Podcast Summary: TIP782: The Search for Mispriced Stocks w/ Clay Finck

Podcast: We Study Billionaires (The Investor’s Podcast Network)

Host: Clay Finck
Date: January 9, 2026
Topic: Exploring mispriced stocks and value investing insights from Daniel Gladys’s book Hidden Investment Treasures

Episode Overview

Theme:
Clay Finck reviews Daniel Gladys’s book Hidden Investment Treasures, examining the unique opportunities for value investors in an era dominated by passive investing. Through key case studies—including Markel Group, Alimentation Couche-Tard, NVR, Japan’s equity market, and banking—Finck reveals practical mental models for finding mispricings, managing risk, and applying disciplined investing principles. The episode encapsulates Gladys’s philosophy that current market dynamics may be uniquely favorable for discerning, patient, and fundamental-driven investors.

Key Discussion Points & Insights

1. The Rise of Passive Investing and Market Inefficiencies

• Main Argument:
  The surge of passive investing via ETFs and index funds shrinks the pool of investors focused on underlying fundamentals, exaggerating price-value gaps in overlooked market corners.
• Quote:

  “As fewer investors focus on the underlying fundamentals, the gap between price and value has widened in many overlooked corners of the market.” (03:15)

• Gladys’s View:
  Today’s market is better for value investors than at any point in his 30+ years’ experience.
• Notable Statistic:
  As of 2019, more than 50% of all US market capital is passively invested. Adjusted for further growth, perhaps only 20% is truly actively managed, not all of which is fundamentally driven. (07:20)

2. Defining Value Investing Today

• Misconception:
  Value investing is not defined by low P/E or P/B ratios—it’s about buying shares below intrinsic value with due consideration to growth.
• Quote:

  “A value investor simply looks to buy shares at prices that are lower than their value, and the expected growth of a company always plays an important role in estimating that value.” (05:30)

3. Dangers and Opportunities of Passive-Driven Markets

• Market Concentration:
  The top 10 companies now comprise 40% of S&P 500 value, amplifying risks when passive flows reverse.
• Passive Inflows & Outflows:
  Inflows push indexed stocks higher regardless of value; outflows could trigger sharp declines due to fewer active buyers.
• Gladys’s Tactical Advice:

  “An intelligent investor will not only get off this passive investing train, but will use the whole situation to their advantage.” (10:22)

Case Study Highlights

4. Markel Group (“Baby Berkshire”)

[13:39–24:35]

• Parallel with Berkshire Hathaway:
  Markel has a similar multifaceted structure: insurance, investment portfolio (with $32B float), and private business via Markel Ventures.
• Outstanding Growth:
  Markel has compounded operating income at 11% for 20 years, but trades at a market cap ($20B) Gladys considers undervalued.
• Capital Allocation:
  Conservative underwriting, careful investments (~1% alpha over S&P by Tom Gayner), disciplined acquisitions.
• Quote:

  “Markel's obvious advantage over Berkshire is … its size, giving it less constraints in terms of its future growth prospects.” (15:50)

• Why Overlooked:
  Not heavily represented in indices, belongs to a “boring” sector unattractive to retail and passive capital. (19:48)

5. Alimentation Couche-Tard (ATD)

[24:36–31:20]

• Growth via Acquisition:
  75% of ATD’s 17,000 convenience stores were acquired; management prudently uses debt and swift deleveraging.
• Industry Structure:
  Dominates a fragmented industry, benefits from scale, further consolidation opportunities.
• Shareholder Value:
  Focus on buybacks over dividends when shares are undervalued; avoidance of risky, sprawling acquisitions.
• Quote:

  “The greatest potential risk for value destruction is through acquisitions.” (25:05)

• Performance:
  ATD has compounded at 21% per annum since 1999. (28:24)

6. NVR – The Homebuilder Outperformer

[31:21–41:55]

• Unique Model:
  Avoids capital-intensive land banking—uses purchase options instead, keeping capital requirements low.
• Capital Allocation:
  Non-cyclical profitability, returns most capital via repurchases (shares declined by over 80% since 1995).
• Quote:

  “When you have a company that generates so much cash, has low capital intensity and repurchases shares at a modest valuation, it's no wonder that we've seen shares of NVR compound at high rates for three decades now.” (39:10)

• Persistent Mispricing:
  Despite a stellar operating record (ROIC ~80% in 2023), market treats it as an average, cyclical homebuilder.
• Quote from Gladys:

  “The market views NVR as just another home builder that operates in a highly cyclical industry.” (41:12)

7. Japan – A National Opportunity

[41:56–49:45]

• History:
  Long malaise post-1989 bubble; investor apathy persists.
• Structural Reforms:
  Since 2012, aggressive government and corporate reforms have boosted shareholder alignment and returns.
• Valuation:
  Japanese stocks have lower P/Es (17) vs US (28), despite higher earnings growth and less debt.
• Buffett’s Influence:
  Berkshire’s investments in trading companies quadrupled since 2020.
• Risks:
  Currency depreciation is a real concern for foreign investors.
• Quote:

  “I have seen several situations in my lifetime where a country's entire stock market can be considered a hidden investment treasure.” (49:12)

8. Bank Stocks – JPMorgan Chase & OSB Group

[49:46–56:36]

• Sector Neglect:
  Many investors avoid banks, resulting in mispricings.
• Valuation Approach:
  Focus on equity, return on equity, and book value—not free cash flow.
• JPMorgan:
  Durable high ROE, only major bank profitable through the GFC, led by Jamie Dimon.
• OSB Group:
  UK-based, specializes in landlord mortgages; undervalued at 0.7 price/book, 15% ROE, dividend yield 8.5% at time of investment.
• Quote:

  “Other big banks can only dream of such returns.” (JPMorgan five-year average tangible ROE of 19%) (52:42)

• Market Dynamics:
  Smaller, fundamentally-sound banks may be most mispriced due to passive flows bypassing them.

Risk Management Principles

[56:37–63:22]

• Circle of Competence:
  Focus on understanding your own skills and areas of expertise.
• Permanent Loss Avoidance:
  Avoid over-leveraged, poorly-managed, low-quality businesses.
• Margin of Safety:
  Only buy stocks when the price is substantially below intrinsic value using conservative, simple valuation models.
• Quote:

  “The more sophisticated a valuation model, the poorer the investment outcome.” (61:32)

• Portfolio Construction:
  With sufficient attention to quality and price, it’s possible to build a portfolio with lower risk and higher return than the market average.

Notable Quotes & Moments

• On Passive Investing Side Effects:

  “Everything, no matter how good the idea, has its negative consequences and... the impacts can often run counter to the original intent.” (08:55)

• On Tree Planting & Investing:

  “Picking individual investments for your portfolio is like planting trees... What really matters is understanding the underlying business and the seeds they are planting that will bear fruit for the years to come.” (58:10)

• From Mark Leonard, via Gladys:

  “Index investors buy our stock because we are part of whatever index they are emulating... Despite the fact that they may be long term holders, it is difficult to find someone to speak with at these indexing institutions, and even if we do, they rarely know much about our company.” (60:30)

• On Market Casino-Fication:

  “Buffett’s line about how the market has become more and more casino like, but with the potential fragility of the market here in the US.” (62:30)

• On Risk and Returns:

  “While academia shares that risk is equal to volatility, Buffett and others share that risk is in fact the potential for losing money.” (62:50)

Timeline of Key Segments

• 00:03–13:38 – The rise of passive investing and its effects on market structure
• 13:39–24:35 – Markel Group case study
• 24:36–31:20 – Alimentation Couche-Tard case study; capital allocation philosophy
• 31:21–41:55 – NVR: unique homebuilder model and mispricing
• 41:56–49:45 – Japan: national market inefficiencies and reforms
• 49:46–56:36 – Bank stocks: frameworks, JPMorgan and OSB Group
• 56:37–63:22 – Risk management principles, analogies, and portfolio construction
• 63:22–65:29 – Final reflections and closing thoughts

Conclusion

Key Takeaways:

• The dominance of passive investing has pivotal side effects, creating new inefficiencies and expanding opportunities for careful, fundamental-driven investors.
• Mispricings abound where passive capital, retail excitement, and short-termism ignore quality businesses.
• Durable success follows from disciplined capital allocation, favoring shareholder-friendly management, and buying at attractive prices.
• Effective risk management is about understanding yourself, investing in what you know, and focusing on preserving capital.
• As market environments evolve, mental flexibility, patience, and a strong investment process matter more than ever.

Recommendation:
Clay Finck encourages all investors to seek out Gladys’s book for its practical case studies and to apply these timeless lessons, especially as the investing landscape continues to shift.