The evolution of Michael Karsch: From funds to juice and donuts

How Karsch found Juice Press
How Karsch found Juice Press   

In the 13 years he ran a $3.5 billion long/short fund, KCM Consulting founder Michael Karsch beat the S&P 500 by 100 percent.

Throughout his career, Karsch also worked with the likes of hedge-fund titan Stanley Druckenmiller of Duquesne Capital and billionaire investor and philanthropist George Soros. Now, however, Karsch has made the unlikeliest of moves for a fund manager: food franchise owner and investor.

The financial guru is an investor in Juice Press, as well as owner of all the rights to Dunkin' Donuts franchises in Austin, Texas.

"You kind of hedge your bets, I guess, in the sense that Dunkin' and Juice Press are quite different," he said. "And it is actually quite funny … when the companies do well they actually are quite complementary. But it was not a purposeful strategy."

Karsch said his move into Dunkin' Donuts was a result of "thinking laterally." He still dabbles in markets, however, and credits his exposure to Druckenmiller and Soros for his expertise.

Asked what he had gleaned from them, he replied, "Well, the most important thing I took from both Stan and George would be to look at the bigger picture, to combine both the valuation parameters, but more importantly to step back and see the broader theme."

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On CNBC's "Halftime Report," Karsch said the big picture for stocks, even after two major indexes hit new all-time intraday highs, was bright.

A customer enters a Dunkin' Donuts store in New York.
Getty Images
A customer enters a Dunkin' Donuts store in New York.

"You need to be more selective … but I'm definitely seeing certain opportunities, specifically in the cable sector, in certain parts of the pharmaceutical and certain parts of the consumer sector," he said.

Karsch noted he had previously compared the cost of debt and the cost of equity "and thinking about whether than arbitrage exists."

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"It does still exist, but at the same time it's possible we are closer to the end of quantitative easing and not knowing where interest rates will go," he added. "And also just by definition … the market's making new highs, the gap has closed."

Karsch said from a value perspective, the pharmaceutical industry was "still attractive."

"For example, Pfizer, the stock's actually really done nothing. I think there's a lot of value that could be created if the company was broken up," he said. "I think there's a lot of uncertainty about whether they need to make a transformative acquisition, but ultimately I think the management's going to do the right thing."

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As for Karsch's ownership of Dunkin' Donuts, he said the chain was "a great franchise" but also one in which owning retail operations was at a better multiple than buying the stock.

"So, in other words, the payback might be three years on a store, but if you buy the stock, you have to pay over 20 times cash flow," he said. "So I thought about that arbitrage. And I also thought I'd rather be long Austin than long just broader America … I'm bullish on America, but Austin is a great city."

Karsch also had high hopes for Juice Press, a fresh-pressed juice company.

"I believe firmly that the future of plant-based beverages and food, and somebody's going to come out of this as the Chipotle or Starbucks," he said. "And there's no reason, with the brand name that's been created by the founder of JuicePress and with the type of unit economics being created, there's no reason why JuicePress cannot be that company."