Interview: Starting a Sector-Focused Hedge Fund

  • Peter Lynch

In this ASM interview, Adam Rodman explains how he launched a sector-focused hedge fund to bet on the price of uranium and nuclear energy. But before we dive, I want to briefly discuss the only investor to have ever been played by Christian Bale in a Hollywood feature film: contrarian investor Michael Burry, who rose to fame for his role in identifying the subprime mortgage crisis. The movie was The Big Short, and it provides a terrific glimpse into the life of a contrarian investor.

Contrarian investing requires the confidence to battle prevailing market trends. When contrarians get it right, it sometimes looks easy because the market has come around to their point of view. But the capacity to persist right up until that moment is what makes these individuals unique.

Stream The Big Short for a demonstration, and you will see Christian Bale as Michael Burry attempting to convince his highly critical investors that, “I may have been early, but I’m not wrong.” In the scene, Burry is verbally attacked, and the investors demand that their capital be returned.

How do you remain steadfast in the face of mounting pressure and insults? Burry studied investors before recognizing that success would require an approach that matched his personality. In the book, which inspired the movie, author Michael Lewis describes the lightbulb moment:

The more he studied Buffett, the less he thought Buffett could be copied; indeed, the lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual. “If you are going to be a great investor, you have to fit the style to who you are,” Burry said. (p. 35)

The quote reminds me of my good friend Adam Rodman, who is also a contrarian investor. Much like Burry, Rodman’s conviction around a single idea grew until he was comfortable betting his career on it. In early 2013 the depressed price of uranium drew his attention, and in 2018 he restructured his hedge fund to focus exclusively on the radioactive metal’s resurgence.

In this ASM interview, Adam describes the pressure he felt and the work he did to give himself the confidence to persist. He describes the latter as “simple” in the video; the market for uranium could be modeled (read more about this here), but simple isn’t always easy.

His recent success betting on the price of uranium and nuclear energy, has given him a platform and brand that will benefit him for so long as he chooses to remain an investor, and in this interview we are going to explore how he did it.