Founder of CAS Investment Partners Cliff Sosin has a two-decade-long investment career focused on value investing principles. He founded the company in 2012 and since then has delivered massive returns, with recently noted 96.5% returns during the pandemic 2020 year. Cliff Sosin’s portfolio holdings are valued at $973 million shared amongst 5 holdings.
The biggest holding in his portfolio is Carvana Co Class A stocks with 48.6% of the portfolio. This holding already shows the high concentration in his portfolio. In second place is the Hilton Grand Vacations Inc, followed by World Acceptance Corp.
Recent trades include a massive increase in the Capital One Financial Corp holding and a decrease in the World Acceptance Corp position. Throughout the history of the CAS Investments Partners, they delivered impressive returns, so their approach to investing is a frequent question. We will go through Cliff Sosin’s background, holdings, and investment strategy, to try to find the reasons leading to these successes.
Key Holdings
- Carvana Co Class A (NASDAQ:CVNA) with 48.6% of the portfolio
Cliff Sosin is the biggest holder of this online trader of used cars. He currently owns 6.83 million shares valued at $473 million. He has been trading their shares since 2018 and his total investment in this holding is $441 million. He made the last trade in Q3 2022 when he finished the streak of share increases in this holding. Since then the price has been falling but recently it has shown a glimpse of a chance of moving in an upwards direction. This holding generated a minimum gain of 7.3%.
- Hilton Grand Vacations Inc (NYSE:HGV) with 32.59% of the portfolio
Clifford Sosin started investing in Hilton Grand Vacations in Q3 2021 and now owns 6.77 million shares. During late 2022 and 2023, he trimmed this holding to this size and it is now valued at $317 million. This holding generated minimal returns of 6.3% so far.
- World Acceptance Corp (NASDAQ:WRLD) with 7.51% of the portfolio
CAS Investment Partners own 9.57% of all World Acceptance Corp outstanding stocks. This small-loan finance business company’s holding generated a gain of 47% since Q4 2017 when they started trading it. In 2023 they sold about 200 thousand stocks, for $107 and $117 respectively, and since then the price of stocks has risen to a reported price of $130. They invested in the stake a total of $47 while its current value is at $73 million.
- Capital One Financial Corp holding (NYSE:COF) with 7.43% of the portfolio
A new holding dating to Q4 2022 has delivered a gain of 30% in just a year. Sosin invested $55.5 million in this holding while its current value is $72.3 million. Their stock price is on the rise and since October 2023 it has risen from $90 to $135. In Q4 2023 they increased the position by buying 184 thousand shares at $107.
- Cardlytics Inc (NASDAQ:CDLX) with 3.87% of the portfolio
Cardlytic is the only holding on Cliff Sosin’s portfolio which generated losses. Sosin started piling up their stocks in Q2 2029 and he raised his stake to 5.42 million shares. Most of the buys he conducted at prices between $70 and $100, and the stock price has plummeted since Q1 2022 to well below $10. In 2023 the price didn’t go above $15 and it went down to $7 in 2024. The total loss of this holding is 86% since he invested $86 million, and the current value of the holding is $37.6 million.
In 2023 Sosin filed a 13D regarding Cardlytic showing a possible activist intention. There were rumors that he was aiming for a place on the board. From the latest reports, Sosin is not shaken by the current low price of stocks and is willing to hold onto the stocks until things start turning around.
Take A Look At Why is He Heavily Invested in Carvana? Investor Clifford Sosin on The “Amazon” of Cars:
Sector
The sector allocation in Cliff Sosin’s portfolio is shared among three industries:
- Consumer Discretionary with 52.5% of the portfolio valued at $510 million
- Consumer Staples with 32.6% of the portfolio, are valued at $317 million
- Finance with 14.9% of the portfolio valued at $145 million.
Background of Cliff Sosin
Clifford Sosin went to Swarthmore College where he studied Engineering and Economics. He earned his B.S. in Engineering and B.A. in Economics.
Before he started his business he had several different investment-oriented stints. The first was in Houlihan Lokey where he was focused on restructuring. He worked there for two years before moving to Silver Point, the company dealing with the distress lending business. He worked in a sector dedicated to private lending. The goal of negotiating loans was not up in his alley for the long term.
From there he moved to UBS Financial Services where he landed in the high-yield and distressed stocks. After half a year the company shrank from thirty-five to only nine. He kept his job but the firm moved away from distressed and high-yield stocks. In the period between 2008 and 2012, he was developing his investment strategy.
He left UBS in July 2012 and started his company in October. The main reason was that in UBS he couldn’t invest the way he wanted it. So, the only logical option was to start his business.
Cliff Sosin Investment Philosophy
In its essence, Cliff Sosin’s Investment Philosophy is based on value investing. He doesn’t often change his holdings, and once he decides to invest he is looking at a time frame of at least 5 to 10 years.
Sosin likes to get deep into the business. That includes its fundamentals, its position in the market, the industry it is in, and its perspective. He prefers investing in consumer industries with a stable influx of clients and a regular cash flow. Companies from technology or biotech are not on his radar.
When looking at companies he prefers to invest in those which he can have a wider look at and to be able to predict its future at some point. Sosin points out that he cannot predict how a technology company will act in the future, and whether will it be able to draw new customers or develop new products. But, those sectors that he invests in he knows their ins and outs, and he knows what he can expect.
Another big factor when choosing investment targets is its stock value. He is always looking for a way to find good companies that at some point have a low value, but a big potential. He goes against the herd and doesn’t pay much attention to short-term market swings. Sosin would reluctantly sell an asset if its value shows a current downturn, with still enough potential in it.
Sosin avoided shorting, but he did his fair share of shorting in his career. The issue with shorting in his opinion is that it requires too much time, and there are just not enough good opportunities to stay afloat with this strategy.
Also, he prefers to keep his portfolio concentrated and doesn’t see too many practical benefits from a highly diversified portfolio. He buys only a handful of positions that businesses he knows and understands. With that type of portfolio, you think long and hard before making any trades, and you can take advantage of a few good ideas, and make them even better.
Sosin rarely sells and buys new holdings and before he does he conducts a deep analysis of both positions. If the company he holds is still good and can deliver solid returns he will not sell it. Selling and buying just from vanity is something that he avoids. He sticks with his long-term good players until after a solid analysis it is determined it is time to move on.
In the last year, Sosin showed interest in activist investing, particularly with the case of Cardlytic. He was slowly building up his stake in the company because he saw its potential. They currently are in a downturn, but he believes in the company’s fundamentals and is willing to change things from within.
Will there be these actions in the future only time will tell. But, combining long-term investing with changes from the inside is a good combination if handled properly. It can bring positives for the shareholders, and increase the overall value of the company.
Cliff Sosin’s Portfolio Performance Analysis
Historical Performance
Since the inception of the fund in 2012 they generated massive returns almost every year. The expedition was in 2022 when they were down nearly 60% in the first two quarters. This was mostly due to the backlash of their Carvana holding. This used car retailer flourished during the COVID pandemic, but their bubble burst right after.
But, when looking at other years, the performance is exceptional. In 2013 they delivered 66% returns, 6.3% in 2014, 14.5% in 2015, 22% in 2016, 31.2% in 2017, and 64.4% in 2018. In 2020 during the COVID pandemic, they delivered a massive 96.5% return, mostly to the attractive Carvana.
Until mid-2022 they had their worst year going down almost 60% just in the first two quarters. But, 2023 was another great year for the fund’s investors, when CAS Investments generated a return of 88%.
The reason for a so strong 2023 was their sector allocation. Most of their holdings are concentrated in the Consumer Discretionary and Staples sectors, which benefited from the reduction of inflation. The lower inflation triggered an increase in consumer spending raising the demand for products and services Sosin managed through his portfolio.
Risk Management Strategies
The first step in Sosin’s risk management strategy is picking up the right business. He is looking for undervalued companies that offer a margin of safety as a hedge against market downturn. Once he goes through the fundamentals he is looking at possible problems that could turn him off from the investment.
When we look at Sosin’s portfolio we can see that all the holdings are extremely low-quality companies. The average ROA for these holdings is at -2% which is much lower than the United States standard of 12%.
Identifying companies with reported metrics misrepresenting their real value is not enough. Sosin is looking for information on how and where the market is undervaluing the company’s potential. Once he knows that he is already creating a plan to mitigate risk.
There he knows what is the potential of the company, and what can cause a setback. What he avoids is investing with too much leverage. He does use it but with limited boundaries. He doesn’t want to find himself too leveraged, because you can sometimes overlook factors that could lead to a downturn.
FAQ
Who Is Cliff Sosin’s Wife?
Cliff Sosin’s wife is Susan Sosin.
Final Thoughts
Although CAS Investment Partners never were a big player in the investment industry their investment methods are often analyzed. Their hedge fund reported impressive results since its inception, even through the most volatile times.
After a rough 2022 which was propelled by their biggest holding, the Q4 of 2023 and the whole of 2023 have been a great comeback year. But, their concentration risk still can be regarded as a potential issue down the line.
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