Unemployed Capital Allocator
@atelicinvest
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ex-Buyside PM. Now jobless and homeless, roaming around for lulz. Excuse my bad manners.
Floating Ice Shelf, Antarctica
Joined December 2013
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During my time as analyst then PM at a sizeable, private asset mgmt co ($30B), I did decent number of meetings w institutional allocators.
I was shocked at the questions that never get asked.
A semi-running thread on QtNGA
@EndowmentLP
@ShitFund
@tseides
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Family, friends, health… these are the three dragons you must slay if you want to become…
*checks notes*
An associate at CBRE.
Hot take:
Don’t fall in love from 22-29, there’s to much to lose.
Your career will thank you.
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Investing in 2010: just buy companies w recurring rev and high roic at 12x earnings
Investing in 2022: adj for COVID bump, stimmy fade, commodity squeeze, and bake in risk of ww3, when will the fundamental and narrative momentum turn positive such that we don't lose our shirts?
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One of the most profound experiences of my short professional investing career was watching people get wrecked by a few key decisions.
IME it's less about the loss itself and more about how it happens.
Get blindsided by something big a few times, and self doubt really kicks in.
“Losing money is what kills you. It's not the actual loss. It's the fact it messes up your psychology. You lose the bullets in your gun. Then the elephant walks by when your gun’s not loaded.” - Michael Platt
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It's absolutely incredible that none of these letters say "we really should have sold."
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Being a long term investors was so much easier when prices were going up every day, wasn't it?
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Don't worry babe, the margin of safety keeps expanding on these names which means our portfolio is safer than ever and the forward returns are going to be sick.
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Imagine outperforming SPX by 3% a yr for 30 yrs, while surviving industry wide nuclear winter and a global financial crisis, then some kid comes along to say “that’s it?”
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Buyside conducting 'proprietary research' using a custom mix of tegus transcripts and sell side models
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"Ignore macro" is probably one of the most dangerous investment advice you will get.
Not sure when we defaulted to "it's hard, and you can't predict it accurately, so just ignore it altogether", but just because something is not measurable, doesn't mean it should be ignored.
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Man, ppl *really* misunderstand software businesses.
Consumer media is fleeting. It is a consumable with zero risk. It has zero switching cost.
Some software categories resemble this. But it is a miniscule portion.
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An important caveat to this is that you really should spend at least a couple yrs spinning wheels and plumbing through the depths of a multi tab 300 line model.
Simplicity needs to be derived from experience with complexity.
One mistake I made early in my career was trying to be precise rather than trying to be accurate.
Creating a multi-tab, 300-line model in Excel feels good, but it won't make you a better forecaster.
Identify the 2-3 things that matter and spend your time on those instead.
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How did an entire tribe of buyside dupe people into accepting 'high quality' as an analytical measure?
The words are so vague it's practically meaningless.
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Anyone that wants to work on the buyside.
This tweet is a perfect look into what working with a PM is like.
Constant battles over inane points where they have perfect conviction but ... are wrong. So you have to delicately tell them they're an idiot without hurting their ego.
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One big mistake I see people make is assuming that investing is a life-long profession.
Even within the group that can outperform, most have 10 yrs max. 20 if you're very good & lucky.
I've seen so much misery coming from ppl trying to relive their prime.
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Been doing a few of these, and while I won't be doing any public roasts, some common themes show up repeatedly.
Will likely be a running thread. Mute if you'd like. I won't be saying anything new.
ps. if you sent stuff in and haven't heard back - I'll write back eventually.
Anyone want feedback on their investment pitch / report?
Catch?
- I might publish / tweet about it. (It will be anonymous.)
-Feedback might be brutal.
- I, like many PMs, am highly biased. Feedback may be wrong.
- it might take a while.
DM open.
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I have no dog in this SBC fight but this is some hilarious shit
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Don't short a bubble stock
Don't short a bubble stock
Don't short a bubble stock
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You lose money on well known value tech names like MTCH.
I lose money on international shitcos that nobody knows about.
We are not the same. (I had to do way more work to lose my money, artisanal)
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It's 2020, Feb 7th. You perfectly predict macro 2.5 yrs out
Pandemic that lasts 2 years
Multiple rounds of lockdowns
Supply chain mess
Russia invades Ukraine
Inflation 8%+
Gas $5/gallon
How short would you have gone?
Stop trying to guess where the market goes next.
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@LionheartInves1
There are few things going on here
1: when mispricing is ridiculous, it takes less work to validate
2: when you need to dig in, it's likely further outside your circle of competence
3: similarly, when you have to do a lot of work, it's likely complicated situ - more can go wrong
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Absolutely insane just how much of your quality of life, and to an extent your mental health, depends on some very small, mundane factors.
Most of us in the developed world are so spoiled.
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OK this got way more DMs than I thought it would. I'm seeing some common threads in the qs being lobbed, so here's a consolidated thread of some things to think about if you want to go down the path of 'investFIRE' - aside from knowing how to generate returns.
Aight fuck it.
If anyone is interested in this path, DM is open.
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Willing to pay money to hear 1 monopoly that trades at 30-50% free cash yield. Not joking.
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One of the most commonly spouted investment belief is that if you invest with a long term horizon, you can ignore volatility.
This is dangerously wrong.
@GARPBrooks
The interplay between time horizon and risks you take is severely misunderstood by most investors.
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@nottigeranalyst
you sit down, shut up, and move onto the next one.
0 upside to doing anything else.
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What's your edge?
I'm poor.
If you have a small account, you can get pretty unreal returns out of some of these odd lot situations
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Incredible. I am just in awe.
This mf doesn't miss.
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What's the best business you know of with the lowest gross margin?
Can't say Costco
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Many fortunes are lost on a concentrated position.
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This weekend, I met with a senior software engineer at a regtech solutions provider.
I just had one question for him - what does it take to rebuild this site?
He shed a tear and said "we can't, we don't know how to do it anymore"
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Guys, he dialed it up.
Time is the ultimate currency. This is how Stan Druckenmiller used Perplexity to decide what to invest in Argentina, something Elon has also recommended.
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Now THERE'S something you don't see every day.
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Who uses LLMs daily for investment research?
Reply / DM
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Value crowd from 2001-2007
Quality cash flow crowd from 2008-2015
Tech momo crowde from 2015-2021
It's the same shit over and over again. 90% of this business is about getting lucky then pretending you are amazing.
Anyone in tech or growth whose track record is predominantly from 2015-2021 cannot be considered a great investor. Sorry (actually I’m not). You had the biggest reach around from the Fed and 99% of you are NOT great stock pickers.
#TruthHurts
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Probably the most interesting part of the Einhorn episode of ILTB is where he says it's not worth the hassle to try to select "great clients", because the rhetoric vs actual behaviour in a stress scenario are too unpredictable.
Really goes against the generally accepted wisdom.
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Aight fuck it.
If anyone is interested in this path, DM is open.
@mithridatistcap
@bucketshopcap
Is it dumb to think you could do well enough over 5-8 yrs as an analyst/sr analyst and then manage your own money e.g., make $4-5m and put most in 5% interest and the rest is ‘play’ money?
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Know several ppl that are worth 50 plus while having subtracted value on the average client dollar.
It's theft. Made 'better' by the fact that there are even bigger thieves on the retail side.
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Anyone want feedback on their investment pitch / report?
Catch?
- I might publish / tweet about it. (It will be anonymous.)
-Feedback might be brutal.
- I, like many PMs, am highly biased. Feedback may be wrong.
- it might take a while.
DM open.
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Seeing a lot of ‘x high quality co is reasonable at 3-4% FCF yield’ takes.
Remember kids, if it overshot one way, it can most definitely overshoot the other way too.
Markets don’t care what reasonable is.
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2/ “We get all sorts of mgmt access”
QtNGA: “Does this actually lead to better decisions?”
Most mgmt meetings are excuse to confirm all of your prior biases, aided by expertly coached CEOs who got there precisely bc s/he was good at explaining
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If you start with $1, and find just two 1000x, you can be a millionaire.
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You are flipping thru a deck and you come across this slide.
How many red flags does this quality as?
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"we run a super concentrated portfolio of best ideas"
"No room for anything but highest conviction"
"Need to have hyper asymmetrical return profile with tight downside"
...
"We have 20 or so long positions with relatively equal weights"
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The real great irony of investing is that because the vast majority of investors are shit at it, you can find just about every stereotype of a shitty investor to match your prior beliefs.
You guys should read up on how much work Buffett did in the 70s.
One of the great ironies in investing is that often the guys deepest in the weeds, who have massive models and can tell you which flavor Skittles the CFO's niece likes, are some of the worst investors.
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I see this guy plastered on this site every few months.
I hate to be the bearer of bad news, but the real secret is his $10m a year income, and being in the market for 49. years, not his genius picking skills.
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Some disagreements, but good thread.
Couple key disagreements. Just my opinions.
1) Waste time. It's necessary to do a lot - and I mean a *lot* of ineffective, inefficient things.
Overread. Overreach. Overanalyze. Only after you overdo it, can you prune.
Mini thread for new/aspiring analysts:
Tip
#1
: Spend the first few weeks of your investing journey reading investing books. Read the classics. Read maybe 5 or 6. After that, never read another one. I wasted so much time reading 30+ investment books. Not worth it
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Finally, there's a general under appreciation of how portfolio volatility impacts your psyche
There are only a handful of true freaks that can be down 50% and still make optimal decisions
Most of us get knocked out when punched in the face
You won't know until it's too late
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One of the biggest lies of asset mgmt industry is that performance is all you need. Just give it a little bit of marketing push and you're set.
The core component you need is a sense of safety. Both for retail and institutional.
This beautiful psychopath (who is a very close friend of the koala) printed a 35% year and beat the ACWI benchmark by ~1400 bps in the 6th year
With <10% of the portfolio in Mag7
Still no material inflows
The buyside & investment management industry is so broken
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Back to being a fully unemployed degenerate. Prepare for the continuation of some shitty hot takes.
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Guys, stop dunking on this. This is a valuable look into how a junior analyst spent her time at Point72 from “checks notes” Dec 2015-May2017.
Now for my 🧵on valuable insights I gained regarding inner workings of QSR industry, as a Subway sandwich artist from 2007-2008 👇
Day in the Life of a Hedge Fund Analyst
Few live to tell the tale.
"Was it like Billions?"
"Describe ur investment process?"
"What did u learn?"
I get these questions all the time, but for a while I was afraid of answering publicly. No more!
Hedge fund story time.
👇
🧵/
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PMs: Market is broken. I will take advantage. Invest with me.
PMs: I'm lagging massively because markets are broken.
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4/ "We do exhaustive, in depth due diligence."
QtNGA: "Does the additional research hours lead to alpha? What is the optimal level of depth and how do you know?"
Can't count how many times I've seen ppl do 10-50 additional hours of research confirming whatever we already knew
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My biggest learning from investing for the last couple decades is that it is WAY too easy to develop overconfidence in your own abilities.
In fact, it is "terrifying" how common this is.
Noobs put together a few good years, and think they've got it all figured out.
My biggest learning from being on Twitter this year: it is WAY too easy to sound smart and be completely wrong about everything.
In fact, it's *terrifying* how common this is.
I don't sound smart, but I beat 95% of people's results on this platform YTD by doing simple things.
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Bookmarking this to read it later.
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Who are the best investors under the age of 5?
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Aight, trying something new
@dalibali
has the saas shitco index
I've got the global nanocap saas shitco index
The only difference is that I'm stupid enough to put 70%+ of my NW into them
As a group, these are sticky entp software, at 1.5x ARR, growing 10%+, self funded.
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For something so predictable, drawdown predictions get a ton of airtime and take up a lot of headspace.
It's simple:
- Pretty much every year we have 10-15% drawdown.
- Every few years, we have 20%+ drawdowns.
- Maybe once a decade, we will have 30-40% drawdowns.
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Imagine thinking getting 50% back w 13% earnings yield in 12 years is a good return.
Nestle is a boring investment.
I first purchased it in Nov ‘16 and added to my stake a few times.
I estimate by 2028, I will have received approx half of my money back in dividends and the earnings yield on my remaining basis will be over 13%.
Staying rich is boring.
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'my thesis is still intact'
NEW: The owner of a $16M California mansion that is on the verge of falling into the ocean, is refusing to leave his home.
82-year-old Lewis Bruggeman says his house is "fine" & isn't worried about it falling into the ocean after a recent storm eroded the cliffside.
"The house
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My hedges, defending my portfolio against the down market
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Getting triggered because someone else dismisses your long is probably not the best sign.
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This is an insanely underexplored space in investing.
Somehow, most of the attention goes to stuff like 'buy illiquid! be contrarian! Behavioural edge!' and close to zero effort goes towards better workflow / tooling.
@finphysnerd
It really has to do w critical decision making chain from rock flipping to purchase.
You can view the entire pipeline as a manufacturing line, and think about edges from intake to processing to defect rate etc.
I'll stop here.
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@ebitdaddy90
From what I've seen
1) "earnings" =/= earnings.
2) biz often owner dependent = year 1 earnings decline
3) who's lending you 90% LTV on SMBs at reasonable interest rates?
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1/ "The vast majority of our liquid net worth is invested alongside you"
QtNGA: “How does this compare to your net worth coming from shares in the asset mgmt co itself?”
You’d be shocked at how lopsided this number is for vast majority of the PMs. Incentivizes wrong behaviour.
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Being able to spot bullshit / incongruent facts without having in-depth knowledge of the field is a superpower.
And something that's becoming more valuable every year.
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You made 6% on your goog position today
I made 150% on a call position today.
We are not the same
(I made 100x less in $ terms cause it was a fun punt vs your conviction weight position)
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Since 2009, we've been on a continuous loop of:
1) Something happens
2) Everyone thinks the financial system is going down
3) Stocks dip
4) Bottom of the dip is much higher than people think
5) The world doesn't end
6) Rally time
Sort of reminds me of post 1930s.
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Absolutely getting wrecked in April and May.
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Bit of a PSA.
This account was created a long time ago then left dormant for yrs.
Then some time ago, I started poasting. Mostly jokes and memes, some investment stuff. Just to shoot the shit with 10 friends I have.
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One more of these and I'll just pull the trigger.
Gun to your head, you have to pick 5 names each to put 10% of your net worth in today and you can’t sell for 30 years. What names are you choosing?
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One of the last things you learn in wealth mgmt is that vast majority of PMs are awful investors.
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One of the dumbest aphorisms spouted by fundamental investors is "We are long term focused. We don't want to focus on the short term"
This is like a sports team saying "We are just going to focus on winning the championship. Forget about the period"
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TFW you're in the arena, grinding it out, trying things, ekeing out a few bps here and there, while some dude with a bandana makes a billy poasting memes.
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career advice:
succeed young
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The European mind cannot comprehend that if you like the work, it's entirely possible to do it for 14 hrs a day without sacrificing health or relationships.
And that there are fields where doing so for a period of time can lead to extraordinarily good outcomes
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Wife - who's very much not into markets - is asking me how much we are down by YTD.
Anyone know a good marriage counselor?
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What do you call a stock that's down 75%?
One that was down 97.5% then 10 bagged.
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There's this side hustle called doing your job well which can be really f profitable in many industries.
What's the most unexpectedly profitable side hustle you've ever had or heard about?
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Long term investor in the sheets. Tick by tick price watcher in the streets.
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Empathy is all you need. (I mean, not really, but it sure is an underrated skill.)
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It also wrecks your investing brain a lot of the times. Sometimes permanently.
making a lot of money very quickly does terrible things to people in the aggregate. It's not something you'll understand until it's happened to you.
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3/ “Assessment of culture and C-suite is essential in our decision making process.”
QtNGA: “Do you keep a record of your accuracy in assessing these variables?”
Most PMs way overestimate their ability, based on one off hit from years ago. Batting avg is usually very low.
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