David Walker is a co-founder, President and COO of Growthline Capital Management, a long/short equity hedge fund headquartered in Stamford, CT. Our philosophy at Growthline is simple: We believe that Disruption Changes Fortunes. It allows some companies to grow to become multiples of their current size, leaving others in ruins. We believe that an investment team, with skill and experience, can identify those disruptors and avoid or short those being disrupted. We believe that wealth is created through the long term ownership of these growing disruptive businesses.
Growthline’s strategy is to identify companies that will become multiples of the current size over the next three to five years. We excel at building frameworks and processes to manage investments in these growing companies. Our process also leads us to companies whose share prices are likely to decline, which provides excellent short opportunities.
David was previously the COO of SHIM, a hedge fund in New York city that grew from $800 million to $2.6 billion while he was COO. Prior to SHIM, Mr. Walker held various COO and CFO roles at multi-billion dollar hedge funds. He also was the co-founder of Flintlock Capital, a commodities-based hedge fund which he launched in 2009 and grew to $160 million. David is a private investor and has invested in several technologies start-ups and cryptocurrencies. David was a former Special Forces Commander (“Green Beret”) and has served on the Board of Directors of the Green Beret Foundation. He was previously on the Board of Directors of Racing For Vets as well as The Kingsport Child Development Center. David is an active surfer, skier, sailor, stand-up paddler and scuba diver…or what he likes to call, the “5 S’s”.
Where did the idea for Growthline Capital Management come from?
It’s actually a funny story how Growthline Capital came to be. Mark Shattan, who is a good friend and classmate of mine from West Point, asked me to have lunch with him one day. Mark was working as a portfolio manager at Jennison Associates, one of the premier boutique investment managers in Manhattan and I was working for a large billion dollar long/short hedge fund also in Manhattan. Mark and I met for lunch and Mark began telling me how he was thinking about quitting his job and starting a fund. As a portfolio manager at Jennision, Mark had one of the most prestigious and well-paying jobs on wall street. I had worked for multi-billion dollar hedge funds as well as small start-up funds and knew the difficulty of starting a new fund and hence, basically told him what a terrible idea it was. He listened and off he went. But about six months later, Mark wanted to meet for lunch again. And again, he expressed that he wanted to start a fund. Again, I basically talked him out of it. But the third time we met, he explained how his experience as a portfolio manager at both Goldman Sachs and Jennison had taught him a foundation of how to invest in growth companies and from these experiences, he had developed his own ideas around investing in growth companies. He told me how he doesn’t see the world via a technology, sector or industry lens, but through a “Growth Cycle Investing” lens. Growth Cycle Investing is quite unique in that if you look back at history, many technologies and companies go through a growth cycle, commonly referred to as the S-curve. So to invest using growth cycles as a parameter was quite unique and interesting to me. I had never heard of any fundamental investor ever looking at growth companies or any companies for that matter, through that lens. Mark’s performance as a portfolio manager at both Goldman and Jennison were quite good having outperformed the S&P 500 over the course of both his tenures at the two firms. And, given how his philosophy of Growth Cycle Investing made a lot of sense, I had an epiphany that we could build something very impressive. So I jokingly told Mark, “if you are going to ruin your life, if you are going to quit a great job and start a fund, I might as well join you.” And that was the genesis of how we started Growthline Capital.
What does your typical day look like and how do you make it productive?
A typical day is very busy. We run a lean structure at Growthline because we use great technology and we have great counterparties. A typical day for me is to start off the day by reading. I like to read in the early morning, even before I workout. It’s a quiet time and 45min to an hour of good reading sets the tone for my day. Generally, after a great cup of coffee and a morning read, I’ll do an hour or so workout which sets the tone for my day. Normally, the first order of business is to review the portfolio on both our internal systems and at our prime brokers to ensure we do not have any trade breaks. I also do a quick review to see if we are within our risk parameters. Mark does the same each morning in reviewing the portfolio. Then I usually do some other operational or compliance work followed by some investor relations work. Then in the afternoon, we may have a firm-wide catch-up meeting, conference call or zoom. I’ll do research in late afternoon and early evening to find out the latest trends in the industry or to research areas where our fund has made investments or is planning to make them. I like staying abreast of the latest technology and trends.
How do you bring ideas to life?
Our firm generates ideas from multiple sources. All of us at the firm are voracious readers. Reading from multiple sources is a great way to learn about what is going on in the world. We try to learn more about mega trends and try to understand how they are shaping the world in which we live. Mega trends can be anywhere, not just in technology. They can be in Consumer, Energy, Healthcare, Industrials, etc. Once we find a mega trend, Mark and his analyst team will go into depth to determine the size of the Total Addressable Market (“TAM”). We then research those companies that are in this market and do deep fundamental research on each of them to try to determine which ones are better positioned to capture a good piece of the TAM.
What’s one trend that excites you?
One trend that excites me and our entire firm is clean energy. Not just renewable energy, but clean energy. Clean energy is great for the planet and its time has come. People around the globe are demanding clean energy and there are a lot of exciting technologies and companies that are starting to deliver viable solutions. We think the TAM for clean energy is in the trillions of dollars. These clean energy companies, if they continue to perform, will grow to become multiples of their current size. It’s a very exciting time for clean energy right now.
What is one habit of yours that makes you more productive as an entrepreneur?
One habit that I think makes me more productive as an entrepreneur is working out. I truly feel that keeping a healthy body allows me to work harder and longer hours. Additionally, When you exercise, your body releases chemicals called endorphins. These endorphins interact with the receptors in your brain that reduce your perception of pain. Endorphins also trigger a positive feeling in the body and when your body feels good, it just seems like your mind feels good too. And when your body and mind feel good, I think you are more productive and are able to make better decisions. I try to work out almost every day.
What advice would you give your younger self?
The advice I would give myself is relatively simple: “Buy and hold a mixed portfolio of stocks.” I can’t tell you how many times I sold a stock, after a good run-up in price and took a profit…only to see that stock continue to appreciate over the next few years and sometimes decades. I have held great stocks in great companies (Apple in the 90’s, Amazon in the 2000’s) and if I would have just held them and not sold them for a little profit, I would have had a much greater profit. The key is to find great companies in large and growing markets, research the heck out of these companies, buy a few that you think could capture a sizable portion of the large and growing market, and hold them. If you are a professional money manager, I do agree that you can manage the position here and there by sizing up or down based on numerous macro and micro-events. However, if you are not a professional money manager, I would recommend that you simply buy and hold great companies and let their growth plus time do the work for you.
Tell us something that’s true that almost nobody agrees with you on.
Well first, I think we should have a philosophical discussion about what is the definition of the word “true.” Just kidding. Not sure if nobody agrees with me or not, but I’ve had few conversations about growing wealth with a few friends. My hypothesis, not sure if it is a “truth” or not, but my hypothesis is that it is relatively easier, in a comparative sense, to make $5 billion dollars when starting with $1 billion dollars than it is to make $1 million dollars when starting with nothing. The first $1 million dollars is by far the hardest to make, after that it becomes progressively easy to compound wealth.
As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?
One thing I do over and over is continue to learn. I continue to learn in many ways. First, I read almost every day and read from multiple sources – books, articles, newsletters, blogs, etc. Just reading every day is a great way to continue learning. Second I try to use new technology to stay abreast of what’s going on in the world. For example, I heard about TikTok a few years ago and downloaded the app. When I first got on it, all I saw was a 15 second video of a young person dancing followed by another 15 second video of someone else dancing, etc. I kind of didn’t get it at first, but I stayed with it until I figured out that these short-form videos were the way consumers wanted to view media…fast, fun, simple, digestible. Hence, it was a good learning point for me. Continuing to learn is one thing that I do over and over.
What is one strategy that has helped you grow your business?
Our main strategy for growing our business remains word of mouth. As we have performed very well, our investors have made recommendations to their friends and other investors. We are thankful for our friends and partners and grateful that they have recommended us to their friends and others. At the end of the day, if you provide a great product or service at a fair price, word will get out and your business will grow
What is one failure you had as an entrepreneur, and how did you overcome it?
The first fund that I co-founded about 12 years ago did not do well. In fact, we performed below standard and even though we were able to grow assets under management, it became clear that our strategy was not working in the market environment. That strategy was a commodities trading strategy and much different than what we do now. We eventually made the decision to close the fund. This was a difficult decision because we had to let all the employees go. We cared about our employees and I worked hard to find them other roles in other firms. We returned all the capital to our clients and closed the fund. Having this fund fail was a great lesson for me and it was a long time before I decided to join my business partner, Mark and start another fund. The lessons that I learned from it were very helpful in starting our current fund. One of the key lessons is to have a strategy that is going to work in all market conditions, which is what we believe we have now.
What is one business idea that you’re willing to give away to our readers?
Unfortunately, I don’t really have any business ideas right now. I am too focused on growing our current business, Growthline Capital. I’m not one of those guys who dream up multiple business ideas and never executes on them. I think that execution is way more important than the idea. Look how many businesses were not the original idea, but they simply executed better than their competitors and hence grew faster than their competition. Facebook was not the first social network, yet it is the largest. Where are MySpace and Friendster now? Amazon was not the first online retailer but look at them now. The key to success is not the idea, it’s the execution.
What is the best $100 you recently spent? What and why?
I recently purchased the book “A Guide to Money and Investing” from Lightbulb Press for a friend’s kid. I think it’s a good book for teenagers and young adults who don’t have much knowledge about money, investing, finance, markets, etc. I hope he reads it and asks a lot of questions. The key to learning is reading and asking lots of questions. It was far less than $100 but I believe it was a good purchase. I also bought a new Giro ski helmet with MIPS technology. It was more than $100 but very much worth it. Any purchase that enhances your safety is a good purchase.
What is one piece of software or a web service that helps you be productive?
An electronic calendar is probably my most productive software tool. I always have multiple tasks to accomplish and be allocating time for them and actually placing them on my calendar has been quite helpful to my productivity. Balancing daily tasks with long-term projects can be difficult without managing your time commitment to both. So planning and allocating specific time on my electronic calendar has become crucial to my productivity.
What is the one book that you recommend our community should read and why?
The first book I would recommend is the one I mentioned before, “A Guide to Money and Investing” from Lightbulb Press. It has all the basics on where to start to understand money, investing, stocks, bonds, markets, etc. Another book I recommend is Chris Mayer’s “100 Baggers”. I don’t know Chris very well, but I do know he did a lot of research for his book, which is a modern take on Thomas Phelps’ classic “100 to 1 in the Stock Market”. In his book, Chris reveals how one finds and evaluates companies that have the potential to increase in value 100 times. And, of course, the key to this is to also hold onto these great companies even during economic downturns. If you find the right ones, they can literally compound 100 times or more. Chris gives a number of great examples of these 100 baggers in his book. It’s a very good read and well worth your time. This is one of only a few books I actually give to friends as gifts.
What is your favorite quote?
One of my favorite quotes is from Marcus Aurelius, who was a Roman emperor and a Stoic philosopher. He once said, “You have power over your mind – not outside events. Realize this, and you will find strength.” Aurelius was the last of the Five Good Emperors and one of the great Stoic philosophers. I think this quote is a favorite of mine because markets may go up or down, stocks may do the same, business relationships may change, etc. but one constant is the power you have over your own mind and the way to see events both good and bad. I try not to get too happy when we have good news and likewise I don’t get too down when there is bad news. I have that power over my own mind…and that has truly given me strength.