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Ryan Morris, 25

Occupation: Ex-CEO/founder of VideoNote; now Managing Partner with Meson Capital Partners

Portfolio: AerCap Holdings N.V., Aircastle Ltd., BofI Holding Inc., KVH Industries Inc., Jackson Hewitt Tax Service Inc.

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A varied background
Ryan Morris is one interesting cat. He studied an esoteric field of engineering at Cornell, a combination of applied math and computer science that involves taking models and tools and applying them to real-world business problems. During that time, he took two breaks, one to work surveying in North Alberta oil fields, and the other to tour Europe by bike.

Even after gaining his undergrad degree, he spent a year as a professional road cyclist before returning to Cornell to do his master's. "I just did it for one season, because once you get to a certain point you don't learn too much," he says. "I value learning and understanding things more than anything in life."

Why He Loves Investing
"I have a desire to always learn more, and that's totally satisfied by investing," he says. "It's all about understanding how things work and then making portfolio decisions."

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How He Invests A value investor, Mr. Morris says it's critical for him not to care what other people think. "Part of the satisfaction is understanding and being right, and having everybody disagree with me on the way." It's also the key to finding bargains. "It's extremely unlikely you'll find something that's cheap that a lot of people know about and like."

His screen filters include 52-week lows, lots of analysts' sell ratings, really low price-to-earnings and price-to-book ratios, as well as companies that have an enterprise value to EBITDA ratio (earnings before interest, taxes, depreciation and amortization) of close to 1.

He looks at balance sheets, liking companies that are trading at less than their liquidation value. He also assesses a company's earning power. "Because that is a lot more difficult to calculate, they need to be straightforward, predictable businesses."

A good example is KVH Industries. A maker of TV antenna for RVs, the stock - and business - tanked along with the economy. But Mr. Morris saw that KVH was working to launch a high-speed Internet service for ocean-going vehicles on the high seas. "They're by far the low-cost provider, and the stock went up 40 per cent right after I bought it."

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Best Move When the economy crashed, a lot of investors thought aircraft leasing companies would do the same. But Mr. Ryan's research told him a third of the world's airlines would need to go bankrupt before the sector would take a hit. He bought four public aircraft lessors. Whenever one rose faster than the others, he moved some money out if it and into the laggards. The result? A 400-per-cent return in just six months.

Worst Move Chicago-based phone directory publisher R.H. Donnelley looked like just his kind of company. "I knew it was pretty risky, and the market thought they would certainly go into bankruptcy." The stock, he says, was incredibly cheap, but the company was still making a ton of money and had a good cash flow. "The problem was all the covenants on the debt and restrictions on what the ratios were allowed to be." Trading was suspended at the end of 2008, and the stock now trades on the pink sheets.

Advice "Don't do anything you don't really fundamentally understand. And don't resort to simple rules, you've got to deeply understand something before you invest in it."

Special to The Globe and Mail

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