January 28, 2019

Samir Patel , Askeladden Capital Management

"My life is for itself and not for a spectacle." Qualitative small-cap value investor.

Askeladden Q4 2018 Letter: A Better Life

In Askeladden's Q4 2018 letter, I discuss the agency problems traditionally associated with small asset managers scaling, and why clients can be confident that I'll avoid them.

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

Dear Partners,

2018 was another exceptional year for Askeladden, m

aking up for a challenging 2017 and then some

. Gross

returns

exceeded

21%, despite our benchmark

(S&

P 1000 Total Return)

declining

10%.

This marked the

second

year (2016 being the other)

in which gross returns outperformed the index by more than 30%

his is

espite

Askeladden

using no portfolio leverage in the form of options or margin, predominantly i

nvesting in

companies with strong balance sheets, and mostly avoiding highly commodity

levered companies.

Cumulatively,

in the ~

three years from 2016

08 through 2018

Askeladden has doubled gross NAV

since inception, vs. a cumulative return of ~3

6% for the index

(including dividends, of course)

Annualized

we’ve delivered 26.5%

gross returns

and 20.7%

net

, vs. 10.7%

for the

index

(again, including dividends)

With the understanding that a month doesn’t mean much, we’re also up double digits to

start 2019

, with a

meaningful positive spread to the benchmark

We believe the portfolio is materially undervalued in aggregate,

offering a ~28% three

year forward CAGR assuming our underwritten valuations are correct.

Although we’ve had substantial conce

ntration since inception, we’ve also had a very high hit rate

excluding

bookmark/starter positions, most of our positions, regardless of size,

that have been held long enough to

play out,

have delivered extremely strong returns.

Below is a table with mor

e detail that is hopefully helpful.

As usual, a few caveats are in order.

First, w

e don’t believe that these returns are sustainable on

either

absolute or relative basis. We would be perfectly happy with mid

high teens

annualized

gross returns

forward basis

, although we’re hopeful for 20+

Second, and similarly, there

are market environments that

would certainly be far less favorable to our performance than the ones we’ve experienced.

Finally, we don’t believe that these returns suggest

that

there aren’t things to improve.

I judge my

performance by lead rather than lag measures, and there are several instances

some of which I’ve discussed

in past letters

in which my decision

making could have been better.

Those who know me know that

I take

my job seriously

too

seriously, some days

and I’m extremely focused on trying to constantly improve and

evolve.

Nonetheless, on the whole, it’s a three

year track record to be proud of.

And I’m even prouder of

it given the unusual circumstance

s under which Askeladden was founded

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

Business Philosophy

Most of my letters have focused on my investing and analytical worldview

–

that is to say,

helping

existing

and prospective clients understand our investment process bot

h t

heoretically and practical

ly. To the latter

end, c

lients have received a specific, private 11

page

update on the portfolio along with this letter.

More broadly, however

, I think the

valuation

sensitive, watchlist

driven

Askeladden

investment approach is

by now

reasonably well

und

erstood.

At the pivot

al three

year mark,

with roughly ~$5 million in FPAUM

across the fund and SMAs

pro forma for verbal commitments from existing and prospective clients,

I’ve been

asked

a different set of questions

–

namely, what are my future plans for

Askeladden?

It’s an important question to answer

given the agency problems inherent in asset management

It is in clients’

best interests for funds to stay small, while it is usually in managers’ best interest for funds to scale rapidly.

Many small fu

nds that start out with good performance unravel over time, whether due to scaling out of their

original opportunity set, or due to principals transitioning from active research to more management

riented

roles as the team grows, and facing the accompanyi

ng challenges

–

new time commitments, skillsets, etc

My solution to this problem hasn’t changed since inception:

I intend for Askeladden to be a low

overhead,

one

man

shop into perpetuity. I intend to close Askeladden to new fee

paying AUM when we reach

~$50MM in capital, to preserve our runway for making concentrated investments into attractive small and

micro

cap securities.

(I would still allow capital additions to offset any capital redemptions after that point.)

In fact, I’ve recently toyed around w

ith the idea of closing a little earlier

–

say, $40MM FPAUM

–

reserve a

$10MM

block of capacity for friends and family who may want to invest in the future

but don’t have the

ability today. Many of my personal friends are highly

educated professionals

with high future earnings power,

but have current financial commitments such as young families or student debt. I’d like to be able to invest

on their behalf in the future, but wouldn’t want to do so to the disadvantage of other clients.

To be clear,

whet

r the number ends up being $40

something

with a reserved block o

r $50, either would

exclude

non

fee

paying

proprietary

capital (i.e. mine and my father’s), and I’m also not planning to

return

capital

once we reach $50MM FPAUM. It’s difficult to know without playing in that world, but my

best

(conservative) guess

is that our strategy’s capacity is probably somewhere in the ne

ighborhood of

$200MM.

Many similar concentrated small and micro

cap

funds have found $200

$300MM to be the sweet spot, and

it’s possible (but not guaranteed) that we could succeed at that level of capital.

So why close to new money at the low level of $50MM? It’s pretty simple

–

from both a day

day

operations and

higher

level strategic point of view, running a $150MM fund is

different from running a

smaller

fund. It is easier to deal with any potential adjustments or challenges if they come slowly rather than

quickly. Moreover, I don’t believe it’s fair to client

s to raise capital up to the point of capacity

–

that would

deprive new clients of the ability to compound at high rates of return for

–

10 years

Of course, investment management is an industry full of people who sa

y one thing and do another. One

clie

nt who

funded an SMA this fall

asked me point blank how he could know for sure that I wouldn’t change

my mind about closing at $50MM when I got there.

I’d like to say it’s because I’m the sort of person who

wants to do the right thing even if it costs me,

but again, that’s easy to say and hard to do.

As with investment philosophy, the easiest way for me to help you understand

to explain our reasoning.

To do that, we

need to go on a little detour, t

he point of which will be made clear

if you keep readin

ounterintuitively,

unlike those of most managers,

my incentives are aligned with keeping Askeladden small.

If you don’t feel like a detour, feel free to close up shop here and read the portfolio update instead.

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

Broken promises... and a war with your blo

odstream

Technology was supposed to make our lives easier. When

The Andy Griffith Show

was still first

run

TV,

visionaries proclaimed a future wherein we’d only have to work a few days a week.

Instead,

each subsequent generation of technology seems to h

ave made our lives busier rather than easier.

Paradigm

shifting advances such as the internet and smartphones were supposed to disintermediate

productivity from time and location

–

no longer would

we need to be present in

physical

offices at any given

tim

e of day to work on a problem, whether individually or collaboratively.

Rather than

enabling

spend more time sleeping and with our families, and less time sitting in rush hour

traffic

, t

hese technological advances have perversely

extended

our workday

s. We’re

still

supposed to have our

butts in ergonomic chairs from 9 to 5, but we’re

also

supposed to be available via

kype/

before and

after.

Journalists are supposed to write compelling stories...

and

engage on Twitter. And so on.

So what happened? Where’d the soothsayers go wrong? Mental models make sense of the matter: it’s

order impacts

In one sense, it’s the same thing as

the Berkshire paper mill, investing in new technology

with a high ROI and s

eeing it competed away. We’ve perpetually r

einvested the very real productivity savings

of technology. Rather than choosing to do the same amount of work with less time and effor

t, we’ve chosen

to do more work with the same amount of time and effort we did before.

Another equally important issue, however, is

culture / status quo bias

(with a side of

local vs. global

optimization

)

. For example, t

oo many meetings persist despite the fact that meetings are generally onl

marginally productive at best. And the worldwide default of physical and temporal colocation

–

i.e. the

dreaded commuter 9

–

persists despite the original reasons justifying it no longer being relevant for the

vast majority of knowledge work.

The

combination

of ever

increasing stress and sleep deprivation

is dem

onstrably worsening our health

–

literal war with our bloodstream,

as discussed compellingly in books like Dr. Matthew Walker’s

“

Why We

Sleep

”

(

sleep review + notes

), Till Roenneberg’s

“

Internal Time

”

(

IntTm review

+ notes

), and Robert Sapolsky’s

“

Why Zebras Don’t Get Ulcers

.”

Sleep

and

stress

modulate all major diseases known to man.

I want those years back...

Why is any of this import

ant to me

–

or, more importantly, you?

Because at the end of the day, what we’re all looking for

–

or, rather

should

be looking for

–

is a better life.

Every person has a different definition thereof; economists might phrase this by saying that every

individual

has a unique

utility

function. One acquaintance of mine has no interest in

having kids of his own, but has a

burning desire to spend his life writing impactful novels for young adults. Others are interested in pursuing

excellence in various domains

–

athletic, professional, etc

–

at any cost

. Others still

want to do

interestin

work, but only to the point where it doesn’t interfere with their ability to pursue

personal

interests.

There are some people who are truly passionate about their car

eers, to the point where the work is

autotelic

–

i.e. the career, and all it demands and

gives,

the point moreso than any rewards.

For most of us, however, our careers are best viewed through the lenses of

tradeoffs

. We’re

doing

work that

we enjoy to one degree or another, but

work is also s

omething that enables us to achieve goals in other

domains of our lives

–

whether personal, familial, athletic, spiritual, or otherwise.

For example, one

man I know

gave up the opportun

ity for a major

promotion

because it would requ

ire

putting his two preteen sons

through a difficult cross

country move, and deprive him of the opportunity to

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

coach them in sports. Similarly, another wound down a business he’d spent the majority of his adu

lt life

creating, because it demanded too many personal sacrifices that had cumulatively taken their toll.

These were admirable decisions

–

right globally, if tough locally.

Unfortunately, however, we often fail to

correctly solve

local vs. global optimization problems

Thanks to a relatively predictable set of cognitive

biases

–

especially

contrast bias

and

social proof

–

it’s eas

y for u

s to be led down the wrong path.

As an analogy, it’s often stated for humorous effect that love activates many of the same neural pathways as

cocaine

–

love is a drug, etc etc. This is undoubtedly important for assessing the

base rate

of decision

making quality when you’re deeply in love

, as alluded to in Sunstein/Thaler’s

“

Nudge

”

(

Ndge review + notes

)

However, by

inversion

, another interesting lesson emerges. Is it more likely that love happens to utilize a

pathway our brains created for cocaine... or that hard drugs happen to hijack pathways that evolved for

reinforcing positive, life

givi

ng behaviors?

The sheer number of negative external

stimuli that can cause addictive behaviors

–

ranging from those as

“mild” as social media

, food, or video games

to more dangerous ones like gambling, alcohol, and so on

–

demonstrate how easy it is for us

to miss the greater point, to make decisions that feel good

locally

but lead

down the wrong path

globally

. It is entirely possible to make what seems like the right decision at every given

moment, and end up somewhere

we don’t want to be whatsoever:

Card

inal crashed into my window, I think he might die.

Plan him a funeral, we’ll read his last rites.

‘cause I know what he saw in that

reflection of light on the glass

was a better life.

“Cardinals” by The Wonder Years

Our careers are

often one such in

stance

of crashing through invisible glass trying to get somewhere warm and

safe

. When I was in college, I spent a significant amount of time researching what makes

happy

–

both via

personal interviews with those with enough experience to reflect, and more broadly via books, such as Shawn

Achor’s

“

The Happiness Advantage

”

(

THA review + notes

) and Karl Pillemer’s

“

30 Lessons for Living

.”

Restricting ours

elves to the subset of

successful professionals, universally, one of the

base rates

is that very

few people regret not making more money. Nobody, on their deathbed, wishes they’d spent one more

late

night or early morning

at the office

They wish they’d been more willing to take risks

–

mainly

to pursue

personal interests

, and to spend time with their family

and friends

In fact, a significant body of empirical research suggests that beyond a surprisingly low number (say, $70

$100K

in annual household income), there is an extremely limited (if any) correlation between income and

happiness. This squares up with

marginal utility

theory.

Yet highly

paid professionals

–

particularly those in the finance industry

–

succumb to

the hardwired human

driv

e for status and prestige

. Turney Duff does an excellent job

with

this in his memoir

“

The Buy Side

,”

describing how a small

town Maine kid ended up making all the wrong decisions on Wall Street. Our

satisfaction is often not correlated to absolute metrics, but rather relative one

–

explaining how bankers can

be angry at $2 million bonuses (because their

coworker

got $2.1 million).

This point was driven home to me when I heard a story about a very well

known, very wealthy hedge fund

manager. In public interviews, he stated that

what meant the most to him was spending time with his kids.

Yet his firm, shortly after those interviews, launched a number of additional products

–

when he already had

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

enough money that his grandkids’ grandkids’ would be able to spend their e

ntire lives

in the Ritz

. A personal

friend of his

told me he

was so busy with work that he

only very rarely had the chance to see his family.

Statistically speaking,

those are likely decisions

he’ll regret someday.

I had that nightmare again...

And here, our

wild goose chase

brings us back to A

skeladden,

my golden goose. Not to mention

the

somewhat counterintuitive reason you should

trust that I’m sincere in my desire to not scale

: beyond a really

very low threshold, I don’t actually care about making money f

or myself.

I know, I know

–

I’m in the wrong industry. Allow me to

pick up the

hedge

fund manager card

I just

dropped

. I’m not Mother Theresa. I’m

a capitalist.

I wrote the winning essay for the

Atlas

Shrugged

essay

contest one year, for crying out lou

Every

decision I’ve made in setting up Askeladden has been

carefully

designed to maximize my self

interest. I just have, perhaps better than most, a thorough understanding of my

own utility function

–

as well as an understanding of how to avoid

losing

sight of it

Most people who don’t know me personally assume that my decision to launch Askeladden was somewhere

along the spectrum from brave to daring. In reality, it was more desperation than anything else: I didn’t

exactly have a lot of other options

. I am what you would call unemployable.

It’s not due to my resume.

I’ve scored in the 99

percentile on pretty much every standardized test I’ve ever

taken (SAT, ACT, GMAT) with minimal studying. I graduated

simultaneously

from high school

and

communi

ty college

at 17 with 84 hours of college credit

and a perfect GPA.

completed my

MBA, also with

a perfect GPA, before I turned 21

–

despite

working full

time in a white collar pr

fessional job since I was

18. Setting aside academics and focusing on sof

t skills,

all of my mentors

agree that my capacity for empathy,

as well as self

reflection and self

improvement, is off the charts for a 20

something male.

It is thus difficult to craft a plausible nar

rative in which I wouldn’t be a lights

out

asset

in mos

t any analytical

knowledge

work type role. Yet I have an unusual

constraint

: I’m a late chronotype and I have higher

than

average sleep needs

In any environment with artificial light exposure,

I’m physically incapable of falling

asleep before 2 AM, which means that I’m also more or less physically incapable of getting up before 11

(sometimes noon)

on any sort of regular basis without severe

ly de

priving myself of sleep. (Even on camping

trips, 8 or 9 AM is about as early as I wake up without an alarm clock.)

Decades of chronobiology r

esearch demonstrates conclusively that you can’t wish or will away your

chronotype any more than you can cancer.

Yet

t turns out that if you can’t

or won’t

show up at an office at

9:00 in the morning, the rest of your skillset and personality inventory is usually deemed irrelevant.

Even at companies with

supposedly

flexible schedules, research demonstrates that

–

controlling for

equivalent actual job performance

–

managers severely penalize

those

professionals who choose to start their

days later rather than earlier.

Indeed, being a late chronotype is hazardous to your career trajectory; the

corporate environment

selects far more strongly for morningness than for talent

That undoubtedly leads

many brilliant late chronotypes to feel the same way I did

when I was constantly

patronized and talked down to by an early

bird superior

. She

made me out to be lazy and ch

ildish because of

something

biological

I couldn’t

change any more than I could change my skin color.

I felt hurt, lost, sad. Angry. Demeaned. Bullied, like high school all over again.

Keep looking down on me, I am

more than you’ll ever be...

“K

ick Me” by Sleeping with Sirens

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

I was lucky in that I was homeschooled throughout K

–

12, and my first job

(as an editor for Seeking Alpha

Pro)

was

work

from

home

. So, for most of my life, at least most days, I was able to wake up

more or less

when I want

ed to.

When I started working as an analyst and was expected to show up at the office every day,

that’s when reality hit me: I couldn’t do this

for another two years, let alone 40

’s not a work ethic issue

: in some senses, my personal life has been on

hold ever since I was ten years old.

I’ve either intentionally or unknowingly given up many of the typical experiences of childhood and young

adu

lthood in pursuit of my goals.

But from a pure health standpoint, it simply wasn’t tenable for me to work

an employee for the vast majority of companies

What he saw on the reflection of light

on the glass...

I learned one important thing

while working as an analyst at

a former hedge fund so

rta

turned family office.

The portfolio manager

told me that his clients didn’t care if he was working in the office at 3 AM on Sunday,

or if he was playing golf on a Tuesday afternoon

–

both of which he’d done.

No: what his clients cared about was

whether or not he made them money.

Period. Full stop

. No caveats.

And a lightbulb clicked for me. My boss

showed up

to the office

–

or the golf course

–

whenever he wanted,

because his relationship with his clients was contractual

and performance

based

. I had to show up to the

office whenever my boss tol

d me to, because my relationship was

one of employment, and thus optics

based

So it immediately became clear that if I

wanted the

sort of life I wanted to live

–

i.e. one in which I had

control over my time and location

–

then I had two options.

The first

was the approach of getting to “the number.” Also colloquially known

in the finance industry

having “bless

you money” (yes, that’s a euphemism), some people take the approach of killing themselves

(almost literally) for enough years to walk away with

a bank account that provides them with the financial

freedom to do whatever they want for the rest of their life.

The second was to create a business for myself in which I leveraged my unique skillset

, along with modern

technology,

to create value for clie

nts

who

wouldn’t care when and where I did the work to create that value.

The choice between the two was pretty easy. The first requires tremendous

and irreversible

sacrifices along

the way, along with

–

as a mentor

who went through this

pointed out

–

the

unsolved

prob

lem of what you do

at the end. W

ork, however much we may dislike it some days, provides valuable intellectual stimulation and

social interaction for many of us. Retirement isn’t always as easy or fun as it sounds.

The second

choice

required sacrifices too

–

primarily, the sacrifice of the stability and certainty of a paycheck,

as well as the extreme level of effort and responsibility required to start a new business

–

but on a discounted

net present value type basis, very clearly pr

ovided the best of both worlds: the intellectual and social benefits

of work, coupled with the lifestyle benefits of being retired.

And so the plan was made to launch Askeladden

Capital raising isn’t a pure meritocracy, of course; pedigree

matters, and s

o does having wealthy family and friends. I had neither.

Nonetheless: s

o far, so good

–

stated earlier, pro forma for verbal commitments from existing and new clients, we’ll broach $5 million in

FPAUM soon

, the majority of which is derived from those

who are or have been successful investment

professionals themselves

. Returns have been phenomenal. And I’ve been happy.

One prospective client noted to me recently that

“I know you like to make it sound like you don’t work that hard, but

I can tell that

you do.”

He’s right, of course

–

in a highly competitive world, there’s no free pass on applying

yourself. There is of c

ourse the occasional day or week

where I binge

watch Modern Family or play through

Red Dead Redemption 2, but most of the time I’m pre

tty locked on to

getting stuff done

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

But working any amount of hours is far more enjoyable when there’

s autonomy involved.

I’d rather work 6

hours a week for myself

, when and where I want,

than 3

0 for someone else

, on their terms

When I launched

Askeladden, I posed myself a

hought

experiment

: would I rather spend the rest of my life making

$50K/yr

on exactly my own terms, or would I rather make a practically unlimited amount of money but sell my

freedom to do it? The answer was easy when I frame

d it that way: the first.

What I wanted was...

...

a better life.

Was all of that context entirely necessary? Perhaps not. But I think

the depth is helpful in answering

the

question that the one prospective client asked point

blank, and many others undoubte

dly wondered: in an

industry all too often characterized by duplicity and greed, how can you trust that I’ll stick to my guns an

close at a small capital base, ensuring that we don’t scale out of our opportunity set (or my skillset?)

The

most compelling a

nswer:

it’s in my best interest to do so

, based on my unique

utility function.

Incentives

are too often simplistically reduced to money; there’s more to the story.

elevant variables

for me

Income

above a certain point

(say, 95

percentile HHI

, or ~$25

0K/yr

)

holds very little value for me

won’t t

ade ANYTHING for sleep

(both amount and timing) on a regular basis.

I will trade off very few things for

day

schedule control

I like long

term, qualitatively

oriented research.

I don’t like complianc

e / administrative

/ operations / trading

, and I don’t like managing people

Again, with the critical factor being that I’m optimizing for being

happy

, rather than wealthy,

scaling

too large

makes no sense. Universally, all the investors I’ve known who’ve

run

large

funds have noted the inverse

correlation between fund size and time spent on research. Larger funds naturally require more

operational/compliance/administrative work, more marketing, and more time spent managing teams.

So a larger fund would m

ake me more money... which wouldn’t do much for me... but it would require me

to spend a lot of time on stuff that I don’t want to spend time on

, and am not particularly good at

. Which

would make me sad.

t would also probably require me to get up before 11

more often than once a month,

which would make me

very

sad.

We’d be back to “the number”

–

get rich, then get out. If that’s what I

wanted, there are much easier ways to get there than trying to launch and run my own fund.

Finally, and critically, the

larger the fund, the fewer

–

and more picked

over

–

the opportunities that are

available. Although I’m theoretically willing to invest

in a company of any size

–

I won’t

turn down Google if

it trades at five times free cash flow

–

I’ve repeatedly found, o

ver the course of my five years as a professional

investor, that s

maller companies tend to have

greater frequency and magnitude of favorable mispricings.

Many Askeladden portfolio companies, even those with larger nominal market caps, have accessible flo

ats

well below $300 million, and in some cases

below

$100 or $200 million, which creates an obvious

mathematical liquidity challenge for larger funds

that want to take concentrated positions

My business will succeed or fail

based on my performance. I don

’t have a fancy pedigree or brand name

fall back on.

I’m not going to impress you with my Levi’s and Chuck Taylors.

Given that I’m trying to run

Askeladden as a sustainable lifestyle business for decades, there’s no point in flying too close to the su

n and

burning our wings.

Of course, all other things being equal, more money is better than less

–

but all other things are rarely equal,

and the same analytical process that leads me to consistently identify and invest in undervalued companies

leads me

to believe that it’s unlikely that Askeladden would be either operationally or strategically sustainable,

in a manner that is acceptable to me, if it scaled to a very large size.

2019

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Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

In Conclusion

I haven’t actively marketed Askeladden during its first three y

ears, other than posting content online and

making it readily available to anyone interested. After careful consideration, I am planning to start marketing

more actively in a very selective way, which I will discuss in more detail in the next letter.

Askeladden has a credible value proposition; the quality of our thinking

and the unique effectiveness

of our process

is self

evident from the body of work we’ve cumulatively presented. The same analytical

capabilities that have led me to enjoy a bette

r life can help others achieve a better life for themselves

–

whatever their individual utility functions may be.

Key in on “very selective,” however

–

I’ve turned down capital in instances when the client was not a good

philosophical or personality fit f

or Askeladden, and

I am completely willing

to do so in the future as well, no

matter the check size.

Indeed, h

alf a year elapsed between me

reading Ogilvy on Advertising,

originally

considering ways to actively market Askeladden

and finally taking a new

step that will help us do so.

While it would be nice to have a larger operating budget both personally and professionally, it’s much more

of a want than a need

–

Askeladden as a business is meaningfully cash flow positive and as a single 25 year

old who l

ives at home

in a very low cost of living metro (D/FW)

, my personal cost structure is very lean.

The things I like in life (kale,

EVOO,

coffee, backpacking

, books

) tend to be pretty cheap.

Rarely do I really

want something and feel like I can’t afford i

t. I live a good life.

I’m not eating ramen (unless it’s the tonkotsu

kind.)

Moreover, I have ample savings and no debt.

There will come a day when I’ll

have a family and need

to be able to support them, but that day is quite far away.

As such, I don’t

have any specific capital

raising targets:

I’m focused on

building Askeladden

well

rather than

quickly

There is substantial intentionality here.

I want my focus

and time

to remain

firmly

on research

–

it’s

the

goose that lays the golden eggs

–

and I’m

very sensitive to my lifestyle being compromised.

I’d rather maintain those two constraints and scale somewhat more slowly than abandon them and scale more

quickly. Capit

al is far more plentiful than alpha.

$50 million is, in the grand scheme of things

, not a lot of

capacity

–

the leverage is on my side of the table. As such,

I’m willing to take

long as it takes to get t

$50MM on terms I find acceptable

, although I have a hunch that it’ll be sooner rather than later.

Three years of experience

ultimately leaves me with

substantially more confidence than I had when I started

confidence that we have a sustainable and repeatable process for generating superior investment

performance, and confidence that our process

–

and our uniquely transparent c

ommunication style

–

resonates with

financially s

ophisticated

clients

who are often successful investment professionals themselves

or have previously invested in name

brand funds

(

the type

un by

famous

“

superinve

stors.

”

)

This con

fidence, however, is not hubris.

I remain focused on continuing to expand and stre

ngthen our circle

compete

nce

. I use every opportunity I get with older and more experienced investors to

earn something

: about a skill like interviewing management teams, about the history of a certain industry or business

model, about t

he challenges I’ll face as my fund scales.

There’s lots to learn. I’m just getting started.

In closing,

I am grateful to all Askeladden clients for entrusting me with their capital, a responsibility that I

take very seriously.

More than anything else,

am grateful to you for enabling me to live exactly the life I

want to live, and

–

in turn

–

I hope that my efforts will help you do the same.

As always

westward on.

It’s our manifest destiny (in case you were wondering

why I always close letters

with t

hat phrase.)

Samir

2019

–

Askeladden Q4

2018

Letter

: A Better Life

askeladdencapital.com

Appendix

DISCLAIMER: Data is estimated, unaudited, and provided for directional color only. Past performance is

not a predictor of future results. We do not expect our future returns to approximate our historical returns.

Amounts may dif

fer due to rounding. Please consult your monthly statements from Fund Associates LLC or

audited annual financials from Spicer Jeffries LLP for actual returns. Decimal points have been excluded so as

not to convey a level of precision that these estimates a

re not intended to convey.

Net returns are calculated assuming a hypothetical investor paid the standard fee structure of a 1.5% annual

management fee and 30% of the outperformance, if any, vs. the S&P 1000 Total Return index,

which was

chosen because it

had, at the time of inception,

historically outperformed the Russell 2000 and most

accurately represents our typical investment universe of small and mid

capitalization U.S. equities (i.e., those

with a market cap of $10 billion or less). We may invest out

side this universe (for example, in U.S. large caps

or international small caps.)

Individual investors' returns may differ from those presented here due to their date of entry into the fund or

their specific fee structure (for example, accredited but non

qualified clients may not, by law, be charged a

performance allocation, so they are typically charged a higher, flat management fee).

Results are presented only for Askeladden Capital Partners LP and not for any of the separately managed

accounts which As

keladden Capital Management LLC (the investment advisor to Askeladden Capital Partners

LP) also oversees. While separately managed accouts are generally allocated very similarly to the fund, SMA

clients' performance may differ based on factors such as: tim

ing of account opening, tax considerations,

specific client instructions, and manager discretion; therefore, SMA clients should consult their Interactive

Brokers statements for specific performance information for their account.

This is not an offering of

securities or solicitation thereof; any offering of securities would only be made to

accredited investors via a Private Placement Memorandum under Rule 506(c) of Regulation D, and any

prospective partners who did not have a pre

existing relationship with

Askeladden as of 1/18/2017 would be

required to verify their accredited status with relevant documentation. This requirement does not apply to

separately managed accounts.

Any documents prepared prior to 2017

18 were not intended for public distributio

n and should be read

accordingly. Askeladden Capital Partners, and SMAs that mirror its strategy, should be considered high

risk

investments suitable for only a small portion of an investor's overall portfolio, as they involve the risk of loss,

including t

otal loss. Specific risk factors

are enumerated in our Form ADV.

Samir Patel, Askeladden Capital Management

Askeladden Capital Q3 2019 Investor Letter - "Earn It"

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Why Value Investors Need Systems Thinking

Tunnel vision is dangerous, y'all.

Jan 11, 2017

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