J. Carlo Cannell is giving me tips on cooking with a Crock-Pot, which he does in his San Francisco office. “I like to ram in a whole turkey, cook it all day, and then serve it with cranberry and some spicy mustards,” he says. Not exactly standard fare from a high-end hedge fund manager. But then again we’re talking about a guy who owns a van with think peace painted on it in graffiti-art style (check it out at his website, donkeynation.com) and who loves to swim the Alcatraz Invitational across San Fran’s frigid, shark-infested bay. Carlo’s writings are as colorful as his hobbies: He recently noted there are more hedge funds than Taco Bells in the U.S. (That’s bad.) And he boasted that he “acquires information like a rodent foraging through trash.” (That’s good.)
Carlo’s way may be wacky, but there is definitely something to it. His Tonga hedge fund has averaged a net 25.8% annual return since 1992. With $324 million under management, Tonga, which trawls in small stock waters, is hardly a hedge fund blue whale. (Overall, Carlo runs a total of $800 million.) But in part that’s because Cannell doesn’t want it to be. Over the past five years Cannell has returned some $250 million to investors because he doesn’t think he can produce outsized returns if he has too much money to worry about. “We can’t add value buying Exxon or Procter & Gamble,” he says. “We have a much better chance of finding value at a flea market in Texarkana than at Sotheby’s.”
