An Interview With The Bear Cave

From writing exposés on corporate misconduct to becoming one of Substacks top finance newsletters, we sat down with Edwin Dorsey.

We recently spoke to Edwin Dorsey (@StockJabber) who founded and runs The Bear Cave. His reports focus on flagging up bad companies to investors. Edwin has over 42,000 subscribers on Substack that receive his content each week.

To begin with, could you give us a bit of background on how you first got interested in the stock market?

“I’ve been passionate about stocks from a very young age, even from second grade. I believe that you don’t choose your passions, your passions choose you and that’s been true with me and the stock market.

In high school my Grandma put some money into a trading account, she wouldn’t give me the money directly but did give me the login details. From there I would invest it, which elevated my interest in markets.

Another big step forward in my interest came in my Freshman year of college when I met hedge fund manager Marc Cohodes, a professional short seller. I took an hour-long Uber up to his chicken farm in Northern California and he just got me completely hooked on the short selling. He told me stories about the frauds he had exposed and spoke with such passion about his job.”

Could you talk us through the key elements you look out for when you analyse a company?

“In terms of models, I don’t really focus on financials. My sweet spot is $1-10bn market cap US-listed companies generally in the consumer tech space that are misleading investors or harming customers. That’s what I focus on.

In terms of harming customers, this can be explored through different areas. One example of what I look at is auto renewal polices/cancellation policies. Everyone makes it a little difficult to cancel, but some take it to an extreme. Doing so degrades your business value and credibility in the long run. Planet Fitness is a case here, whereby they don’t let members sign up with a credit card but rather a debit card where stopping payment is much harder.

Another element is noting companies taking advantage of the elderly, minority groups or vulnerable customers.

The other element is misleading investors. I say they often have more bark than bite! Embark Trucking is a good example, that went public via a SPAC with a $5bn merger. It has since fallen 99% in value, as it never recognised a penny in revenue from core products. If you look deeply at it, it was a 25-year old CEO employing his college roommates trying to make software for autonomous trucks. In some situations it’s difficult to prove there is nothing there, but you can look at the circumstantial evidence and highlight all the red flags.”

Embark Technology Inc Share Price:

What advice would you give for those that want to get into financial analysis but don't know where to start?

“I’ve learned a lot from Twitter and YouTube. Watch Warren Buffett’s interviews, watch interviews with hedge fund managers. From Twitter, build up a good feed and you’ll learn from osmosis. To this end, I’ve published a list of 100 great Twitter accounts to follow here.

One person gave me the advice that ‘you learn by doing’. Putting a small amount of money into a trading account makes a huge difference just for the purpose of starting to learn.”

What do you make of the power that other firms (e.g Hindenburg) have garnered and the impact it can have on a share price?

“We’re definitely seeing a transition between activist shorts that used to just release a short report online to now becoming a form of journalism. Firms like Hindenburg seem to be focused not just on reporting for the investing community but to society more broadly. It’ll be interesting to see how this transition progresses.

I feel in the future there will be more activist short companies positioned almost as more of a newspaper, with a focus on corporate misconduct.”

You've managed to have large success in growing a readership base from the ground up. What are some of your tips for others to replicate?

“The number one is growing a Twitter audience. I can tell if someone is going to be a successful Substack author based on their Twitter persona. Naturally, part of this is based on the number of followers, as you get the conversion to newsletter subscribers in the early days from this.

Further, the same traits that make you successful on Twitter carry through to longer-form written content. Are you a clear communicator? Are you a genuine person? The internet is good at sussing out who’s genuine. Getting likes and retweets doesn’t always correlate to having true support and a loyal fan base. The only way to grow true support and have people actually want to pay for your product is to be a genuine person, add value and care about what you are doing.

To anyone thinking about starting a newsletter, start by building a Twitter following. If you can’t get people to follow you for your content, there’s no chance of you getting anyone to subscribe to a free email. If you can’t get people to read your emails for free, you’re never going to get people to pay for a newsletter! Learn what resonates with people, grow a Twitter following, launch a free newsletter, start a paid element.”

When you started out, did you feel it was a realistic goal to make a living from publishing your reports?

“I love this question! When I was starting out in 2020, Substack was still new. What gave me hope was noting a publication that covered corporate bankruptcy (Petition) was earning over half a million a year from their newsletter. I reached out to them to see if I could replicate their success and they kindly replied with helpful points.

I realised that putting out great content wasn’t beyond me, it wasn’t superhuman.

At the time though, I thought I could make some money and then get hired into a hedge fund. But with the growth in paid subscribers, things have gone a little differently!”

What are your next goals for The Bear Cave?

“Aside from The Bear Cave, I have a second newsletter called Sunday’s Idea Brunch where I produce an interview great off-the-beaten-path investors. I’m also thinking about launching a third publication to recap all the long-biased tweets and research published by others online

I also want to get into YouTube. It’s a really powerful platform, and I feel I could take my reports and put it in a more mass-market format visually that could do really well.”

If you could go back in time and visit yourself in college, what piece of advice would you tell your younger self?

“It gets better in the future!”

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