David Baker’s willingness to go where others won’t started from digging into obscure small caps years ago, and now, quite literally, going into the field to build a differentiated strategy around land, infrastructure, and water rights.
I met David many years ago after he subscribed to GeoInvesting, and over time we developed a friendship.
As I got to know him better, it became clear he had a unique background, from managing money to building and selling businesses, and now launching the Land Value Alpha fund.
David has moved across public markets, private ventures, and real estate, and today he’s settled in on a strategy centered around land, infrastructure, and water rights.
In this conversation, we walk through that evolution and how he’s thinking about building value in an asset class that most investors don’t spend much time on and why he believes this is one of the most overlooked opportunities in investing today.
Skull Sessions is a collaboration with Geoinvesting.com, a full-stack microcap research platform and MS Microcaps LLC , home of the Microcap Quality Index (MSMqi).
How did you first get into investing?
“I was a stock jockey starting at age 13, my grandfather taught me about the stock market. In my early teenage years, I was even trying to get on the phone with Kenneth Iverson from Nucor Steel, and I was an early investor, with my grandfather’s guidance, in Nucor Steel and International Mineral and Chemical.
What was interesting about Nucor was that they paid performance bonuses to employees at every level, from the lowest to the highest, and obviously the stock did very well over decades.
So I was hooked on the stock market. When I got into college during the crash of ’87, I doubled down… and it worked out quite well. I ended up buying more of both International Mineral and Chemical and Nucor Steel.”
What did your early career look like after that?
“When I went to law school, I worked for the SEC in the Division of Enforcement. What was great about it was not only did I learn a lot, but I also learned that I didn’t want to be on that side of securities in any form.
So when I graduated from law school, I worked for Merrill Lynch in San Francisco. I had a very good experience there, and then after three years, I went off and started my first hedge fund, focused on small-cap and microcap stocks, searching for idiosyncratic returns. I ran that fund for the better part of seven years. It was a very strong-performing fund: 42% gross, 33% net audited returns over almost seven years.”
How did you transition from public markets into real assets?
“I went off to a startup company that I founded called Sector Base, which was later renamed Revere Data, and eventually it was sold to FactSet Data Systems in 2013. Over that period of time, I then got into doing reverse merger transactions… alternative ways of going public.
We had a bell curve of results. Some didn’t work, some were average returns, and some were exceedingly successful.
At that point, I said, ‘Well, I’m going to take a left turn and check out real estate.’ So, being a contrarian investor, I bought facilities in bad locations, in poor condition, with low occupancy, assets that no institution would touch, and then turned them around.”
What led you specifically to focus on land?
“So focusing on hard assets, I then decided to explore land. What happened was, in 2019, I started flying around the country, traveling by train, driving… really trying to find a place for the rest of my life that was a resort community or near a resort community.
After doing all that travel, in 2022 I found the Flathead Valley (Montana). I determined it was an incredible opportunity, not just from a personal lifestyle perspective, but also for investing… because it’s a very fast-growing community. And yet, at the same time, it still has modern conveniences.”
What insight led to your Land Value Alpha strategy?
“I met a large landowner, and I saw what he was doing on the land. He didn’t know anything about Wall Street or capital markets, but he knew how to buy land, and he knew how to use heavy equipment to build roads and develop infrastructure.
Through that observation, I realized there was an opportunity not just to buy land, but to conduct infrastructure work and create water rights. That would create an active layer of appreciation on top of the passive layer of simply buying land and waiting.”
How do you actually generate returns from land?
“People think when they buy land, you just hold it and that’s it. But there’s really an active component. We look at land as having three parts: passive appreciation, active appreciation, and a reset premium.
So building roads, installing power, drilling water wells… that active component is what drives returns well beyond the typical five to seven percent you might expect from passive appreciation alone. Then there’s also a reset premium that we gain over time as the land becomes more discovered.
If I had to estimate, I would say something like 20% to 25% of the return comes from the passive component, and roughly 60% to 70% comes from the active component.”
What role do water rights play in the strategy?
“There’s secular scarcity in the western United States… What a lot of people don’t do when they’re researching to purchase land is they’re not looking at water basins, they’re not looking at aquifers… We look at all that stuff, and we use that as an information advantage when buying land.
We project that for every dollar you invest in water infrastructure… you should get 4x your return… So water is not only critical for life and critical for the value of the property, but it’s quite an accelerant.”
What kind of returns are you targeting, and why is this asset class attractive?
“So we’re targeting 20% annual returns… we expect to generate 6x in terms of your return on capital in 10 years.
What I find incredible about this asset class is not only the returns are very compelling, but it’s very, very stable. So the volatility is very low, measured against every other asset class you could find.”
Closing Thoughts
What was interesting to me in this conversation is how much of David’s approach still reflects his roots in microcap investing, just applied to a completely different asset class.
He’s still looking for informational advantages, still focused on asymmetry, and still willing to go where others aren’t. The difference now is that instead of parsing filings or catalysts, he’s “underwriting” land, infrastructure, and water… and physically creating value rather than waiting for a management team to execute on their timeline.
It’s also a reminder that alpha doesn’t disappear, it just migrates. And sometimes, it shows up in places that investors who specialize in information arbitrage aren’t even looking, something we also continue to explore more deeply through conversations and research shared at the MS Cliffnotes Substack.
