Daniel Barach has recently launched Turnaround Stocks LP, an alternative stock fund he believes will yield superior returns.
By Janice Llanes Fabry
Daniel Barach has recently launched Turnaround Stocks LP, an alternative stock fund he believes will yield superior returns. As its founder and chief investment officer, Barach is the fund’s sole investment professional and self-proclaimed “super stock picker.”
He is delighted to base his fund in Rye, close by his home in Shore Acres. Moreover, Barach was all too eager to detach himself from Wall Street, which he believes generally neglects the correlation between a business’ value and changes in its senior management critical to a stock’s potential.
“No New York City ivory tower for me,” he said. “The secret to my success is that I’m independent minded. I read a lot and I talk to a lot of people.”
Barach lives and breathes stocks. Not the market, but individual stocks. With 22 years of investing experience, he looks for companies that might be out of favor or misunderstood. He keeps his finger on the pulse of the consumer. “I’m always attuned. Even when I walk through the mall with my daughter, I see what’s popular, what people are drawn to,” he noted.
The Harvard MBA also attributes much of his success to having had a knack for assessing people’s talent. From the time he was in summer camp when kids assemble teams and typically choose their friends to play for their side, Barach did not.
“Our team won by the most points,” he recalled. “As I look back on it, it was so much like stock picking.”
According to Barach, his first fund, MLT Capital, roughly tripled the average annual performance of the S&P 500 over its first 10 years. That’s about 21 percent versus 7 percent annually.
Barach dismissed the notion that there’s a formula to picking stocks. He’s a believer in extensive research, hard work, and being a keen observer of human nature. He suggests the stock market has a lot of psychology to it. The fact that he was a psychology major as an undergraduate and was raised by a social worker mother and a CEO father significantly influenced his investment style.
Turnaround Stocks is structured like a hedge fund, but it offers an unleveraged portfolio. Looking for accredited investors, Barach is adamant about neither leveraging nor shorting. “I don’t short because the stock market has been up on average 10 percent a year since 1925, so in the long term, it’s prudent to accept some down time.”
As a rule, he disregards market volatility. “I’m all about the intermediate, the next two to five years of a stock’s performance,” he noted. “People might get lucky once or twice, but I don’t believe anyone’s strength is predicting the short term.”
The investor enjoys sharing his expertise with students at Rye Neck High School, which all three of his children have attended (his youngest is a senior). In the Wall Street Club, he has students debate stocks and discuss Warren Buffet quotes.
If he had to simplify, Barach likens stocks to backgammon, rather than chess, because one has to take calculated risks. Extolling due diligence and thorough risk management, he dismisses investment groups who jump on bandwagons. “I’m not interested in fads, I’m interested in staying power,” he said.