Thread by @mario_cibelli

Over the years, I've been involved in some real battleground names where the debate over the company's prospects was quite intense to say the least.

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With some of these companies, I, and other longs, have been opposite some highly reputable, brand name funds.

At one investor meeting many years ago, after going over a favored long at the time, I was hit with 'but so & so are short that name' to which I responded 'so what, we’re both going to be right.'

Of course I got a confused look from the group I was speaking with as they asked how what I said could be true.

I explained that we had different time horizons. XYZ very smart fund will pinpoint a quarter that we miss and be rewarded for their skepticism.

We, on the other hand, are playing the long game and despite missing some quarterly signals, we'll get the big picture right over a longer period of time.

They add value over their duration and we add value over ours.

The friction/debate can get high pitched when this dynamic is ignored by market participants.

In a perfect world, funds with different durations wouldn't even debate the merits of an investment but these mismatches occur regularly -- thanks $TWTR :) Recognizing these mismatches can be very valuable.

I believe is exceedingly hard, and maybe even impossible, for an equity fund to switch to a duration that it does not typically/naturally invest in.

In fact in all my years, I have never found a single person or group capable of getting short-term under and over-valuation right while simultaneously getting the long-term play correct. The mindsets are simply too at odds with one another.

I'll say it another way: If you hope to own something over a long period of time - 5 to 10 years - it's really impossible to optimize for every quarter along the way. To get what you want, you just have to own it. It's as simple as that.

To own something for 5 years and get the benefit of a transformation to significantly higher earnings power you have to own it for 20+ quarters straight, sometimes through extreme volatility.

One can try and hedge some of these risks along the way if there's a strong opinion on a particular quarter but that's starting to play someone else's game and may distract from the getting the big picture right.

I've also noted many times that XYZ smart fund may have a 2% short position in the battleground name versus our long position that could range from 10 to 20%.

With two intellectually matched funds on opposite sides of the table, I would tend to bet on the one that had higher conviction and more to lose from being wrong - all other things being equal.

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