racemize Posted March 17, 2017 Posted March 17, 2017 https://www.forbes.com/sites/nathanvardi/2017/03/16/the-34-year-old-hedge-fund-manager-who-bet-everything-on-a-stock-that-tanked/2/#444e23357fcf
Spekulatius Posted March 17, 2017 Posted March 17, 2017 He probably should abstain from managing other people's money, since he appears to be a gambler. He has a computer science degree and should do something more productive.
woltac Posted March 17, 2017 Posted March 17, 2017 If he read "What I Learned Losing a Million Dollars" this may have been avoided, or maybe not. I highly recommend the book, which details the emotional and psychological effects of a trade that was initially up and ended as a large loss that wiped out the trader's net worth and reputation. https://www.amazon.com/Learned-Million-Columbia-Business-Publishing/dp/0231164688
muscleman Posted March 17, 2017 Posted March 17, 2017 I thought the article was about SHLD until I read through it. I bought SHLD in 2013 and thanks to his SHLD article, there was a huge short squeeze that helped me get out safely. I'd remember this guy forever. One lesson is that if you have a big position, you HAVE to cut your losses quickly if the position doesn't go in your direction immediately.
winjitsu Posted March 17, 2017 Posted March 17, 2017 His thesis deck: http://www.bakerstreetcapital.com/BakerStreet_WAC.pdf
Cevian Posted March 17, 2017 Posted March 17, 2017 From his website: "Baker Street Capital Management is a value-focused investment firm". A lot of people calling themselves "value investors" or "value focused" but not adhering to concepts of Prudence and Moderation (Two of Plato's Cardinal Virtues).
randomep Posted March 17, 2017 Posted March 17, 2017 Wish I heard of him earlier.... everything that he picks is a great short!
oddballstocks Posted March 17, 2017 Posted March 17, 2017 There's a lot of love for the concentrated value investing philosophy, which is great if it works well. But if it doesn't you're in his shoes. If you only own a few stocks you look like a genius as they're going up. But as this thread shows the love is lost if you have losses.
KJP Posted March 17, 2017 Posted March 17, 2017 There's a lot of love for the concentrated value investing philosophy, which is great if it works well. But if it doesn't you're in his shoes. If you only own a few stocks you look like a genius as they're going up. But as this thread shows the love is lost if you have losses. It's not just concentration, but concentration + leverage. In this case, levered equities.
Gray Fox Posted March 17, 2017 Posted March 17, 2017 I had an economics professor explain leverage in a great way. "Leverage is like the dark side of the force, it is very powerful but ultimately leads to fear and failure." Unless you're the Emperor, then it makes you rule the galaxy (ie John Malone).
fareastwarriors Posted March 17, 2017 Posted March 17, 2017 I think he will be just fine. He probably can get a job at another fund or somehow raise capital for his own fund again. This industry love to reward gamblers...
Jurgis Posted March 17, 2017 Posted March 17, 2017 Wish I heard of him earlier.... everything that he picks is a great short! Not really true. He owned a chunk of UVIC - Florida nanocap contact lens company that was bought out by B&L (Valeant). http://www.siliconinvestor.com/readmsg.aspx?msgid=27642316&srchtxt=Baker He left director position and sold his shares to company for not much gain before the B&L buyout though. So maybe you're somewhat right. ;) (I also sold out for a wash to small gain before B&L buyout too. :'( )
AzCactus Posted March 17, 2017 Posted March 17, 2017 Two main takeaways for me: 1. Don't make your largest holding an 85% position (123 mm/145 mm) This math is not precise but either way this position appears to have been well north of 60% 2. Don't invest in companies that are irresponsible or otherwise have too much debt. Best of luck to this guy. Hope he bounces back.
racemize Posted March 17, 2017 Author Posted March 17, 2017 He should never manage other people's money again. Totally irresponsible and reckless behavior.
netnet Posted March 17, 2017 Posted March 17, 2017 Well Munger says to study failures, and this case is a Lollapalooza indeed. My takeaways are, unless you are business with a really sound partner, i.e. you are invested in BRK, thirty years ago, with a Buffett at the helm, don't concentrate so much. I will have to go back and look, but I don't think Buffett ever had that much in any 'cinch' like say American Express during the salad oil scandal. The estimate on the board and Forbes looks as if he had from 60 to +80 in WAC. The business was not good enough for that. (Munger seems to have gone to those kinds of %'s, but those were cinches.) With WAC, you have execution risk, and there where there is one cockroach there often are many. And you had to know what the asset values, in this case earning power, in an industry that is changing. We have a case of poor portfolio management and poor stock selection both. So this is a why not and how not to be a concentrated investor!
Mephistopheles Posted March 17, 2017 Posted March 17, 2017 Well Munger says to study failures, and this case is a Lollapalooza indeed. My takeaways are, unless you are business with a really sound partner, i.e. you are invested in BRK, thirty years ago, with a Buffett at the helm, don't concentrate so much. I will have to go back and look, but I don't think Buffett ever had that much in any 'cinch' like say American Express during the salad oil scandal. The estimate on the board and Forbes looks as if he had from 60 to +80 in WAC. The business was not good enough for that. (Munger seems to have gone to those kinds of %'s, but those were cinches.) With WAC, you have execution risk, and there where there is one cockroach there often are many. And you had to know what the asset values, in this case earning power, in an industry that is changing. We have a case of poor portfolio management and poor stock selection both. So this is a why not and how not to be a concentrated investor! Are you sure about Buffett and AXP? My recollection is that he had like 2/3 or 3/4 of his portfolio in it. And Munger once had over 100% of his personal net worth in a Canadian Utility, though I forgot the details of that.
merkhet Posted March 17, 2017 Posted March 17, 2017 IIRC, Buffett's fund was 40% AXP during the Salad Oil Scandal. He was 75% personally in GEICO at some point though, but that's personally.
CorpRaider Posted March 17, 2017 Posted March 17, 2017 The Munger thing was a risk arb, I believe, back when no one did that and the returns were fat and easy.
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