David Katz '84 is the rare alumnus who not only thinks about
his thesis — he uses it every day.
Katz's thesis is the backbone of Matrix
Asset Advisors, the money management firm that he
co-founded in 1986. The company now runs $550 million in
assets for high-net individuals and institutions.
Katz, who says he always knew that he
was going to be in the investment business, wrote his
thesis to be an entree into the industry. It worked;
Management Asset Corp. “hired my thesis and took me
along, too,” he says.
His thesis, a computer program that
analyzed lucrative stocks, led him to focus on the
attractiveness of buying stock in solid, undervalued
companies. The trick was to determine which companies
were facing short-term problems only and which were
doomed to failure. After analyzing countless economic
models, Katz discovered what worked best and created his
own model.
After two years with Management Asset
Corp. and one and a half years at New York University
Graduate School of Business, Katz was ready to start his
own company. In 1986, he and a partner started Matrix
Asset Advisors, which has grown from $3 million in assets
that first year.
Matrix's analyses are based on the
computer program that Katz developed for his thesis.
Modified to reflect Matrix's current needs, the program
narrows the universe of about 8,000 companies that Matrix
considers to about 100 or 200 securities that meet their
criteria. The company then conducts qualitative research
to determine which companies are the best buys.
“The question always is how can
you buy a company at one-third of its worth,” Katz
says. He explains that Matrix often buys stock in
companies with perceived short-term problems, relying on
the fact that the stock market's reaction to short-term
problems can produce dramatic price swings unrelated to
the long-term prosperity of a company. “If you look
beyond the short-term problems, you often find that these
are good, solid companies.”
A typical Matrix portfolio will include
thirty to thirty-five stocks spread over twenty to
twenty-five different industries, and stocks are sold
when they reach Matrix's estimated fair value or if the
company's balance sheet violates their criteria. Matrix
also recently took on the management of a mutual fund,
which is primarily geared to the needs of smaller
investors. The company manages the $10 million fund just
as it does its other portfolios.
Is there some key to developing a
thesis that can be transformed into a successful
business?
Katz says that it was a combination of
identifying a thesis topic that, if successful, would
have real world applications, being at the right place at
the right time, and getting lucky. He also credits his
professors, with special thanks to Brad Lewis of the
Economics Department, for invaluable assistance over the
years.