We have a treat to share with you all today.

We're chatting with Adam Seessel, an investor who wrote the fabulous book Where the Money Is: Value Investing in the Digital Age, which Bill Ackman called “one of the best books I have read on investing in years.”

That’s high praise from a legend, and Adam brought tons of insight into our conversation below.

All this, and more, in just 6 minutes to read.

— Matthew

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Trivia

Value Investing in a Digital Age With Adam Seessel

An ideal workday for Adam Seessel often starts with documents and music. The investment manager settles in at his desk and dives into company reports, trade journals, and industry research. But what happens next reveals his investigative journalist roots: he picks up the phone and starts working his network — executives, customers, vendors, and trusted industry contacts. One conversation leads to another, each discussion unlocking new sources and insights.

"You read the documents so you can ask good questions and be informed," says Seessel, explaining how his former career as an award-winning journalist shaped his investment approach. "Because a firm’s executives respect you for learning about their business, which is their passion, they repay you by giving you good answers and new sources – new people to talk to, new companies to look at. Suddenly, you have this flywheel going."

That pursuit has served Seessel well. His boutique, Gravity Capital Management — which requires a $5 million minimum investment — takes long-term positions in companies where he's built deep conviction through this investigative process. Among his top holdings are Amazon and Alphabet, which have both crushed the market over virtualy any time frame. And in an age of algorithmic trading and constant market noise, he argues that his old-school investment research approach is more valuable than ever.

This interview with Seessel, author of Where the Money Is: Value Investing in the Digital Age, has been edited lightly for brevity and clarity. 

Why did you write this book? 

I’d been thinking about this for a decade. The market was kicking my butt, and I had to figure out whether I was wrong or the market was wrong. I decided that I was wrong. Then I figured out why. In 2018, I wrote a long article that was the precursor to the book. During the pandemic, a literary agent said I should do a book, and because I couldn’t travel, I said maybe I should bring everything into focus for myself and bring all of my ideas together. 

Well, we’re glad you did. One of the key takeaways from your book is that you look at price last. Investors ought to identify a moat first. 

100%. Investing is a reductive art. You have to reduce it to very few things. You must find businesses with a moat, study and understand that moat, and then determine if it’s durable. Only then do you check the price and see if it’s reasonable. 

Another idea you write so well is that we should retire the growth vs. value debate. Tell us about that. 

That upsets me. It’s a false dichotomy. Whoever came up with the growth vs. value idea has done a disservice because anyone who studies the issue seriously knows that growth and value are two inputs of the same equation. Warren Buffett has been trying to tell us that for decades. He has said that a high P/E is not correlated with a non-value stock, and a low P/E is not correlated with a value stock. He says it himself. Investors would help themselves if they would stop talking about growth vs. value.

What’s interesting is the timing of your book. When this book came out in 2022, tech stocks were hit hard. But they’ve since been on a tear. How do you assess this market and the Mag 7 overall?

I'm in this rally. People ask me, what’s your AI strategy? I don’t have an AI strategy. My strategy is that tech is where the money is. I tell people a thought experiment: What percent of the incremental value over the next decade in the economy will be created from tech? Or pick five industries: tech, industrials, healthcare, retail, and financials, and then just assign a percentage of the value created in the economy.

We can argue over exact percentages, but tech will be well north of 50%. This is 12-year-old stuff. There are all of these trends in tech, whether it is driverless cars or virtual reality. Now it’s AI. But now there are questions about can these firms truly monetize it? It’s really expensive. 

What we know is that all of these trends are coming, so you ask yourself, who will benefit from these trends? The small guys or the big guys? Sure, startups will succeed, but many, like Anthropic, will go to big guys like Amazon. Many can’t scale without help from the likes of Amazon. The main beneficiaries of these trends are the companies with the money, engineers, and scale to monetize those trends globally. 

Is about half of your portfolio in tech? Do you own all of the Mag 7?

Roughly, and I own two: Alphabet and Amazon. 

Are you doing mathematics and any quantitative work or valuation calculations as well?

I do mathematics, but I would call it arithmetic. It’s subtraction, division, multiplication, and addition. I calculate net present value (NPV), which is highly valuable conceptually. 

It might tell me that stocks trade at high multiples for a reason, and there are times when you shouldn't be afraid to pay a high multiple of current earnings. Conceptually, tech companies that have scale should trade for a high multiple of current earnings. By contrast, a company like General Motors should trade for low P/E current earnings because their earnings are not going to grow much. In fact, they are existentially threatened as a company.

So NPV is a great conceptual framework, but it's a lousy practical investing tool because, since you can't see into the future, you don't know the cash flows. Nor do you know the discount rate.

Do any stocks come to mind that you like right now, especially not in the Mag 7?

Progressive, the insurance company. It’s a monster. I’ve done well with this stock. It’s a good example of a company that uses technology well, even though it isn’t a “technology company.” But tech is at its core. They say they're a tech company that just happens to be in insurance. Their team is full of PhDs and coders. It’s really impressive. 

Domino’s is another one. It runs circles around other chains partly because of its technology. They use the tools to gain and sustain a competitive advantage.

What’s your ideal time horizon for an investment like that?

You should think about selling daily, but like Buffett, taxes are a big consideration. So, selling is a big decision and must be outside the zone of fair value. I’ve regretted the last few sales I’ve made. I try to adhere to that “forever” horizon because it works. I just hold unless there's something wrong with the business or management. If the business is intact and management is quality, selling too early is a classic mistake.

Talk about your philosophy of “buy what you know — with a twist.”

Do you remember what Peter Lynch’s favorite class in college was or the one he thought was most applicable to investing? A philosophy class on logic. So, I find my religious studies helpful for rigor in my thinking. You want to be logical. 

The problem with buying what you know is for older people like me. Much of what we know is no longer a good investment. Fossil fuel companies like Exxon used to be a great investment, right? That's not happening. Wells Fargo used to be a monster. Media companies, once fantastic investments, aren’t anymore. 

Much of what older people know isn’t investable anymore. So we need to learn tech. My son, a software engineer, is one of my tech teachers. It’s not hard to learn. We all use it and benefit from it. We just need to re-educate ourselves. You just need to learn, read my book, read other books, and study these things. 

As you said, sometimes we overcomplicate things, too. Perhaps it hasn’t been hard to see that Amazon has enormous competitive advantages, for example. 

I think many young people are also disdainful or scared of markets. It’s understandable because they had the great financial crisis in 2008, then they had the pandemic. This system has a lot of distrust, which is why crypto is so prevalent. They just need to understand that they can invest in companies that they know well.

Markets generate tremendous wealth. People my age remember when we had just $20,000, and with the power of compounding over decades, what that can turn into is staggering. Young people need to internalize that. 

Where do you stand on cash?

I try to find investments with good internal rates of return, good businesses, good management, and selling for prices where I think I can make a market-beating return. I don't try to make a top-down decision on cash. I make a bottoms-up decision on cash. I'm fully invested now.

It’s funny. Buffett said he missed tech except for Apple. He said oh, I missed Amazon. I missed Google. What is he talking about? It’s not too late. Have you seen how these stocks have done over the past seven years? It’s extraordinary. Of course, Google went public when he was around 70, so you can’t be too hard on him. But nobody is too late for the right companies. 

How do you think about the valuation for companies reinvesting heavily in growth, showing little or no current profits?

You've got to adjust for that earnings power. It's wrong to compare a company like Intuit to one like Campbell's, Wells Fargo, or Exxon. The older companies are in harvest mode, while the younger ones are in growth mode. You have to make allowances for that. 

Amazon’s P/E since IPO is like 200 times. What’s that about? Either they're making smart decisions by reinvesting, or it's the all-time world's greatest con, and it will fall to a $1 billion market cap. I think anyone who believes the latter is sadly mistaken. Amazon makes smart bets on the future and gets rewarded in the marketplace. 

Do you have any favorite books or publications you like to read?

I read a lot. I read a lot of books. 7 Powers: The Foundations of Business Strategy is good because it talks about competitive advantage in a fresh way. I read Barron’s, The Wall Street Journal, the weekly magazines, and many trade journals, like insurance and aerospace journals. I subscribe to a lot of tech newsletters. I talk to many people and read a lot, and I try to be out in the world observing things. 

What can you tell us about your firm, Gravity? 

My firm is very small. I kept it small on purpose because I don't like managing people. I like having the freedom to do what I want to do. I’m not going to gather assets for an asset-gathering sake. Anyone interested in short-term returns is welcome to go elsewhere. My short-term returns happen to be good, but all of my investors understand I’m in it for the long term. 

I like people who think long-term and want to compound their wealth but can leave me alone to do my job. In this age of charts and constant news, I try to do things a bit more old-fashioned. I think that style is more effective now than ever.

Dive deeper

For more, reach out to Adam on LinkedIn or buy his book.

See you next time!

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