About Aleph Investments, LLC & David J. Merkel, CFA

Sometime in the mid-’90s, I realized that I had a talent for picking cheap stocks that didn’t stay cheap.  I was working as an investment actuary at the time, doing fairly advanced work in investment risk control for Provident Mutual Life.

I was motivated enough at that time to draft a business plan for setting up my own mutual fund.  But once I did that, I looked at my young and growing family, and realized that I didn’t have the capital to do it, without potentially putting a number of other goals at risk.

I went to the Chief Investment Officer of the firm, showed him my track record, methods, etc., and asked if I could manage a separate account for variable annuity investors.  He politely turned me down, and as I learned later, the investment department that reported to him had asked if I could be a part of their department, but he turned them down too.  Thus, I set the business plan aside.

Two years later, I received a job from the St. Paul Companies, which was buying out USF&G, asking me to help them invest assets of the life insurance company, Fidelity & Guaranty Life.  Initially, I managed the investment risks, and then began managing the mortgage bonds.  After Fidelity & Guaranty was sold to Old Mutual plc, my investment arm was sold along with them, and in the process I became the corporate bond manager.

All the while, I kept doing my value investing, and succeeded for my benefit.  Going back in time a little, in early 2000, I had an e-mail dialogue with Ken Fisher.  I wanted to discuss value investing with him, but he challenged me to develop my own proprietary sources of value.  Throw away the CFA syllabus, and all of the classics — look for what is not known.

So I sat down with my past trading and looked for what I did best.  What I found was that I did best buying strong companies in damaged industries.  That was the key idea that led to my eight portfolio rules. Value investing with industry rotation may be a little unusual, but it fit my new view of the world. I couldn’t always analyze changes in pricing power directly, but I could look at industries where prices had crashed, and pick through the rubble.  I could also try to see where trends were under-discounted.

I did very well as a corporate bond manager for two short years, but in early 2003 my boss gave me an ultimatum, “Move up to the main office in Burlington, VT, or you are severed.”  My family had good friends in Baltimore, and a congregation that we did not want to lose, so I took severance.  Two months later, I was employed at an equity hedge fund analyzing insurance stocks.

At the same time I was invited by Jim Cramer to write for RealMoney, which gave me my start in investment writing.  I think Jim for his confidence in me.

That lasted for 4.5 years.  I did well at it, and I got to apply my value investing to managing the firm’s internal profit sharing and charitable endowment assets.  Because of my outperformance in that time, there are one or two more orphanages in the world.

In early 2007, I started the Aleph Blog, to more fully put out my ideas on investing to the world at large.   It has become one of the best financial and investing blogs on the web.

But disagreements at work, and difficulties at home made me leave.  A few months later I joined a minority broker-dealer, Finacorp Securities, with the objectives of providing research to their brokers and clients, and starting an asset management arm for them.  That lasted for about 2.5 years, before Finacorp dissolved.  After they dissolved I realized that I had to do it myself, and so I started Aleph Investments.

I had enough capital from past savings and successful investing that I knew my family would be okay, and so at age 50, I finally opened my doors to manage assets for others.  I picked up the business plan written 15 years earlier, modified it to fit the present circumstances, and started this business in January 2011.

For I while I wondered if it would work, because the response from my marketing was so light.  But by April 2014, I concluded that things were working, and that I had sufficient income to take care of my family, and if things grew further, well, great.  I think I can do this the rest of my life, loving it, and doing my best for my clients, while not charging an arm and a leg.

Thanks for reading this.  Please consider using Aleph investments for your investing needs.  Have a look at the Documents page.