Competition Demystified Continued; Hedge Fund Job; Hire an Ex-hooker

Experience is something you don’t get until just after you need it.–Steven Wright

Next Reading in Competition Demystified

Let’s tackle pages 113 to 136 or Chapter 6: Niche Advantages and the Dilemma of Growth–Compaq and Apple in the Personal Computer Industry. Good work to those who did the Coors Case Study.

Finding a Job at a Hedge Fund

The reader who wants to obtain a hedge fund job has received good advice from several of the readers this post yesterday: http://wp.me/p1PgpH-lm.

Everyone gives advice that they think will help but we have our biases and what has worked for us may not fit the advisees. Please take my advice with a heap of salt.

Let’s take a step back and ask a few questions—what is your ultimate goal? I assume your reason to work at a hedge fund is to be paid while you learn to become a better investor.  You have to be sure that you have unique skills or traits that would make you suitable for the work. Would you like to be alone sitting in a room all day reading, thinking and struggling to find answers to questions?  That is what I do, and I am one weird guy. I think of the country song, “Don’t let your babies grow up to be value investors.” http://www.youtube.com/watch?v=ePgnkVAM3L8&feature=related.

What do YOU really want to do and what combination of your life situation and skills will help you attain what you are seeking. Below is an excerpt from www.fool.com on a job search board http://boards.fool.com/that-is-awesome-that-you-have-been-able-to-do-25280669.aspx.

Where is the place to be in business today?

I don’t want to sound rude or negative, but that is the wrong question if you are looking for career advice. No-one can give a general form answer to that question. Everyone can try to answer that for themselves, but how does that relate to your own situation? Rather, you should be asking yourself:

– What do I enjoy doing? – What am I good at? – What are the skills that truly differentiate me from my peers? – What type of environment do I enjoy working in? – What level of interaction with others do I need on a day-to-day basis? – How important is money to me?

Once you have thought through these questions (and I suggest you do this in writing), you’ll be on the way to finding an answer to this question:

“Where is the place to be in business today for me?”

Regards,  Alex Dumortier (TMFMarathonMan)

Obsessed

Ok, I am back.

Read Snowball by Alice Schroeder. You will understand how focused, obsessed and hard-working Buffett is. Do you love the work THAT much? Because you will have to work extremely hard, but if you love what you do then it isn’t really “work.” Work hard for the moneyhttp://www.youtube.com/watch?v=Lnd7Urx28f8

Traits of a Money Manager: http://www.fool.com/news/foth/2001/foth010717.htm

Career Advice

Some videos meant in fun but there is helpful advice–Steven Spielberg’s career suggestions:http://www.youtube.com/watch?v=kBN9jpooZoM&feature=related

Do you have the talent or why most people fail at screenwriting: http://www.youtube.com/watch?v=gXPYhW8Q74w&feature=related

Advice to an actor–be yourself: http://www.youtube.com/watch?v=m_Ui2IGbqhY&feature=related

Find your passion:http://www.youtube.com/watch?v=HqC7sN1DQzw

Wall Street

To those who wish to work on Wall Street I would say that you will probably witness shrinking of the financial sector for awhile as regression to the mean sets in. There was too much leverage and with the de-leveraging and greater regulation, you will see lower ROEs for banks and other financial institutions. There will come a day when MBA students will not even bother to look at Wall Street. Remember when Wall Street was a wasteland in the 1940s? On August 19, 1940, the stock exchange volume totaled just 129,650 shares. Read James Grant’s introduction the Security Analysis, 6th Edition.

Not a Clue

Another point that might sadden, anger and shock readers is that there are many brokers, money managers, and analysts even from Harvard, Morgan Stanley, or even Goldman Sachs who do not know what they are doing. Exhibit A: recent financial collapse. Also, Wall Street exists to raise and move money, so few actually analyze businesses properly.

I spoke with a young analyst who works for a fund where the partners came from a fancy investment bank and they all have CPAs, CFAs and MBAs. Their fund is down about 10% CAGR since 2008! The fund has no investment process, method or discipline. This young analyst has learned from his own reading. Go to www.lmcm.com and click on the information there and you will be impressed with the credentials. Bill Miller did very well for himself and not so well for most of his investors these past five years. Why?

Working at a Fund

If you do land a job at a good value fund, I doubt the principals have the time, temperament or inclination to train you. If you want a sense of what it is like working for Michael Price, go to my book synopsis: http://www.scribd.com/doc/80246703/5-Keys-to-Value-Investing. This analyst worked for Price. He would present ideas and then defend his thesis in order to convince Price to place the investment in the fund. Certainly the questioning by an experienced investor is a valuable learning tool. If you didn’t do your work thoroughly beforehand, you were not there long. But I doubt Mr. Price will patiently explain what deferred taxes are to the aspiring analyst. You are there to help him make money.

thinking in a little box

The ad for a hedge fund analyst position I posted yesterday required either an MBA or a CFA.  I would offer $10 to 1,000 million to the fund manager or anyone to show any statistical evidence that having those degrees improves analytical or investment ability over other attributes. It is just another screening technique for the lazy and unimaginative. One of the best investors in history, Walter Schloss never studied past twelfth grade. Seems like he did just fine. His temperament, discipline, work with Graham (he went and sat in on Graham’s lectures), and study of Security Analysis were his assets.

Let’s say I interviewed a Harvard MBA who wanted to become a value analyst. I would ask him or her, “We will have superior performance because I am so smart, hard-working and experienced. Don’t you believe that as well?” If the analyst agreed, especially just to be polite, the interview would be over. You need to be driven by curiosity while having humble skepticism and be willing to disagree; question.  I seriously would rather hire an ex-hooker http://www.youtube.com/watch?v=ZivA_f7DRdE.

Successful, but Unconventional

Below are professional investors who all have excellent records but unusual backgrounds. They made their own path; YOU can too. Also, get the book, Free Capital by Guy Thomas. The book is better than The Buffetts Next Door because you will see how several others have been successfully investing in their OWN way.  Many never aspired to having a pedigreed background nor previous investing job.

Jim Chuong: http://www.ticonline.com/

Francis Chou (former telephone lineman): http://v1.theglobeandmail.com/partners/free/globeinvestor/investment/may08/chou.html

Video:http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Guest_Speakers/2009/Chou_2009.htm

Michael Burry: Betting on the blind side (note his personality): http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004

Kupperman as an adventure capitalist: http://adventuresincapitalism.com/page/Whos-Kuppy.aspx  While in college he would visit obscure Canadian mining companies and uncover what no other analysts bothered to look at.

I know this gentleman, Jordan Mariuma, who could barely read a balance sheet while in New York, but he had the guts to go to Romania. http://www.hedgefundsreview.com/hedge-funds-review/profile/1931806/worldwide-opportunity-fund-terra-partners

We will discuss again after others chime in or disagree with my “advice.” Don’t give up the faith. Good luck.

Of Interest

Fairholme 2011 Letter: http://www.gurufocus.com/news/159850/bruce-berkowitzs-2011-shareholder-letter

Canadian Investor in SUPER STOCKS

6 responses to “Competition Demystified Continued; Hedge Fund Job; Hire an Ex-hooker

  1. As a side remark, I believe you should also be aware that there aren’t that many real analyst jobs available at funds. First of all, the same team often manages different funds. Secondly, from time to time they are actively recruiting but the boutique investment funds for example are not recruiting on a regular basis. Therefore, I believe going your own way is probably a rewarding one in the long term. By going your own way, I mean doing your own research, talking to people, writing about your findings, etc. It is probably a cliché but…for example if you are not printing an annual report and reading it (at home) because you are curious and have fun reading it…you are probably not made for it. When you have a clear investment process, valuation techniques, thinking outside the box mentality, etc. etc. you probably get involved into better and better discussions with other people (fund managers) as well.

    Just my two cents of course…

  2. Good addition to the discussion. Thanks!

  3. John, the only thing that perhaps impresses me more than the quality of your posts is the wide spectrum of interesting youtube videos you share…thank you for yet another wonderful post.

    I strongly agree with your point about figuring out what one’s true passion is. I can’t remember where I saw this (maybe from one of the videos that you actually) but I believe there’s a clip where Bill Gates talks about the 10,000-hour rule in Malcolm Gladwell’s Outliers. Gates mentions how the rule is more tiered than linear, e.g. you do the craft for a hundred hours, then 50% of the people stop and after 500 hours, 70% of the people quit, etc. By extension, I think first determining one’s true passion and then the discipline to dedicate 100% of one’s effort are very underrated keys to success.

    Here are two of my favorite “motivational” videos that I would like to share:
    1. Will Smith on Success:
    http://www.youtube.com/watch?v=q5nVqeVhgQE

    2. Maybe it’s my fault:
    http://www.youtube.com/watch?v=cEVCjUG1Mww

    Also, to PT’s point, I’ve observed that many good investors don’t hire teams of analysts. My guess is that they limit their investment decisions to their circle of competence and must invest in something they have researched and fully understand. Nevertheless, there are still great investors that use/have used the help of analysts (Graham, Einhorn, Klarman). The struggle for a young aspiring investor with financial difficulty is s/he may not have the financial means to start independently yet it’s often hard to find a real research-based analyst job. With that said, I’m confident that anything is possible with hard work, perseverance, and time.

    • Thanks IImarsi: Your youtube videos are a great addition, and they illustrate your points. Having readers share their perspective adds a great deal to my narrow and eccentric point of view.

  4. Just to briefly chime in, I completely agree that having a suffix at the end of one’s name on a business card does not make them necessarily competent or successful in their chosen field. Personally, the only reason I entered the CFA program was due to the many instances in which I saw “progress towards the CFA charter” as a requirement.

    As others have said, it’s all about finding your passion. Did I know I wanted to become an analyst? Not initially, but I found myself wanting to do nothing more than lock myself in a room and read 10-Ks all day (and still do). The point is, regardless of any short-term difficulties, if you truly want to become a successful investor/analyst, it takes patience and time; I should know as I walked away from my family’s business (which has been around since 1905) nearly four years ago in that pursuit. It was extremely difficult, but I’m wholeheartedly committed to having success in investing.

    And in keeping up with the videos, here’s another one that may inspire:

    http://youtu.be/hzBCI13rJmA

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