Under the Ice, You Have to Rub It Clear

On the North Slope we do only three things. Two have been written already: injecting order into the market, and translating intent into language. This piece is the third — finding value where it has been misread.

Our view is that undervalued assets rarely lie inside the consensus. Why? Because nothing inside the consensus is discounted. What sits in the consensus everyone can see and anyone can price; there is no "finding" left for you to do. Real value is often buried deep under the ice, covered by the market, wrapped in misreading. You have to rub it clear before you see the gold.

There are no overlooked gems where the crowd is

So why does everyone still crowd in? Because it is easy to get approved. Once a theme has been confirmed by market consensus, it takes the fewest words at the investment committee. But whatever is easiest to explain has already been bid up. Most of what the industry does is aimed at a wave that was already established in the last cycle.

Two words need separating here. Heat means many people are willing to talk about it. Consensus means someone is willing to pay at that multiple. Anchor on heat and the roadshow is lively for three months and comes to nothing; anchor on consensus and there is someone to take the valuation. We are fairly sure of this one.

One more thing runs against intuition. The people actually doing non-consensus deals are usually out of the industry's sight: the direction has not been categorised, there are no comparable companies, so nobody is watching. Whoever shouts non-consensus is on the stage. Whoever does it is off it.

So one category in our intake threshold is the undervalued gem: misread by the market, bright after one wipe. Note the order. First there has to be something bright underneath; only then does the wiping matter. Rubbing will not make an ordinary stone shine.

The gold also needs a door out

An unpleasant line first: a good asset is not the same as a good deal. A company can be steady, it can be profitable, it can be wedged into an excellent niche. But if it can neither list on its own nor be conveniently carved out of its parent, the value on its books has no route to realisation.

Which is to say, looking at a target, "why get in" and "how to get out" have to be answered together. Answer only the first half and what happens? The steadiest one is the hardest to realise. So far, this filter takes more names off the gem list than technology does.

Finding is not inventing. Glacier's philosophy is a philosophy of integrity: it is used only to dig out what someone has already thought and cannot say — to help him say it, and to close the loop. Between what a person says and what he truly thinks there is always a gap. Our work is to fill that gap, not to open another one. If there is no gold under the ice, all the rubbing does is polish the ice.

How long does one piece of ice take? We have stayed ten months. A mandate runs sixty days and eight milestones — that is when the window is open; when it is not, you wait. But the moment a company is understood, the whole frame of reference changes. The days before it is understood are the coldest: no queue, nobody fighting for allocation.

So are we used to the cold? Reasonably. Glacier is our English name, and a glacier forms through extreme cold and long deposition. The hotter the market runs, the harder you have to look for the scarcest underlying assets, and the colder you have to stay inside. The North Slope is harder to climb, but it is never crowded.

Cold is not a pose. It is the precondition for finding.