Out of the Box: Julian Robertson on How to Make Money in the Stock Market and Avoid Bankruptcy

1. “Smart ideas, based on exhaustive research, Next comes a big bet.” “Listen to the story, analyze it, and aggressively buy if it feels right .” A colleague of Robertson said: “When he is convinced Julian bets on the farm when he’s right.” George Soros and Stanley Druckenmiller are alike. Mispriced big bets don’t come around very often, and when they do, people like Robertson make big bets. This is not what he calls a “shootout” strategy, but a patient approach to betting with odds in his favor. Research and critical analysis are important to Robertson. Patience, discipline and aggressiveness are a rare combination. Robertson has proven he possesses these qualities. 2. “Hedge funds are the antithesis of baseball. In baseball, you can hit 40 home runs on an A-League team and never get paid. But in hedge funds, your pay is yours Average success rate. So you go to the worst league you can find, where there is the least competition. You can play .400 on the Durham Bulls, but you’re not going to make any real money. If you play in the majors, even if Your batting average is not very high, and you can still make a lot of money.” “It’s better to create a batting average in the lower leagues than in the major leagues. Easy because the pitching is not as good there. That’s always true; it’s easier for hedge funds to get into areas with less competition. For example, we initially invested in South Korea where most people Entered Korea before. We invested a lot in Japan for a long time before we actually got into Japan. One of the best ways to do well in this business is to go into areas where research capabilities are untapped and do your best All I can.” “I think if I were younger, I would invest in Africa a.” Robertson means that it is profitable for investors to go where there is less competition. Competing in less researched markets gives investors who do research an advantage. Berkshire Hathaway’s BRK.A, +0.48% BRK.B, +0.33% Someone asked Charlie Munger who he was most grateful for in his life. He replied that he was most grateful to his wife Nancy’s ex-husband. When asked why this was true, he said: “Because he’s an alcoholic. You need to make sure the competition is weak.” The way is to have him play something other than chess. Buffett added: “It’s important to keep playing, play against the underdogs, and fight for the big bets.” And: “If you’ve been playing poker for half an hour and you still don’t know who that kid is, you Just that kid.” If you want to outperform an index, some investors will try to find a market or part of a market, and you’re not that bad. 3. “I think the best way to manage money is to go long and short stocks. My theory is that if the 50 best stocks you can come up with don’t outnumber the 50 worst stocks you can come up with, then you should be in Another business.” The investment strategy mentioned here is the so-called “long-short” approach, in which long and short positions are established in various stocks in an attempt to Hedging against the broader market, which makes returns more tied to sound stock picking. This approach actually involves an attempt to hedge market exposure, unlike some hedge fund strategies that do not involve real hedging at all. When Robertson started using this long-short method, it was less popular. In particular, short bets are more likely to be mispriced than they are now. Many of Robertson’s so-called “little tigers” — his disciples — continue to invest long and short. 4. “Avoid big losses. That’s how you’ve really made money over the years.” Robertson believes that hedge funds should make “outperforming the market in bad times” a priority. That means adopting a strategy that the hedge fund actually hedges. As mentioned earlier, a long-short strategy helps to achieve this. Another way to avoid major losses is to buy assets below their private market value. When it comes to finding the right entry point in terms of price, investors can make mistakes and still be in good financial shape. Of course, this is a margin of safety approach. 5. “For my shorts, I’m looking for a bad management team and a badly overvalued company in a declining or misunderstood industry.” When investing It is a safer bet when a trader shorts a company with a poor management team, because a business with a good management team is more likely to solve the problem. In other words, if the business being shorted has a poor management team, the real business problems behind the shorting will continue, which is an insurance. Robertson also said that overvaluation has to be “wild”, not tame, for him to be interested in bears, and he likes to be short in a long-term declining industry, so the wind is behind him . 6. “Not many people have the ability to pull the trigger.”“I’m usually the trigger puller here.”Robertson The system used may have dispersed research and analysis functions, but it concentrated his trigger on the trigger. Newsletter Hedge Fund Express wrote: “Managers oversee different industries and make recommendations, but Robertson has the final say. The firm places big bets where they feel confident, typically covering less than 10 per manager Only long and short positions. Positions are constantly revisited, and if things change, there are no reservations – positions are either added or removed.” Someone may be a good analyst, but it may also be A bad trigger puller. Successful triggering requires mental control because most investing mistakes are emotional, not analytical. 7. “I’ve never been particularly comfortable with gold as an investment. Once found it’s not used up so much that they take it out of the mouth of a corpse. It’s not so much a supply and demand situation as it is a psychological issue – a psychiatrist better suited than me Invest in gold.” “Generally speaking, gold bugs are the craziest people on earth.” About gold , Robertson agrees with Buffett, who has said: “The second largest type of investment involves assets that will never produce anything, but buyers who want other people — who also know these assets will never produce — More will be paid for them in the future. Tulips, on top of that, were once a favorite of such buyers in the 17th century. This type of investment requires an ever-expanding pool of buyers who, in turn, will be tempted, Because they believe the buying group will expand further. Owners will not be inspired by what the asset itself can produce – it will remain dead forever​​​ but believe that others will desire it more in the future. The mainstay of this category The asset is gold, [favored by investors] they are afraid of almost all other assets, especially paper money (as mentioned before, they are rightly afraid of the value of paper money). However, gold has two notable drawbacks, neither being of much use , nor fecundity. True, gold has certain industrial and decorative uses, but the demand for these uses is limited and incapable of absorbing new production. At the same time, if you own an ounce of gold forever, you will still own an ounce of gold. Most gold buyers are motivated by their belief that the ranks of fear will increase.” To buy gold is to speculate based on your predictions of human psychology. That’s not investment, it’s speculation. A gold speculator is running a Keynesian beauty contest: “It’s not about choosing the [faces] that are really the prettiest according to one’s best judgment, or even those that the common opinion thinks the prettiest. We’ve reached At the third level, we put our intelligence into predicting the average opinion expected by the average opinion. I believe some people practice fourth, fifth, and higher degrees.” (Keynes, “The General Theory of Employment, Interest, and Money”, 1936.)8. “When you manage money, it takes over your whole life. It’s a 24-hour thing.” This is Katherine Burton’s book A quote from the book Hedge Hunter: The Return, Risk, and Liquidation of Hedge Fund Masters. Robertson is not alone, as many financial and tech billionaires have only turned to philanthropy after switching careers. It’s also a statement about the competition and changing nature of the investing world. Only an academic like Bob Gordon who is not involved in the real world can claim that the pace of innovation is slowing. The pace of innovation is accelerating, and the impact is brutal. Regarding the level of innovation and competition in hedge funds, Roberto Mignone, head of Bridger Management, once said: “You have a better chance of being a savvy trader in Chicago than four years in the hedge fund industry.” 9. “The hedge fund business is success breeds success.” One of my favorite articles was by Duncan Watts titled “Justin Timberlake is a product of Cumulative Advantage Is it?” The concept of cumulative advantage is very important in understanding life outcomes, yet very little is known about it. The basic idea is that once a person or business gains a small advantage over others, that advantage will compound into a larger and larger advantage over time. This is sometimes called “the rich get richer and the poor poorer” or the “Matthew effect” based on biblical references. Robert Merton used this concept of cumulative advantage to explain the advancement of the scientific enterprise, but its application is much broader. Cumulative advantage is a general mechanism for increasing inequality and explains why wealth and income follow the power law described by Pareto. Part of what Robertson said is that the more money you raise, the more money you can raise [duplicate], the more talent you can attract, the more talent you can attract [duplicate]. 10. “I remember being on the cover of BusinessWeek once and being “the world’s greatest financial planner”. Everyone saw it and I loved it Impressed. Then three years later, the same author wrote the harshest lie. It’s a rough racket. But I think one of the good things in human narcissism is, based on what the media think of you, to realize that you’re from orgasm To the bottom – really, it doesn’t matter.” Letting the opinion of the media influence how you think about yourself or what you do is foolish. Criticism is difficult for most people to accept, but considering the source helps to overcome this. The only thing everyone likes is pizza. My uncle likes to say “Illegitimi non carborundum”, It’s a Latin parody saying, “Don’t let those Assholes crush you.” The phrase was popularized by U.S. general “Vinegar Joe” Stilwell during World War II and is said to have been borrowed from the British Army. 11. “[March 2000] This method doesn’t work and I don’t understand why. I’m 67 years old; who needs this? Let our investors take risks in the market It doesn’t make sense, and frankly, I don’t get it. After much deliberation, I’ve decided to return all funds to our investors. I don’t want my obituary to be “he was quoted in yen when he died.” Sometimes the world changes so much, it’s time to take a break or hang up your cleats – especially if you’re already wealthy. Some people do this successfully. Others ride the old ways o their financial doom. When Druckenmiller and others saw that their approach was no longer working, they decided to mostly retire. In 1969, Buffett wrote a letter to his partners saying he “couldn’t find any bargains in the current market” and began liquidating his portfolio. That changed, of course, and Buffett had a new weapon of competition in the form of corporate perpetual capital, rather than partnership panic capital. 12. “I still remember the first time I heard about stocks [at the age of six]. My parents went on a trip and an aunt accompanied me. She showed me in the newspaper A company called United Corp. is listed on the big board for about $1.25. I realized I could even save enough to buy stock. I looked at it. Gradually piqued my interest .” If you want your child to be interested in investing, it is wise to introduce them to key ideas in real form early in their life. No matter how small the stakes, the impact of real money on the market means the experience is meaningful and memorable. Mary Buffett, who is married to one of Warren Buffet’s sons, wrote in a book that Warren believes that success in business depends more on one’s Does one have “Had a lemonade stand as a child, not where they went. College. Early love of doing business equals success later in life.”
Tren Griffin works at Microsoft. He has written a column on investing and business at 25iq. Follow him on Twitter. MORE: Hear Ray Dalio at the Best of Money New Ideas Festival in New York on September 21st and September 22nd. The hedge fund pioneer has a strong view of where the economy is headed.