Decoding Success: How to 130x Your Portfolio
A Deep Dive into Jeremy Raper’s Memos – Part 1
Introducing Jeremy Raper
Today we continue the Decoding Success series. Unlike most media that focus solely on the greats of the past like Buffett, Munger, and Greenblatt, I shine a light on current practitioners who still manage smaller pools of capital, making their investment style much closer to the early years of those legends we all admire.
This time, we kick off a new series covering a well-known and highly skilled investor: Jeremy Raper, the mind behind the research service Raper Capital.
Jeremy is a well known figure in the online investing world, with a long track record of publicly shared pitches. He started publishing articles on Seeking Alpha in 2014 and later transitioned to a paid newsletter on rapercapital.com, a service so successful that he eventually stopped accepting new members and implemented a waiting list.
Jeremy has produced incredible returns, recently sharing a screenshot showing a total return of over 13,000 percent, or more than 130 times his original capital.
Given both the wealth of public material and these stunning results, I think his work is well worth analyzing.
A bit more on Jeremy’s investment style. He is clearly an active investor, often focused on catalyst-driven situations that he believes will play out relatively quickly. If you ask Jeremy how he describes his own strategy, here’s a quote from his site:
"After many years of refinement and self-education, I’ve arrived at an approach I term simply ‘credit-based equity investing.’ That is, I try to think like a creditor, but apply that mindset to look at equities, not credit (with the odd dalliance back into bonds to be fair :)). Since lenders have extremely different, if not opposing, motivations to owners, this perspective is, I believe, at least somewhat differentiated from most stock market participants these days."
So many times the catalyst Jeremy tries to find come from his lens as a creditor, not from on equity view. Which makes his style very unique. Now that we know a bit about Jeremy, let’s dive into his actual pitches.
Since he has written a large number of memos (often 10 or more per year), and many are paywalled, I had to narrow the scope somehow. Fortunately, Jeremy has curated a selection of 32 memos on his site that he sees as a good representation of his investment style.
Today is part one of a series in which I’ll cover all of those memos, along with a few less successful pitches sprinkled in to keep things balanced. After all, I believe there is as much, if not more, to learn from mistakes as from successes.
All pitches, I will cover on the blog in the coming weeks.
Elizabeth Arden – Short – June 2014
Aeropostale – Short – July 2014
GT Advanced Technology – Short – October 2014
Quicksilver Corp – Short – December 2014
Tuesday Morning – Short – February 2015
Chegg - Short - July 2014 (Selected "mistake pitch")
---------- Today
Avolon – Long – March 2015
Afren Plc – Short – March 2015
Aercap – Long – October 2015
Peabody Energy – Short – March 2016
Universal Entertainment – Long – May 2016
Toshiba Corp – Short – June 2016
Sharp Corporation – Short – July 2017
Japan Display – Short – July 2017
Rezidor – Long – January 2018
Maxwell Technologies – Short – February 2019
Nio – Short – March 2019
Hexo – Short – October 2019
K+S Aktiengesellschaft – Short – November 2019
Tupperware bonds – Short – February 2020
Endor – Long – May 2020
Metlifecare NZ – Long – May 2020
Haier equity arb – Spread – December 2020
Automated Banking Services – Long – January 2021
Harbor Diversified – Long – February 2021
Hunter Douglas – Long – April 2021
Cardno – Long – September 2021
FAR Limited – Long – February 2022
Shell Midstream – Long – June 2022
Twitter #1 – Long – July 2022
Twitter #2 – Long – September 2022
Danakali – Long – October 2022
Montero Mining – Long – February 2024Elizabeth Arden - Short - June 2014
Valuation at the time of the pitch:
Stock Price: $22.50
Market Cap: $674m
Adj 2014 EV/EBITDA: 14x (or 15.5x GAAP)
Pitch Summary
Jeremy pitched a short on Elizabeth Arden (RDEN), a cosmetics company, in October 2014. The key catalyst was the removal of the biggest risk to the short thesis: a potential takeover at an uneconomically high price by LG Household. With that risk eliminated, Jeremy believed the stock presented a compelling short. EBITDA margins were expected to contract, and if the valuation multiple returned to historical levels, the stock could fall by 45 percent.
The expected drop in EBITDA was driven by several factors. RDEN's topline had already begun to decline sharply, and EBITDA fell in parallel. Jeremy supported this with a chart showing the deterioration in recent quarters.
Furthermore Jeremy had identified 6 red flags:
Structural Margin Disadvantage from Licensing Model
Unlike most cosmetics companies, RDEN relied heavily on licensed celebrity products. These are structurally lower-margin because a significant portion of the revenue goes to the celebrity partner.
Margin table provided by Jeremy Core Brand Stagnation and Licensed Brand Decline
RDEN's core brand had stopped growing. For a while, growth in licensed products masked that weakness, but as those products began to decline, Jeremy expected a sharp drop in revenue.Large Gap Between GAAP and Adjusted EBITDA
Management frequently presented adjusted EBITDA figures, explaining the differences as one-off items. Jeremy showed that these adjustments were recurring and should be treated as ongoing rather than exceptional.Weak Balance Sheet
The company had a stretched balance sheet with 4x trailing debt to adjusted EBITDA. More concerning was the size of its inventory relative to sales, which suggested a high likelihood of write-downs or heavy discounting.Negative Signals Ahead of Q4
In recent announcements, management warned of major write-offs in Q4 2014 and continuing into 2015. They also announced the resignation of the head of marketing, which Jeremy saw as another red flag.Takeover Risk Effectively Removed
With LG Household pulling its bid, there was no credible acquirer in play. The removal of the takeover premium significantly reduced the risk of shorting the stock.
Valuation argument
Jeremy modeled Q4 and full-year 2015 earnings, estimating that RDEN was trading at 14x EV/EBITDA on 2014 figures and 13x on 2015 estimates. Peer companies traded around 11.5x, but given RDEN’s structurally lower margins and declining performance, he argued that 9x was a more appropriate multiple. This implied a price target of $12, representing a 45 percent downside.
What happened next
Jeremy’s thesis played out well. The stock never traded above his pitch price and steadily declined to his target range of $11 to $12 within about a year. Revenue dropped approximately 15 percent year-over-year in both 2014 and 2015, which aligned with his forecast. By 2015, Arden reported almost no EBITDA. Even on an adjusted basis, the figure was just $144,000, confirming that Jeremy’s model had been conservative.
While he likely covered his short near the target price, the stock continued falling and eventually reached around $5. However, in 2016, the company was taken private at $13.90 per share, close to JR’s estimate of fair value.
My Learnings
Jeremy’s most important insight was recognizing that the failed buyout removed the key risk from the short, clearing the path for the stock to decline. He also did a strong job analyzing where earnings were headed. The main lesson here is to find ideas with a catalyst, such as a risk reversal, paired with conviction in the fundamentals.
One open question is whether most investors covered their shorts near $12 or stayed in longer, expecting worse results. That might have worked in this case, but the eventual buyout at $13.90 shows the risk of pushing too far even when the fundamentals continue to deteriorate.
Aeropostale - Short - July 2014
Valuation at the time of the pitch:
Stock Price: $3.2
Market Cap: $250mm
P/S: ~0.15
Pitch Summary
Jeremy pitched a short on Aeropostale (ARO), a former teen retail staple, at a time when the brand was being overwhelmed by the rise of fast fashion players like H&M and Zara. Despite the stock trading at just $3, he argued it was still overvalued based on three core points:
Declining comps and store closures would drive massive cash burn and asset erosion.
The store footprint was significantly overbuilt.
Recent punitive refinancing meant equity recovery in a bankruptcy would be close to zero.
Based on this, Jeremy set his target price at $1.50, a slight premium to his forecast for next year's book value after accounting for expected cash burn. This implied roughly 45 percent downside.
Why ARO Was Vulnerable
ARO had always competed on price and lacked the brand equity of players like Abercrombie. When fast fashion entered the market, higher-end brands were forced to lower prices. That left ARO with a terrible trade-off: cut prices even more or lose traffic. They did both, which drove down both revenue and margins.
Despite clear signs of stress, management had continued opening stores through 2013 and 2014. The result was a dramatically overbuilt footprint just as comps were falling and EBITDA margins were collapsing. Store closures were now inevitable.
The Negative Retail Spiral
Jeremy highlighted a key dynamic in retail: well-run brands typically benefit from a virtuous cycle—growing store count combined with rising comps fuels rapid bottom-line growth. That’s how companies like Chipotle scaled. The reverse is also true. Once a retailer with a large footprint begins closing stores and comps are negative, it triggers a self-reinforcing downcycle. Top-line deteriorates, margins compress, and fixed costs become increasingly burdensome.
ARO was already experiencing margin pressure even before closing stores. Now with closures on the table, things were set to get worse. Add in the upfront costs of closing stores and heavy discounting to liquidate inventory, and Jeremy saw a steep hit to book value coming.
Equity Burn and Bankruptcy Risk
Jeremy forecast that ARO would burn $108 million in equity over the next three quarters. At the current valuation of 1.2x book, this pointed to a 43 percent downside.
Worse, if the company filed for bankruptcy, equity holders would likely be wiped out. A recently completed refinancing deal with Sycamore Partners, a private equity firm, meant that almost all remaining value would go to creditors. With both debt and lease obligations layered on top of deteriorating fundamentals, Jeremy argued equity recovery in a restructuring would be effectively zero.
What Happened Next
ARO traded flat to slightly up for about six months after Jeremy’s pitch. But by mid-2015, the stock collapsed, falling from the $3 range to around $1.70 in just a few weeks. It continued trending downward and filed for bankruptcy in 2016.
As Jeremy predicted, the company burned through substantial cash in 2015. Equity holders ultimately recovered almost nothing in the restructuring, validating the thesis.
My Learnings
Jeremy’s pitch was clean and well-timed. The business was clearly in structural decline, and the thesis mapped out a likely path to destruction. My biggest takeaway is how quickly things can unravel for retailers. In 2013, ARO was still opening stores. Three years later, it was bankrupt.
The combination of financial leverage (debt and leases) and operating leverage makes retail a high-volatility sector. Growth can happen fast—but failure can happen even faster.
GT Advanced Technology - Short - October 2014
Valuation at the time of the pitch:
Stock Price: $1.2
Market Cap: $165M
P/B: 0.75
P/TB: 2.5
Pitch Summary
Jeremy pitched GT Advanced Technology, the supply of sapphire glass to Apple, short immediately after it filed for bankruptcy. Even though the stock had already collapsed 90% the previous day, he believed equity still had significant downside—ultimately worth close to zero. He structured the thesis around three valuation frames:
Q2 liquidation value (pre-filing):
Without applying a haircut to the balance sheet, tangible book value was $0.48 per share—already well below the $1.20 trading level.Post-filing liquidation value:
Adjusting for estimated cash burn, tangible book dropped to $0.18 per share. Once Apple’s secured debt and its associated collateral were removed, it became clear equity would be fully wiped out in any liquidation.Restructuring scenario vs. liquidation:
In a highly optimistic case—with creditors taking steep haircuts—Jeremy estimated equity could be worth $0.61, still implying 51% downside. But this scenario assumed better recovery for equity than for some debt holders, which was unrealistic. Under more conservative assumptions (e.g., 50% debt recovery), equity was worth just $0.12 per share.
Across all scenarios, the conclusion was the same: the equity was significantly overvalued. Jeremy went short at $1.20, believing the remaining equity value was based more on speculation than on any recoverable claim.
What happened next
The stock quickly fell toward $0.48 following Jeremy’s analysis and continued to decline afterward. GTAT eventually emerged from bankruptcy in 2016, and, as expected, equity holders recovered almost nothing.
My Learnings
This was a simple but elegant pitch. As someone new to analyzing bankrupt companies, Jeremy’s approach, especially his breakdown of liquidation versus restructuring scenarios, was eye-opening. It offered a clear and accessible introduction to post-bankruptcy valuation and made a compelling case that even a 90% drop can leave room for a high-conviction short.
Quicksilver Corp - Short - December 2014
Valuation at the time of the pitch:
Stock Price: $2
Market Cap: $1119m
EV/EBITDA: 9.1x,
Pitch Summary
Quiksilver (ZQK), a collection of surf and skate brands, continued JR’s venture into shorting structurally challenged teen retailers facing increasing pressure from fast fashion. JR argued ZQK was in the sweet spot of being both structurally broken and richly valued. The core of the thesis was that ZQK would likely breach a debt covenant in the next quarter. Based on JR’s balance sheet analysis, tangible equity was already negative, leaving almost nothing for equity holders in any restructuring or bankruptcy scenario.
JR supported this with a five-point analysis:
Unsustainable margins
ZQK’s margins had remained elevated but looked fragile. Due to its high debt load and related interest burden, the company had underinvested in advertising. This left its premium pricing unsupported. Like Aeropostale, ZQK would either need to cut prices or lose market share—both outcomes would compress margins.Working capital reversal
Management had generated cash by managing working capital aggressively in recent quarters. JR believed this would largely reverse in the upcoming Q4 season, resulting in a significant cash outflow.Liquidity stress and covenant breach risk
ZQK was heavily overleveraged, with second-lien bonds already at 6x debt-to-EBITDA. Including $500M of senior debt pushed total leverage to 15x. Given the complex capital structure and stacked liens, JR argued that senior lenders had little incentive to waive a covenant breach—they would be better off forcing restructuring rather than allowing value to leak to junior creditors.Asset sales exhausted
Management had been selling non-core assets to raise cash. With the final sale completed, this liquidity lever was gone, leaving the company reliant on deteriorating operations for cash generation.Equity overvalued even in upside case
Even in a flawless turnaround, equity still looked rich. If management achieved $123M in EBITDA, leverage would remain at 9x—while most peers traded at 4–7x without ZQK’s capital structure burden. JR’s model implied ZQK was trading at 16x debt-to-EBITDA, and applying more realistic multiples suggested equity was worth zero.
JR combined these points with a short model projecting severe cash burn and a likely covenant breach. Based on that, the implied equity value was effectively zero.
What happened next
[Sorry I could not find a chart anymore]
The stock was eventually delisted. ZQK filed for Chapter 11 bankruptcy in 2015. Equity holders recovered close to nothing.
My Learnings
This was an excellent analysis of a capital structure with multiple layers of debt. The clear misalignment between a small senior layer and the rest of the capital stack created a strong catalyst for restructuring.
Tuesday Morning - SHORT - February 2015
Valuation at the time of the pitch:
Stock Price: $19.4
Market Cap: $854M
EV/EBITDA 29x (2015), 15x (2016)
Pitch Summary
JR pitched going short Tuesday Morning (TUEMQ), a brick-and-mortar discount furniture retailer that had executed an impressive turnaround in recent years. However, in JR’s view, Wall Street had gotten too excited, assigning a valuation multiple that was far too high.
JR argued that TUEMQ was structurally disadvantaged in its space, which should result in structurally low margins. TUEMQ was neither a major player in the online retail space nor among the largest in the physical discount retail world. That meant it lacked the scale advantages that most successful value retailers benefit from.
With competition intensifying due to the growing online presence, JR believed TUEMQ would struggle to maintain its recent margin profile.
Based on his own model, JR estimated that TUEMQ was trading at 29x and 15x EV/EBITDA for FY 2015 and 2016, respectively. Compared to comps, this looked extremely overvalued, especially if, like JR, you believed TUEMQ was a structurally weaker player in the space.
What happened next
There’s limited historical data available from major providers for TUEMQ before its delisting from NASDAQ in 2020, so I can’t give an exact breakdown of post-pitch stock performance. However, based on articles and financials, things don’t appear to have gone well.
Both the CFO and CEO unexpectedly retired in 2015. The announcements led to significant stock drops of 11% and 30%, respectively.
FY2015 results were roughly in line with JR’s estimates — but 2016 came in well below expectations, making the already expensive valuation based on JR’s model look even worse in hindsight.
As the first 5 pitches where all huge success and hand picked by JR by listing them on his investments memo’s page, I’ve taken the liberty to add one stock pitch not selected by JR that was less of a success. As I believe there is even more to be learned from mistakes. Let’s dive in.
Chegg - Short - July 2014
Valuation at the time of the pitch:
Stock Price: ~$6
Market Cap: $500m
P/B: 2x
P/S: 1.6x
Pitch Summary
JR pitched going short Chegg — the textbook rental and digital education hub company — in July 2014. He argued that Chegg was burning too much cash, which could lead to a need to raise capital or a potential shutdown/liquidation of the business. This view was supported by several core points:
Core textbook business margin deterioration: Margins were falling while prices remained above major competitors like Amazon, implying more margin pressure and accelerating cash burn.
Digital business under pressure: Margins in the digital business were also deteriorating, further hurting the company’s overall profitability and increasing cash burn.
Capital allocation concerns: Management was using valuable balance sheet cash to fund acquisitions — turning cash into intangibles that might be worth far less in a liquidation, thereby weakening the balance sheet.
JR estimated that Chegg would end the year with roughly $40m in cash — enough to fund only one more year of operations.
On point one, JR showed that Chegg’s textbook margins had fallen nearly 700 bps YoY. Despite this, Chegg remained uncompetitively priced vs. other textbook sellers. For its top five rented titles, Chegg was only the price leader on one — with an average price premium of 20%.
These are the top 5 titles Chegg rented out and only on one title they are the price leader, being priced 20% above on average.
For the non-print (digital) business, JR estimated the margins (which weren’t disclosed) by backing into them from known textbook margins prior to the launch of digital services. His analysis showed the digital business was also under significant pressure.
JR then examined Chegg’s balance sheet. While the company had $40m in cash and another $91m in high-grade bonds and treasuries at the time, it had spent $44m post-quarter on acquisitions. JR wasn’t impressed with management’s track record and saw this as essentially replacing needed operational cash with questionable intangibles. He estimated the company would burn another $38m in cash through operations — leaving only $40m by year-end, enough to survive one more year of burn.
He then estimated a liquidation scenario. With textbooks as the primary asset, JR assumed a 50% recovery in a fire sale. Factoring in costs of liquidation, he concluded Chegg’s equity could be worth as little as $0.70 per share — or even $0.
What happened next
Chegg traded up ~20% over the course of 2015. The company ended 2014 with $56m in cash and $33m in short-term investments — well above JR’s estimate. However, Chegg did burn about $40m in cash (cash from operations minus capex), consistent with JR’s model.
So what changed?
Chegg entered a strategic partnership with Ingram (August 2014), which took over logistics and inventory for the textbook business while continuing to use the Chegg brand. This allowed Chegg to retain the flywheel of converting book renters into users of its digital products — while exiting the capital-intensive book business.
Because this deal wasn’t a fire sale, most inventory was sold at or near book value. The transition — completed over the following year — provided Chegg with a cash boost and turned it into a more appealing, asset-light digital-only business.
This shift was relatively successful: gross profit continued to trend upward after JR’s pitch, and the cost structure improved drastically with the exit from textbooks. The stock responded accordingly, rising to nearly 7x JR’s short price of $6, pre covid.
Eventually, Chegg became a COVID darling, as students flooded to its digital solutions (often to cheat) during lockdowns. However, JR got some revenge: after being a pandemic winner, Chegg became one of the biggest losers post-ChatGPT. With LLMs rendering many of its services obsolete, the stock collapsed from a COVID-era high of $100+ to just $1.40 today.
My Learnings
Before picking apart what went wrong, it’s worth noting that this likely wasn’t a large capital loss for JR. He’s a fairly active investor and probably covered his short sometime after the announcement of the Ingram partnership trial (August 2014) or after the decision to divest the textbook business (February 2015). The stock traded between $7–8 during this window — implying a modest loss vs. the $6 short entry.
So, what went wrong?
Here comes one of the most repeated (yet true) investing clichés: circle of competence.
JR has a credit background and is one of the best balance sheet analysts out there — but his strength lies in liability analysis: how debt and covenants create downside through default risk.
Now take a look at Chegg’s 2014 balance sheet (as shown by JR). What’s the first thing a trained eye would notice?
No debt.
In fact, barely any long-term liabilities at all. Just $5m in deferred tax — and otherwise a liquid, flexible balance sheet.
There was no credit-based catalyst. Chegg’s management had significant flexibility to maneuver assets. The textbooks weren’t pledged as collateral. No EBITDA covenants were in play. No working capital lines to trip. That flexibility ultimately worked against JR’s thesis.
Thanks for reading
Over the coming weeks, I’ll be publishing more articles covering the work of Jeremy Raper, breaking down his public investment memos one by one. If you enjoyed this piece and want to follow the rest of the series, make sure to subscribe so you don’t miss any updates.
If you’re eager for more right now, I recommend checking out the first article in the Decoding Success series, where I covered another exceptional investor, Daniel Smoak, who, like Jeremy, has delivered a CAGR in the 50% range.
His mama named him Raper, so I’mma call him Raper. Love Jeremy’s take on things, he deserves all his success.
Interesting, short positions have substantial risks, e.g.
- The market can stay irrational longer than you can stay solvent
- With longs you can lose a maximum of 100%, with shorts theoretically an infinite amount. Further, the maximum performance of short positions in equities is theoretically limited to 100%.
Past results are no guarantee of future results (of course). Few fund managers do outperform in the long term as market conditions can change substantially. However, this may be easier to achieve with short positions. Example: The (long) investor with very high documented performance I know (approx. 30% p.a.) is https://www.nonamestocks.com/. But in recent years, he underperformed the market.