books have inspired you?

“The Intelligent Investor The Definitive Book on Value Investing” by Benjamin Graham.

What is a recent purchase you have made that’s helped with your business?

A new data provider that compliments my other systems. It seems to be paying off nicely.

What was the best course you have taken for your business?

Columbia Business School’s Value Investing and Making Intelligent Investment Decisions.

You can learn more about Kenneth Orr at kennethorr.net

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