Shortsighted Capital Profile picture
Nov 12, 2023 4 tweets 1 min read Read on X
“The Fund” was a fun read.

Folks always joked that people invested with Bridgewater just to get the macro commentary… but I was not aware that Bridgewater got its start with that sort of writing.
Dalio is not just the founder of the world’s largest hedge fund.

He’s also the creator of the world’s most successful financial newsletter business.
You can’t explain it all as *just* marketing. Dalio clearly thought he was doing something important with his dots and radical transparency.

I just don’t know how you go from “systematic / risk parity fund mgr with macro commentary” to building that whole thing out in Wesport.
Such a fascinating place to think about. Like the Church of Scientology.

Amazing some of those practices persisted as long as they did. Don’t think you could build it today.

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More from @ShortSightedCap

Oct 30
Every now and then you get a glimpse into the inner workings of a privately held company. It’s unfortunately not always inspiring.

Patek Phillipe is one of the world’s leading watch manufacturers, and is owned and managed by the Stern family.
Morgan Stanley estimates they did over $2b in sales in 2023, despite selling only ~70k watches. (As reported here: usa.watchpro.com/rolex-sales-to…) Patek is to watches what Ferrari is to cars.

They are a big deal. There was a Business Breakdowns on them: joincolossus.com/episode/reardo… Image
And business appears pretty good going from their UK accounts (Companies House, charts from )

This is all to establish that they are a large and successful enterprise. They would likely be a midcap if publicly traded. usa.watchpro.com/what-can-we-le…Image
Image
Read 10 tweets
May 1, 2023
It is interesting how few banks have outperformed SPY over 10 years. Even if you measure 1/1/2013 - 1/1/2023.

You can say rates depressed earnings. And that's true. But it didn't stop companies like SCHW. And some banks were able to create value: Image
And if you restrict that to banks that were actually large enough to be investable 10 years ago... it's a pretty short list.

16 beat. 2 of which went to zero shortly thereafter. And quite a few are not exactly banks (LPLA, SCHW, IBKR etc.) Image
Yes, again, rates.

But I think it might just say that operating a commodity-like business in a highly fragmented industry is difficult, and unlikely to generate economic returns without some material differentiating factor / strategy.
Read 7 tweets
Feb 11, 2023
I appreciated this introspective piece from Oakmark on the underperformance of Oakmark Select relative to Oakmark.

oakmark.com/news-insights/…
I've been running a (small) concentrated portfolio for ~5 years. That's not a long time. But I have come to appreciate some of the challenges associated w/ concentration. Things that weren't necessarily obvious to me when I was idolizing Chieftain, TCI, etc. earlier in my career
We all know that investors are generally bad at sizing. Equal weighting tends to be additive, and long tails of small positions tend to detract from performance.
Read 16 tweets
Feb 11, 2023
One of your analysts comes to you with a turnaround pitch -

“Yes, I know [ Citigroup / Advance Auto / Expedia / etc.] has underperformed in the past, but this time is different! Look at all these new plans, they’ve got new mgmt, I’ve done a bunch of checks and…”
The pitch seems plausible and well researched. But that was true the last half dozen times you heard it as well.

Again, your guy has done a bunch of work substantiating his thesis… but experience suggests the company will find new and innovative ways to disappoint you.
How do you push back on this?

You don’t want to come off as close-minded. You don’t want to discourage him. If you don’t buy it - and, by some miracle, it actually works - he’ll hold it against you.

But you also don’t want to bet on a decade-long turnaround finally turning.
Read 5 tweets
Dec 22, 2022
That GS Prime Brokerage report on multi-managers... I think I've looked at it a half dozen times over the past week.

Quantifies what I felt to be true (that multi-managers account for nearly 100% of industry growth).
The ultimate product is very good! Yes, they are levered and the fees are high... but the net outcome is great.

The reduced liquidity on new share classes could even be a positive for some institutions (although they'd never admit it).
I do wonder, what slows or reverses this trend?

PM talent is currently the gating factor on growth... but you can find / develop new PMs.

Maybe crowding? But that feels like a weak counter.
Read 6 tweets
Nov 5, 2022
I've been thinking about this a lot the past year or so:

Does the Capital Cycle work differently in intangible-driven businesses?

It's fun to think about, even if it doesn't really help you make money near term.
The capital cycle isn't a new concept. We've lived it, repeatedly. Telecom, shale, etc.

High returns drive capital inflows, which then lower returns. We often overshoot in both directions, because we extrapolate recent results and returns manifest with a lag.
Super straightforward with commodity businesses.

"The cure for high prices is high prices" is the closest thing commodity investors have to a Buffett-ism.

Sunk vs marginal costs, inventory gluts vs shortages, capacity additions / rationalizations - it works perfectly.
Read 13 tweets

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