Haren Bhakta, Inside Ownership

Haren Bhakta got into the industry in 2008 by selling insurance at Prudential because nobody else was hiring, then spent time in wealth management at Merrill Lynch and Morgan Stanley before starting his own firm in 2017. There he ran a microcap fund, won a proxy contest, and later sold the company. The idea for his index came at the 2024 Berkshire Hathaway annual meeting, the first without Charlie Munger, when he realized the S&P 500 will actually buy more Berkshire stock when Warren Buffett dies, because Buffett's shares are excluded from the free-float index weight until they hit the market.

In this episode, Haren walks through OWN, the Inside Ownership 100 ETF, launched June 3. The fund takes the S&P 500, selects the 100 companies with the highest dollar value of insider ownership, and weights them by that dollar value instead of market cap. Haren built the index history himself from about 21,000 proxy filings covering 21 years because no major data provider had the ownership data. He explains the third way to index alongside equal weight and market cap, why the result is a power-law portfolio concentrated in leaders like Jensen Huang, Elon Musk, and Mark Zuckerberg, and why Apple still makes the cut but is significantly underweight. His clearest example is Intel and Nvidia in July 2020: the same size and the same S&P weight, with Intel ahead on revenue, profit, and free cash flow, but only Nvidia run by an owner.

Haren also covers a century of market leadership, from General Motors under Alfred Sloan to IBM under Thomas Watson Jr. and GE under Jack Welch, and how each declined after its leader left. He discusses the back test showing roughly two points of annual outperformance and shallower drawdowns in 2008 and 2020, his zoo lion versus wild lion analogy for hired CEOs and owner-operators, and why OWN focuses on owners rather than founders compared with FFF and the Billionaires Club ETF. He closes with why he'd use OWN as a replacement for S&P exposure and how that can let advisors reduce equity exposure at today's valuations.

Want the framework behind this conversation? Fifteen minutes with Brad Roth, founder and CIO of THOR: https://thorft.com/call?s=podcast

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