Tag Archives: Hedge Fund Job

Our Job Search Continues….Advice from Readers and Sleuth Investing

 “Politics: “Poli” a Latin word meaning “many”; and “tics” meaning “bloodsucking creatures”.”–Robin Williams

Our Job Search Continues

We will continue from our last post discussing a search for a job at a hedge fund found here http://wp.me/p1PgpH-lB

Several readers contributed insights that expand on my narrow, eccentric view.  I want to repost some of their comments:

PT writes: 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.

From  llmarsii

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. END

Skills not Credentials

Wonderful advice from those readers. Reviewing the previous post, I seemed critical of MBAs and CFAs. No, those are great credentials, but having gone through those programs is neither necessary nor sufficient to developing into a good investor. Certainly, a hiring money manager may think that if someone has completed a Columbia MBA, then the candidate is smart and motivated so one less worry in that hire. But what they really want is someone with the ability to find, research/analyze and communicate in order to help he or she add value for his clients.

Show Your Passion, Skills and Strengths

How can you leverage your time and efforts to learn while pursuing your job search? You can follow the lead of Michael Burry who posted his investment ideas on various web-sites to obtain feedback to improve his process. He not only learned but he got “discovered” by Joel Greenblatt. Yes, luck was involved, but he pursued his passion while learning. Burry also realized that if HE was to be successful he was going to have to do it his way and not just be a mimic of Buffett—just as Buffett went his own way versus Graham’s style.

Whether you only have $3,000 to invest or $300 million, you want to keep careful track of your reasons for each investment so over and over again you can go back and try to see your patterns of thinking, success and failure to improve. Learning for your mistakes is often harder than it seems, but you would be surprised how few professionals ruthlessly do it.

The Sleuth Investor

So how does that help you find a job? You need to show someone the quality of your thinking/work so they have a compelling reason to hire you. Depending on your personal situation look around in the town where you live and what businesses or industry catches your attention? One day, I flipped through my Value-Line at the library and came across Miller Industries, Inc. (MLR), a tow-truck manufacturer- MLR_VLhttp://www.scribd.com/doc/80380931/MLR-VL. And Tow-Truck Magazine http://www.scribd.com/doc/80381569/Tow-Times-Miller-Industries.

I noticed the high returns on capital prior to 2007 and wondered how can a dinky tow-truck company earn such good returns, and then why was there a decline in ROA? Could I normalize earnings and was this a good business?

In the 10-K I saw that the business wasn’t that capital intensive plus the industry structure was more like a monopoly with MLR having a dominant share. In fact, a few years back, Miller was sued by the U.S. Justice Department to prevent an acquisition. Miller buys trucks beds at cost which they pass onto to the customer, then they make their money in assembly of the hydraulic winches and pumps plus providing parts to the dealers. Similar to Catepillar, success was driven by their dealer relationships. The wider selection of models, the better product offering for the dealers, while more dealers improved sales and service which allowed for economies of scale in making tow trucks. The strong become stronger. The decline in capital seemed temporary due to a retooling and restructuring investments plus the drop in sales due to the recession. Also, even I could grasp how the tow truck business worked.

To prove this to myself, I called on tow truck operators, dealerships and competitors. Sitting in a tow truck at 11 PM on a freezing Chicago Winter’s night, I learned about the importance of a strong dealer network. An operator doesn’t buy a tow truck to take Betty Lou to the drive-in; he or she buys a capital asset to make money. If the capital assets is out of service, then costs mount quickly. The winch stopped working while pulling out an over-turned bus. The dealer had two mechanics out there within 35 minutes and a hour later, we were up and towing the bus to its garage.

The analyst can writeup an industry map, show how the competitive dynamics work, prove that the company has strong assets (dealer relationships) that are reinforced by economies of scale as shown by their market share and low unit costs by work done outside of just the 10-K and normal analysts’ reports. When in 2009 the company was trading at a $36 million enterprise value with excess cash, you could buy the business for well under liquidation value plus its growth would be profitable. No one on Wall Street was covering the company. Yes, you have to spend a few nights drinking cold coffee, and driving around with a guy who chews tobacco, but go the extra mile.  The investment worked out, but I no longer own the company’s stock. The point is to show you can do deep due-diligence and original work on your own.

Go back to this post on the Sleuth Investor: http://wp.me/p1PgpH-W to learn how to do more in-depth research.  I can guarantee you will set yourself apart.  You can even check your work by sending your report to the CEO of Miller or a competitor and asking what might you have done better before you send it to a small/micro cap money manager. You will receive feedback and may even get referrals to other opportunities.

Many Ways to Heaven

Also, Wall Street is not the only place you can research companies. You can work for the M&A depart of a corporation; you can do investigative business journalism; you can become a loan officer, etc.  There are many ways to go to heaven.

Leave Your Comfort Zone

Granted, you might be out of your comfort zone like Gene Hackman, but you will learn: We Are Family http://www.youtube.com/watch?v=dYLk34GCXbo Turn up the volume after the annoying 30 second commerical (I don’t put those there!)


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)


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


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