Random Ramblings March 2025: the market sell off, relationships with management teams, corp gov
Summary
Andrew Walker argues that the March 2025 selloff was far more violent beneath the indices than the headline numbers suggested. As of March 15, the Russell 2000 was down about 10% over one month and the S&P 500 6%-7%, yet smaller names and cyclicals were pricing something closer to an “absolute depression.” His response is neither blind holding nor panic: remain cool, reassess genuinely impaired theses, and recognize that terrible sentiment may create a moment to become “pretty aggressive.”
The central portfolio call is to stop anchoring to purchase prices and compare every holding against newly dislocated alternatives. A stock bought at $100 and now at $95 may no longer deserve capital when well-understood names have fallen 20%-40%; investors should exploit their existing research bench of perhaps 20-50 companies rather than chase unfamiliar collapses. “Your job as an investor is always to weigh opportunity costs.”
Walker sees possible opportunity across Shift4, Xponential Fitness, coal producers, Sphere and Forward Air, while repeatedly flagging company-specific risks. Shift4 was down roughly 30%; Xponential Fitness fell 57% after bad earnings; Sphere and Forward Air were each off about 30%-35%; and coal names had declined 20%-40%. These are research candidates, not clean recommendations: leverage, governance, weak results and questionable business durability remain central to the underwriting.
Post-COVID balance-sheet repair may make today’s cyclicals more resilient than their historical share-price behavior implies. Walker uses U.S. Steel as the specimen: prior downturns combined collapsing EBITDA with leverage and potential restructuring risk, whereas its post-boom balance sheet had, to his latest knowledge, reached roughly net cash. A garden-variety recession or one-time tariff shock could still burn cash, but many companies may now survive without the bankruptcy risk previously embedded in their equities.
Close relationships with management teams may be worsening Walker’s results by encouraging “thumb sucking” after a thesis breaks. His small-sample observation is that investments performed worse when access evolved into regular calls, texts and dinners, because management’s explanation could replace independent re-underwriting. CEOs are unusually effective salespeople, so “if you’re playing a game of salesmanship and friendship against CEOs, I think they’re probably going to be able to win that game.”
Walker wants to use the podcast to pressure poorly governed small caps where modest discomfort for insiders blocks substantial shareholder value. His targets include boards with little ownership, excessive compensation and obvious operational deficiencies, with remedies ranging from cost cuts to a sale process. The broader project is “active ownership”: informed holders should write boards, surface specific problems and help shine light on situations too small to attract conventional activism.
Geography may itself be part of an investor’s edge, although Walker reaches no firm conclusion about leaving New York. Taxes, living costs, airports and financial networks matter, but he wonders whether a “young Warren Buffett” would choose Singapore or Thailand to develop local knowledge of inefficiently priced Asian small caps. He considers whether an “infinitely hungry” investor could gain an edge by building a network and genuine boots-on-the-ground presence in faster-growing markets.
Deep dive
1. Headline indices are understating the selloff
Walker’s read on March 15: markets had fallen almost continuously for roughly six weeks, while the Russell 2000 may have declined in 14 or all 15 weeks since late November. Its one-month loss was about 10%, versus 6%-7% for the S&P 500.
Beneath those averages, he saw “absolute carnage”: smaller companies could report good earnings and fall 15%-20%, while unreported names dropped 20% or more. Cyclicals had moved from discounting an “imminent recession” to pricing an “absolute depression.”
His first rule is emotional rather than predictive: “It is your job to remain cool when things are getting crazy.” That does not excuse holding a highly levered, tariff-sensitive or recession-exposed business after its economics materially change; it means avoiding wholesale flight to cash merely because markets feel frightening.
Sentiment already felt “really, really bad,” though Walker stressed that conditions could become much worse—tariffs could theoretically rise to 500%, and COVID or the financial crisis were deeper precedents. Subject to individual risk and advice, he nevertheless thought this was “probably the time to be being pretty aggressive.”
2. Dislocation demands fresh opportunity-cost comparisons
Walker’s portfolio exercise is deliberately dispassionate: a former best idea bought at $100 and now trading at $95 must compete anew against researched companies down 20%, 30% or 40%. “You can’t be anchoring to, ‘I bought this at 100; I need to make money.’”
He is not advocating swapping into an unknown stock simply because it collapsed from $100 to $10. The usable opportunity set is the 20-50 companies many investors know deeply; after prior models, expert calls and transcript work, Walker believes he can refresh some dormant research within 48-72 focused hours.
The examples were sharp but qualified: Shift4 had fallen about 30%; Xponential Fitness dropped 57% after bad earnings, amplified by controversy and leverage; and coal stocks were down 20%-40%, although weakening markets might coexist with an improving demand outlook. Metallurgical and thermal coal still require separate analysis.
Sphere, ticker SPHR, was down roughly 30% in a month and, in Walker’s view, might trade below replacement cost. The Las Vegas asset itself survives tariffs of “100% or 700%,” but advertising, licensing future Spheres and corporate governance remain risks. Forward Air, ticker FWRD, had fallen about 35% after a disastrous acquisition and poor earnings, despite activist involvement and assets that could interest buyers.
3. Better balance sheets change the downside calculus
Walker thinks the post-COVID cash “gusher” let many cyclicals reshape their balance sheets, making historical recession analogies too pessimistic. Most companies he follows now carry dramatically less leverage than they did a decade ago.
U.S. Steel was his clearest illustration: entering earlier downturns at roughly 2x EBITDA could become effectively infinite leverage when earnings disappeared, raising bankruptcy or restructuring fears if weakness lasted 18 months rather than six.
By his latest recollection—he had not checked for a month—U.S. Steel had moved to approximately no net debt and remained in an unusual transaction involving Nippon. It might burn cash for one, two or three bad years, but “there’s no doubt that U.S. Steel is going to come out on the other side.”
The capital structure also changes equity sensitivity: when enterprise value includes debt, part of an equity collapse reflects solvency risk; with net cash and enterprise value supported largely by equity, the same 50% stock decline is a fuller operating-value reset. Walker’s hedge was explicit: extreme conditions could overwhelm this protection, but most holdings should weather a garden-variety recession or temporary tariff hit.
4. Management access can become a behavioral liability
Walker identifies his worst investing habit as “thumb sucking”: buying at $10 for growth and rising cash flow, watching a bad quarter send the stock to $8, then silently replacing the broken growth thesis with a cheap-multiple thesis instead of exiting.
He once laughed at stop-losses but now sees their behavioral logic. A roughly 20% decline—adjusted for the market—can force an investor to sell, rewrite the thesis, reassess opportunity cost and actively repurchase, rather than letting inertia preserve a position whose original underwriting failed.
His uncomfortable, small-sample finding is that results have been worse when management access became regular calls, texts, coffees or dinners. After a bad quarter, a CEO can explain that weakness was industrywide or that the sales head was replaced, making it easy to outsource judgment to a persuasive narrative.
The cautionary example was Bill Ackman asking Valeant CEO Mike Pearson whether fraud was occurring: a fraudulent CEO would not confess, while an honest denial adds little. CEOs rise partly through salesmanship and political skill; Walker’s Michael Jordan analogy was blunt—beat them “by not playing him at basketball.” He is considering a Walter Schloss-like reliance on reported actions, filings and numbers instead of being “spoon-fed” commentary.
5. Active ownership and geographic edge both start with proximity
Corporate governance’s “dark arts” become hard to unsee: spring-loaded grants, entrenched directors and boardroom politics can protect insiders at shareholders’ expense. Walker’s recent Sage Therapeutics podcast, where he disclosed being quite long, argued that the company should pursue a sale process and invited agreeing or dissenting owners to write the board.
He wants the podcast to spotlight small-cap boards with little stock ownership, unusually high compensation and weak operating oversight. Sometimes the answer is a sale or cost reduction; elsewhere, two days of research can reveal a straightforward operational deficiency that persists because management is unmotivated and directors resist even “slightly more uncomfortable” work.
That resistance can obstruct “millions or tens of millions or hundreds of millions of dollars” of value. Walker is asking informed shareholders to bring him specific cases so his modest platform can help improve governance outcomes rather than merely observe them.
The same proximity question shapes his thoughts about leaving New York. He wants any move to be optimized for work, including access to airports and financial markets, while low taxes and cost of living would also matter. He asks where a 21-year-old Warren Buffett would build a career: perhaps Singapore or Thailand, close to fast-growing economies and inefficiently priced Asian small caps.
Walker reaches no firm conclusion about moving to Asia, but wonders whether an “infinitely hungry” investor could build a more differentiated network and edge through genuine boots-on-the-ground presence in faster-growing markets.