How Adam Wyden Continues to Win Big Over the Years: A Consistent Strategy [Part I]

From year to year, there is a tendency to focus on short-term hedge fund returns, often looking only monthly or quarterly. However, much more can be gleaned about the state of the hedge fund industry by looking over the long term, especially through studying managers with long track records of success.

For example, Adam Wyden, son of Oregon Sen. Ron Wyden, has been knocking it out of the park for years, so there is much to learn from a review of his letters dating back the last 10 years. Let's start with a review of his strategy, which hasn't really changed over the years.

Note: This is part one of an in-depth series on Adam Wyden's ADW Capital. Click here for part two on the bear market of 2015-2016. Click here for part three on a challenging 2018. Click here for part four on the pandemic years, and click here for part five on the bear market of 2022.

Starting off running

First, let's quickly see how impressive Wyden's returns were out of the gate. He founded ADW Capital in September 2010 and launched his long-term value partnership ADW Capital Partners in January 2011. In 2011, the fund returned 91.31%, versus a mere 0.97% for the S&P 500 and -5.96% for the Russell 2000.

ADW generated double-digit positive returns in six of the eight years from 2011 to 2018, with 2015 coming in 5.67%, outperforming the S&P 500's 1.38% return and the Russell's -4.41% return. The only negative year was 2018, when ADW lost 33% - much worse than the S&P's 4.38% loss and the Russell's 11.01% plunge.

However, between its inception and 2018, ADW Capital generated an annualized return of 20.32%, versus the S&P 500's 11.18% annualized return over the same period. The Russell 2000 generated an annualized return of 8.46% over those years.

Guided by Buffett and Greenblatt

In an investor presentation in January 2017, Wyden shared his strategy in depth. He said his objective was to generate high risk-adjusted returns via "conservative equity investing in small, under-followed businesses," mostly in the U.S. and Canada, although with a few "select opportunities" in western Europe.