Idea Brunch with Ryan Worch of Worch Capital

Welcome to Sunday’s Idea Brunch, your interview series with great off-the-beaten-path investors. We are very excited to interview Ryan Worch!

Ryan is the founder and chief investment officer of Worch Capital, a growth-oriented long/short equity fund he launched in October 2008. Before launching Worch Capital, Ryan managed a growth portfolio for Metzman Capital Ventures and started his career at a local DC-based boutique broker-dealer, Newby and Company.

Ryan, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Worch Capital?

I have a slightly unconventional background compared to most of your guests that come from traditional Wall Street. After completing my degree in finance from Virginia Tech I joined my family’s electrical sub-contracting business immediately upon graduation.

However, I quickly realized this wasn’t the path for me as I had an innate fascination with stocks and the market from an early age. I was always intrigued sitting with my grandad as he showed me his stock portfolio he recorded on a ledger. I even asked for shares in Disney stock for my 11th birthday. I still own those shares today. Fortunately, my father was supportive of my aspirations, and in late 1999 I secured a position at a local broker-dealer. Initially, my primary responsibilities involved providing support to two experienced brokers and acquiring the necessary licenses along the way. However, these brokers eventually left to establish their own firm within a family office environment. For a span of six years, I had the privilege of working directly under their guidance, actively engaging in diverse responsibilities encompassing research, trading, and portfolio management. Coming from backgrounds as former certified public accountants, my bosses had a strong foundation in fundamental analysis and predominantly focused on trading small and micro-cap stocks. As a newcomer to the industry, I eagerly followed their recommendations and implemented trades accordingly.

The 2000-2003 bear market served as a turning point in my career. It exposed me to crucial lessons on risk after I experienced a substantial 60% loss in my capital quickly. This humbling experience compelled me to seek further education and develop a strategy that would prioritize capital preservation, growth, and price action. Over the next few years, I dedicated myself to thorough research. I eagerly consumed various materials on different trading styles, leaving no stone unturned. The Market Wizards books, in particular, provided a valuable source of motivation and showcased the incredible potential that lies within the trading world. They offered a glimpse into what can be achieved, inspiring me to pursue my own trading endeavors.

Over time, I began to see success in managing my own capital, which prompted me to share my track record with my former mentors. Recognizing my achievements, they provided me with a proprietary account, which ultimately paved the way for the establishment of Worch Capital in 2008.

On your site, you say that your fund’s edge “lay in its ability to remain opportunistic and unemotional at all times.” Can you tell readers a little more about that and how being unemotional has led to great investments?

For me being unemotional is adhering to a meticulously crafted process and unwavering routine and not being influenced by external influences and clamor.

Markets look best at the top and worse at the lows. At any given moment, persuasive arguments can be made for both bullish and bearish sentiments, with copious data to support each outlook. Hence, I consciously avoid veering into exaggerated optimism or pessimism, opting instead to place my faith in the sanctity of my daily regimen.

As an avid Orioles fan, I don’t have the fondest memories of Derek Jeter, yet I hold a profound respect for his leadership, play, and how he carried himself. I recently listened to an interview about what led to his success. A recurrent theme resonated throughout: the essence of discipline and routine. His biggest fear in life is being unprepared. He did the same thing every day for his whole career. He knew what worked for him and he stuck to it through good and bad times, success or failure.  

Popular perception often paints the life of a fund manager as an exhilarating saga teeming with rapid-fire action. However, my perspective veers in the opposite direction. Don’t get me wrong, it certainly brings plenty of stress with the job but when I am trading at peak performance, I am calm and collected and everything slows down. In fact, it can be outright boring and monotonous as I diligently replicate the same meticulous routine day after day. It is precisely this approach that has produced healthy returns with much less risk than the overall market for the last 15 years managing my fund.

2020 was a great example of being unemotional, prepared, and opportunistic when I saw a fat pitch. Against the backdrop of a challenging environment, we ended the year with a return of 75.4% net of fees, while sidestepping pitfalls. Based on our internal indicators, we turned bearish in February of 2020. We were lucky enough to be short into the pandemic collapse. However, I covered way too early and remained in cash throughout March. Our models stayed bearish until early April. Once a buy signal was triggered, we started building our long portfolio.

This period was shrouded in uncertainty, as the world grappled with the uncharted depths of the Covid crisis. Emotions ran high and the daily barrage of news was overwhelming. This was a perfect example of staying unemotional and trusting the process. No one ever knows what the market will do, and any such claims should be met with caution. Since we missed the whole down move off the February 2020 top, we were in a favorable position. Capital preservation has multiple effects and the most important is keeping emotions or mental capital in check. Since we were already on the sidelines during the Covid bear market, we remained nimble to redeploy capital at key market turning points. We are not trading from a place of fear as others but from a position of strength as the market began a new uptrend. Even though our buy signal turned bullish in April we really didn’t make money until June. From June till the end of 2020, we outperformed wildly by being aggressive when the opportunity was presented as our strategy was in high gear with the market as we acted without emotion.

What are two or three interesting ideas on your radar now?

Our strategy revolves around identifying compelling growth themes and subsequently pinpointing the industry leaders that underpin those themes. While we understand that it's nearly impossible to consistently time the market by buying at the absolute bottom or selling at the peak, our focus lies in capturing the meat of the trend. We aim to ride the momentum and take advantage of the upward movement, all while being mindful of the potential for a subsequent downturn.

Currently, we are excited about two specific growth themes below that we believe present exciting opportunities for potential gains — I’m excited to share those themes with your readers today.