This interview covers how investor Jason Karp shifted from deep value to 'reasonable price plus growth' stocks. He says fundamental investors now make up less than 10% of trading, creating years-long price-value gaps. He's bullish on healthy food and cannabis, calling cannabis 'far more important than crypto' because cannabis firms have real cash flow, while 'all crypto is greater fool theory.' Key picks: Facebook and Google are 'ridiculously cheap' at 15x earnings with 20%+ growth; his own Hu Products is built to be profitable even without a sale.
Jason Karp (Founder and CIO of Tourbillon Capital Partners) discussed the evolution of investment opportunities in public and private markets on the program. His core argument is that any investment strategy must be grounded in immutable principles such as price discipline and business growth, but i
Jason Karp (Founder and CIO of Tourbillon Capital Partners) discusses the evolution of his investment framework in an interview: shifting from deep value to a "reasonable price + growth" strategy, with a focus on analyzing investment opportunities in two emerging sectors—health foods and cannabis. The most impactful judgment in the entire episode: Karp believes the cannabis industry is "far more important" than cryptocurrencies, because cannabis companies are backed by actual cash flows, while "all crypto is greater fool theory."
Karp points out that the pricing mechanism in public markets has undergone a fundamental transformation over the past five years. Citing investment bank data, he notes that 10 years ago, fundamental active management investors contributed 40–50% of daily trading volume; today, that share has fallen to below 10%. The remaining 90%+ of trades come from passive indices, quantitative funds, CTAs, and risk premium strategies — participants who "don't care what a company does or what it's worth."
This structural shift leads to two consequences: first, a multi-year (rather than multi-day or multi-month) disconnect between fundamental value and stock prices; second, a significant erosion in the effectiveness of deep value strategies. Karp argues that in today's highly efficient information environment, a stock found through simple screening at a "5x P/E" is likely a "frog with serious problems" ("most of them are frogs and you're going to get warts all over your face").
Deduction and Falsification: Karp believes the convergence cycle between fundamentals and stock prices typically spans 3–5 years. If investors can hold for a sufficiently long period, this dislocation instead creates "the biggest opportunity of my career" — but only if LPs can tolerate the volatility along the way.
Karp clearly distinguishes between "value investing" and "deep value investing," arguing that the latter is dead. In the summer of 2015, he wrote a controversial letter explaining why the deep value strategy had failed: with over 8,000 books on value investing already on the market and dozens of related websites, competition was so intense that "thinking it could still work as effectively as before is simply insane."
His alternative framework is the reverse DCF: rather than forecasting future cash flows to derive intrinsic value, it starts from the current stock price to infer the market's implied growth expectations, then assesses whether those expectations are reasonable. The core variable is organic growth in cash flows, not growth driven by financial engineering.
Key mechanism: If a company's earnings grow at a rate of 20%, they roughly double in 3.25 years. Over a 5-year time horizon, even if the valuation multiple is halved or cut by 75%, as long as the purchase price is reasonable, investors still make money. "Growth solves a lot of sins."
Divergence from market consensus: Karp believes that Facebook and Google are "surprisingly cheap" at current prices — they trade at price-to-earnings multiples in the teens, while other companies at similar multiples are "cyclical, with poor margins and inferior business models." He specifically notes that Facebook's earnings growth is at least 20%, and "there are still many levers left to pull."
Karp uses his own experience to illustrate the investment logic in the healthy food sector. Diagnosed with multiple "incurable diseases" in his early twenties, he successfully reversed his symptoms by improving his diet, sleep, and exercise. This experience led him and his family to found Hu Kitchen (a restaurant in New York's Union Square, serving an average of 1,000–1,500 people daily) and Hu Products (a chocolate product line that has entered 1,600 stores, with a year-end target of 2,500).
Industry assessment: Karp believes healthy food is "one of the most compelling areas of investment research," driven by an irreversible force — "once you understand these things, you don't go back." He observes that consumer trust in brands has shifted from "big brands = trustworthy" toward a pursuit of transparency and mission-driven values. Evidence: all major food company stocks are currently at 52-week lows because they "cannot innovate fast enough."
Competitive landscape: Large food companies (e.g., Kellogg's acquisition of RX Bar for $600 million, corresponding to roughly 6x revenue) gain distribution synergies by acquiring new brands. However, Karp warns that many startups only pursue revenue growth to sell to "dumb buyers," and once the capital environment tightens, "these companies will go to zero — actual zero." Hu Products' design principle: even if never sold, it must be a good business that can operate independently.
Reader note: Host Patrick became an investor in Hu Products after the episode was recorded; Karp is the founder and owner — this is a position-holder's perspective, and the narrative may contain elements of self-justification.
Karp believes cannabis will become one of the largest industries in the United States over the next 5–10 years, with significance far exceeding that of cryptocurrency. He spent 3–4 years researching the industry, initially driven by personal insomnia and a shift in his own biases against cannabis. He cites key facts:
Historical Context: Karp traces the history of cannabis demonization — the 1930s conflict between the mafia over alcohol and cannabis (alcohol won), and the political motivations during the Nixon era in the 1970s that classified cannabis as Schedule 1 (alongside methamphetamine). He argues this led to nearly 50 years of "misunderstanding and misperception."
Comparison with Cryptocurrency: Karp states bluntly that "all cryptocurrencies are a greater fool theory" — they have no cash flow support and rely solely on someone else buying at a higher price. In contrast, cannabis businesses generate real cash flow, with some early-stage dispensaries achieving single-store EBITDA of tens of millions of dollars. He warns that currently listed Canadian cannabis companies have "ludicrous valuations," but believes there are abundant opportunities in the private market.
Falsification Condition: The "domino effect" of cannabis legalization is unfolding, with Canada's full legalization serving as a key tipping point. If the U.S. federal legalization process stalls, the industry's growth pace will slow.
Karp summarizes his 20+ years of hiring experience: emotional intelligence (EQ) is far more important than IQ. He identifies three key variables: intelligence ("easy to find"), passion ("rare"), and emotional intelligence ("the hardest to find"). EQ includes: self-control, conflict resolution, empathy, and intellectual honesty (the ability to quickly change one's view when faced with contradictory facts).
Specific preferences: He tends to hire competitive athletes (with experience in failure and teamwork), individuals with military backgrounds, and mothers — "I find mothers are exceptional... They have experience dealing with children and a remarkable perspective on managing all kinds of conflicts."
| Position | Analyst View | Key Data |
|---|---|---|
| Bullish (cheap) | Earnings growth ≥20%; P/E in the teens; "still many levers not pulled" | |
| Bullish (cheap) | Same multiple as Facebook, but business model and balance sheet far superior to cyclical stocks | |
| Netflix | Bullish (daily habit) | Deeply embedded in users' daily routines |
| Amazon | Bullish (daily habit) | "Can't imagine life without Amazon" |
| Kellogg's | Mentioned as acquirer | Acquired RX Bar for $600M (approximately 6x revenue) |
| RX Bar | Mentioned as acquisition case | 4-5 years old, revenue ~$100M, acquired by Kellogg's for $600M |
| GW Pharmaceuticals | Positive mention | Uses CBD oil to treat rare childhood epilepsy |
| Peloton | Example in health/fitness space | No specific data provided |
| Fitbit | Example of health monitoring device | No specific data provided |
| Crocs | Counterexample (unpredictable fashion) | Went from hot to cold in just one year |
| Monsanto | Negative example | Produces glyphosate (Roundup) |
1. "Fundamental price-setters have dropped from 50% to less than 10%" (Karp) — Citing investment bank data, this is seen as creating "the biggest fundamental-price disconnect of my career," but requires a 3-5 year holding period to materialize.
2. "Deep value investing is dead" (Karp) — There are already 8,000 value investing books on the market, and simply screening for low P/E stocks mostly yields "frogs with serious problems." The alternative is "reasonable price + growth": a company with 20% annual earnings growth still makes money within 5 years even if its valuation multiple is halved.
3. "All cryptocurrencies are a greater fool theory" (Karp) — By contrast, cannabis companies have real cash flows, with "some single-store EBITDA reaching tens of millions of dollars." He believes cannabis is a "far more important investment area" than cryptocurrencies.
4. "Once you understand these things, you don't go back" (Karp) — The healthy food trend is irreversible because once consumers learn about the harms of chemicals in food (e.g., glyphosate), they do not actively choose to return. All major food company stocks are at 52-week lows, confirming this trend.
5. "Emotional intelligence is far more important than IQ" (Karp) — Three hiring criteria: intelligence (easy to find), passion (rare), emotional intelligence (hardest to find). He specifically recommends hiring mothers — "they have experience handling children and bring a remarkable perspective on managing various conflicts."
6. "Reverse DCF" framework (Karp) — Instead of starting from projected cash flows, it reverse-engineers the market's implied growth expectations from the current stock price, then judges whether those expectations are reasonable. The core is to find companies where cash flows actually grow, letting "growth solve all sins."
7. "The cannabis industry is $50 billion in size, with only $6-8 billion legal" (Karp) — Canada's full legalization in July 2018 was the key inflection point. He traces the history of cannabis demonization (1930s Mafia conflicts, 1970s Nixon political motives) and believes current valuations of Canadian listed cannabis companies are "absurd," but there are abundant opportunities in the private market.
8. "Hu Products' design principle: even if it never sells, it must be a good business" (Karp) — In the CPG space, many startups pursue only revenue growth to sell to large companies, but once the capital environment tightens, they "go to zero." Hu Products ensures it can be profitable independently, reflecting a "value investor" mindset.