![gregoryblotnick's tweet photo. Intvw with Lee Ainslie of Maverick, Graham & Doddsville, 2014 -- five excerpts on L/S equity, talent, and "No Holds" portfolio construction
1. Tiger Mindset - 'you should be the smartest person alive on your sector.'
"At Tiger you were essentially expected to be the foremost authority on a small number of stocks. For the investments you oversaw, no other public investor should know more about those companies than you did."
2. Talent evaluation:
"The most important components we gauge include competitiveness, mental flexibility and emotional consistency—that last trait is surprisingly important.
This is a very stressful business. We are all human, and we all make mistakes. How one responds to those mistakes and whether someone can keep a level head and make thoughtful decisions is critical.
Conversely, how does one respond to a few big wins? With some folks, early success leads to inflated confidence that may slow the recognition of a mistake."
3. On 'No-Holds' Portfolio Management in L/S:
"I think I have read almost everything that Warren Buffett has written, and I agree with more than 95% of his thinking, but this is one area where I disagree.
I understand the tax impact of turnover, but nevertheless, I would argue that an investor should be able to overcome the negative tax consequences of shorter-term holdings through more efficient use of capital.
For example, if I am starting a new fund, and my portfolio is a blank sheet of paper then I will evaluate the potential return of every potential investment from the prices the market is offering that day. I can decide how much risk I am willing to take to achieve expected returns, and I can evaluate how each opportunity compares to every other opportunity to develop a portfolio which I believe represents the optimal use of capital.
In my view, tomorrow, I should go through the exact same process taking into account any new information including changes in the price of securities. If I conclude that a different portfolio would be preferable then I should buy or sell securities to get to the portfolio that I believe represents the optimal use of capital once again."
4. No-Holds (continued):
"The “no holds” concept simply reflects the approach that every investment should represent a very compelling risk/reward opportunity from current prices, and if that’s not the case then that capital should be redeployed into positions that are viewed as very compelling at current prices.
In the perfect world, every member of our investment team is pounding the table to increase the size their positions every day until they are at a maximum size in terms liquidity or risk contribution.
When somebody tells me that they don’t think we should sell a stock, but that they wouldn't buy more at the current price either, then that investment probably does not represent one of our very best uses of capital—unless the size of the position is already at a maximum from a risk perspective.
We want our portfolio invested in the most attractive use of capital today at current price points, and if a certain position no longer represents that then we should sell.
Sometimes, people have a hard time with this because this philosophy often means we are reducing or exiting a position before it’s reached our expected price. For example, if a stock is 10% away from our original target price, we are likely to sell because we think there are many other opportunities with greater upside.
Conceptually, our team has to accept this concept of “no holds.”
5. On Valuation
"To be clear, I think that valuation is a critical component of understanding where investment opportunities may lie. But I think many “value investors” purely focus on that metric and may ignore other important considerations.
It’s one thing if you have a very cheap stock and reasons to believe that the cheap valuation will not persist: there's a new management team, there's an activist shareholder, they’re restructuring, they just made a decision to buy back stock, and so forth. I believe it is important to identify a catalyst that should benefit the valuation.
The approach of simply identifying a very cheap stock that often has been cheap for a while and then just crossing your fingers and hoping the world will wake up and be willing to assign a higher valuation one day soon is not a very effective approach in my judgment.
So while we place great emphasis on valuation in our investment decisions, valuation alone should never be the driver of either a long or a short investment."
END: Advice to students interested in an investing career
"Two things: first, read a lot. Read as many investment books as you can get your hands on. I've been able to learn something from almost every book I have ever read.
Secondly, the path to an investment career is not necessarily to work at a hedge fund or at a large mutual fund complex. You can start your career by simply improving your understanding of how different industries or companies work or how Wall Street works. Any brokerage firm or Wall Street firm can be a path to an investment career. A lot of people move from the sell-side to the buy-side over time. We probably have as many former McKinsey consultants as we do former Morgan Stanley investment bankers."
[link: https://t.co/dQXK8ha4ki]](https://pbs.twimg.com/media/HLiQRr_XUAAW4Jk.png)
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Intvw with Lee Ainslie of Maverick, Graham & Doddsville, 2014 -- five excerpts on L/S equity, talent, and "No Holds" portfolio construction
1. Tiger Mindset - 'you should be the smartest person alive on your sector.'
"At Tiger you were essentially expected to be the foremost authority on a small number of stocks. For the investments you oversaw, no other public investor should know more about those companies than you did."
2. Talent evaluation:
"The most important components we gauge include competitiveness, mental flexibility and emotional consistency—that last trait is surprisingly important.
This is a very stressful business. We are all human, and we all make mistakes. How one responds to those mistakes and whether someone can keep a level head and make thoughtful decisions is critical.
Conversely, how does one respond to a few big wins? With some folks, early success leads to inflated confidence that may slow the recognition of a mistake."
3. On 'No-Holds' Portfolio Management in L/S:
"I think I have read almost everything that Warren Buffett has written, and I agree with more than 95% of his thinking, but this is one area where I disagree.
I understand the tax impact of turnover, but nevertheless, I would argue that an investor should be able to overcome the negative tax consequences of shorter-term holdings through more efficient use of capital.
For example, if I am starting a new fund, and my portfolio is a blank sheet of paper then I will evaluate the potential return of every potential investment from the prices the market is offering that day. I can decide how much risk I am willing to take to achieve expected returns, and I can evaluate how each opportunity compares to every other opportunity to develop a portfolio which I believe represents the optimal use of capital.
In my view, tomorrow, I should go through the exact same process taking into account any new information including changes in the price of securities. If I conclude that a different portfolio would be preferable then I should buy or sell securities to get to the portfolio that I believe represents the optimal use of capital once again."
4. No-Holds (continued):
"The “no holds” concept simply reflects the approach that every investment should represent a very compelling risk/reward opportunity from current prices, and if that’s not the case then that capital should be redeployed into positions that are viewed as very compelling at current prices.
In the perfect world, every member of our investment team is pounding the table to increase the size their positions every day until they are at a maximum size in terms liquidity or risk contribution.
When somebody tells me that they don’t think we should sell a stock, but that they wouldn't buy more at the current price either, then that investment probably does not represent one of our very best uses of capital—unless the size of the position is already at a maximum from a risk perspective.
We want our portfolio invested in the most attractive use of capital today at current price points, and if a certain position no longer represents that then we should sell.
Sometimes, people have a hard time with this because this philosophy often means we are reducing or exiting a position before it’s reached our expected price. For example, if a stock is 10% away from our original target price, we are likely to sell because we think there are many other opportunities with greater upside.
Conceptually, our team has to accept this concept of “no holds.”
5. On Valuation
"To be clear, I think that valuation is a critical component of understanding where investment opportunities may lie. But I think many “value investors” purely focus on that metric and may ignore other important considerations.
It’s one thing if you have a very cheap stock and reasons to believe that the cheap valuation will not persist: there's a new management team, there's an activist shareholder, they’re restructuring, they just made a decision to buy back stock, and so forth. I believe it is important to identify a catalyst that should benefit the valuation.
The approach of simply identifying a very cheap stock that often has been cheap for a while and then just crossing your fingers and hoping the world will wake up and be willing to assign a higher valuation one day soon is not a very effective approach in my judgment.
So while we place great emphasis on valuation in our investment decisions, valuation alone should never be the driver of either a long or a short investment."
END: Advice to students interested in an investing career
"Two things: first, read a lot. Read as many investment books as you can get your hands on. I've been able to learn something from almost every book I have ever read.
Secondly, the path to an investment career is not necessarily to work at a hedge fund or at a large mutual fund complex. You can start your career by simply improving your understanding of how different industries or companies work or how Wall Street works. Any brokerage firm or Wall Street firm can be a path to an investment career. A lot of people move from the sell-side to the buy-side over time. We probably have as many former McKinsey consultants as we do former Morgan Stanley investment bankers."
[link: https://t.co/dQXK8ha4ki]
![gregoryblotnick's tweet photo. Intvw with Lee Ainslie of Maverick, Graham & Doddsville, 2014 -- five excerpts on L/S equity, talent, and "No Holds" portfolio construction
1. Tiger Mindset - 'you should be the smartest person alive on your sector.'
"At Tiger you were essentially expected to be the foremost authority on a small number of stocks. For the investments you oversaw, no other public investor should know more about those companies than you did."
2. Talent evaluation:
"The most important components we gauge include competitiveness, mental flexibility and emotional consistency—that last trait is surprisingly important.
This is a very stressful business. We are all human, and we all make mistakes. How one responds to those mistakes and whether someone can keep a level head and make thoughtful decisions is critical.
Conversely, how does one respond to a few big wins? With some folks, early success leads to inflated confidence that may slow the recognition of a mistake."
3. On 'No-Holds' Portfolio Management in L/S:
"I think I have read almost everything that Warren Buffett has written, and I agree with more than 95% of his thinking, but this is one area where I disagree.
I understand the tax impact of turnover, but nevertheless, I would argue that an investor should be able to overcome the negative tax consequences of shorter-term holdings through more efficient use of capital.
For example, if I am starting a new fund, and my portfolio is a blank sheet of paper then I will evaluate the potential return of every potential investment from the prices the market is offering that day. I can decide how much risk I am willing to take to achieve expected returns, and I can evaluate how each opportunity compares to every other opportunity to develop a portfolio which I believe represents the optimal use of capital.
In my view, tomorrow, I should go through the exact same process taking into account any new information including changes in the price of securities. If I conclude that a different portfolio would be preferable then I should buy or sell securities to get to the portfolio that I believe represents the optimal use of capital once again."
4. No-Holds (continued):
"The “no holds” concept simply reflects the approach that every investment should represent a very compelling risk/reward opportunity from current prices, and if that’s not the case then that capital should be redeployed into positions that are viewed as very compelling at current prices.
In the perfect world, every member of our investment team is pounding the table to increase the size their positions every day until they are at a maximum size in terms liquidity or risk contribution.
When somebody tells me that they don’t think we should sell a stock, but that they wouldn't buy more at the current price either, then that investment probably does not represent one of our very best uses of capital—unless the size of the position is already at a maximum from a risk perspective.
We want our portfolio invested in the most attractive use of capital today at current price points, and if a certain position no longer represents that then we should sell.
Sometimes, people have a hard time with this because this philosophy often means we are reducing or exiting a position before it’s reached our expected price. For example, if a stock is 10% away from our original target price, we are likely to sell because we think there are many other opportunities with greater upside.
Conceptually, our team has to accept this concept of “no holds.”
5. On Valuation
"To be clear, I think that valuation is a critical component of understanding where investment opportunities may lie. But I think many “value investors” purely focus on that metric and may ignore other important considerations.
It’s one thing if you have a very cheap stock and reasons to believe that the cheap valuation will not persist: there's a new management team, there's an activist shareholder, they’re restructuring, they just made a decision to buy back stock, and so forth. I believe it is important to identify a catalyst that should benefit the valuation.
The approach of simply identifying a very cheap stock that often has been cheap for a while and then just crossing your fingers and hoping the world will wake up and be willing to assign a higher valuation one day soon is not a very effective approach in my judgment.
So while we place great emphasis on valuation in our investment decisions, valuation alone should never be the driver of either a long or a short investment."
END: Advice to students interested in an investing career
"Two things: first, read a lot. Read as many investment books as you can get your hands on. I've been able to learn something from almost every book I have ever read.
Secondly, the path to an investment career is not necessarily to work at a hedge fund or at a large mutual fund complex. You can start your career by simply improving your understanding of how different industries or companies work or how Wall Street works. Any brokerage firm or Wall Street firm can be a path to an investment career. A lot of people move from the sell-side to the buy-side over time. We probably have as many former McKinsey consultants as we do former Morgan Stanley investment bankers."
[link: https://t.co/dQXK8ha4ki]](https://pbs.twimg.com/media/HLiQrmiXEAA65ol.png)
BREAKING: Anthropic says its newest AI model is too powerful to release to the public
@Rebel94289165 @lazereater Scanner and credit card data for their modern oral. The stock is largely down because it’s slowing vs lofty expectations. Yes absolute growth is amazing and they’ve built something incredible. This is a growth stock and it’s an expectations game for now.
@Rebel94289165 @lazereater I figured you’d understand when I said “the data is slowing” that I am referencing their modern oral sales, not the lower volatility segments.
@lazereater When do you think this gets to 10% share, what’s the overall pouch market compounding at during that period and what EBIT margins can wholeco earn? I think I heard you mention like a $400 PT, what multiple / earnings is that on?
@Rebel94289165 @lazereater Appreciate the example but there are plenty of counter examples in CPG. Celsius/Alani unique in that they brought the female consumer to the table. I wouldn’t read this as Celsius success means FRE/ALP have a clear path.
@Rebel94289165 @lazereater Brand building FRE and ALP are completely different exercises than how stokers gained share. It’s a very different set of challenges. To compare the two is fine, but to ignore the nuance is irrational.
@Rebel94289165 @lazereater Big tobacco certainly dominates in legal markets across the globe, that is not a debate. Stokers did okay because it’s a cheap niche product, MO/BATS went for more premium segments within the dip. Either way, dip is becoming a much smaller category bc of modern oral.
@lazereater I’ve been investing in tobacco a long time, happy to chat off of this platform. Your conviction is impressive , open to debate on my end
@lazereater •Mgmt quality objectively low. Unimpressed in meetings.
•Couldn’t guide EBITDA past one quarter.
•Weak holder base. Burned by the last consumer growth flop.
@lazereater •Pro-innovation FDA erodes TPB’s moat, accelerates big tobacco. Not a TPB edge.
•Brand not product. Survey says fad, not franchise.
•No takeout floor. Carlson baggage kills strategic interest.
•Cash engine cracking: Zig-Zag declining fast, funding the burn.
@lazereater Listened to your pod, I thought you had an interesting thesis, though I’ve been short for some time but am long the big players. Thesis cliff notes as follows:
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