"My idea of risk control is a little
non-conventional. I like putting all my eggs in one basket and then watching
the basket very carefully.
At most business schools they teach, I think, a lot
of nonsense called risked-adjusted return and diversification. As a money
manager, if you look at a normal portfolio most people will make 70-80% of
their money that year on 2-3 ideas even though they will have 30-40 things in
their portfolio. My concept was to put into those 2-3 ideas I have the most
conviction in.
I was also lucky to travel across asset classes so I traded
commodities, currencies, bonds and equities. And it gave me the discipline if I
didn’t have a good idea in equities, I was happy to have no equities or the
same thing with bonds. So when you have a quiver with a bunch of arrows you can
usually find something to put a lot of money into.
The only other thing I’d say
is that too many investors look at the present. The present is already in the
price. You have to think out of the box and sort of visualize 18-24 months from
now and what the world is going to be and what securities might trade at...What
a company has been earning does not mean anything. What you have to look at is
what people think it is going to earn and if you can see something (in) two
years that is going to be entirely different than the conventional wisdom.
That’s how you make money. My first boss used to say, “the obvious is obviously
wrong.” If you invest in conventional wisdom you are going to lose your butt."
Five Qualities:
1) Self-Directed
2) Contrarian
3) Strategic and Focused
4) Disciplined
5) Identifies Opportunities
through Forward-Thinking
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