Risk and Portfolio Management Similarities Between Joel Greenblatt and Stanley Druckenmiller - Base Hit Investing
Risk and Portfolio Management Similarities Between Joel Greenblatt and Stanley Druckenmiller - Base Hit Investing
Risk and Portfolio Management Similarities between Joel Greenblatt and Stanley Druckenmiller | Base Hit Investing
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I have been busy over the past couple of weeks. My wife gave birth
to twins about two weeks ago, and now that I am back in the office, I
am catching up on some reading. While we were in the hospital for
about a week, I did have some time to do some reading, and I have
some comments on two annual reports of current holdings of mine
JP Morgan and Markelwhich I may turn into brief posts.
But briefly, I thought Id share two videos I recently watched of two
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great investorsone I talk a lot about, and one that Ive rarely
mentioned.
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Stanley Druckenmiller
Druckenmiller has arguably one of the four or five most impressive
track records of all time when you combine CAGR, assets managed,
and longevity. If there was an NCAA-style bracket for all-time great
investors, hed probably be a 2 seed, or possibly even snag the final 1
seed spothes that good. He compounded at around 30% annually
from 1981 until he retired from active money management in 2010.
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And in fact, those three points are usually exemplified in all the
great value investors. Druckenmiller says in the lecture that he
really sees no point in watering down your best ideas with marginal
ideas just for the sake of diversification. It only will lead to mediocre
long term results. He also says something I strongly agree with:
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there just arent that many great ideas. In order to get great results,
you have to capitalize on great ideas. And you might only find 1 or 2
or 3 really great ideas in any given year.
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So its not much different in terms of philosophy, just the way the
philosophy gets implemented: I tend to prefer undervalued high
quality businesses that I can easily understand, but Druckenmiller
and Soros found an edge by analyzing macroeconomics.
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average company that was trading for less than liquidation value (or
Value Walk
more likely, the value that the business could be sold to a private
buyer for). The twist was that the company had a very small retail
subsidiary that was growing and had enormous potential. The main
business was mundane, lowly profitable, and generally unattractive.
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The small retail operation was just a small fraction of the overall
value, but if the concept worked, it could grow into a much larger
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The case is interesting, but the thing I took away is that Greenblatt
said that his favorite ideas consist of finding an investment
opportunity where there are very few ways to lose money and
multiple ways to win. In the case above: the main business could
have been sold, assets could have been liquidated, or maybe the
operations could have turned around. And of course, the growing
retail business was just gravy. There were multiple good things
that could happen and very few bad things. In fact, I dont recall
exactly how the situation resolved itself, but I think the bad business
didnt really get better. I think assets ended up getting sold and the
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T A G G E D WI T H
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