Were Buffett, Soros, Peter Lynch, Julian Robertson good investors?
Lot of ink has been spilled about these guys (along with other investing “legends” over the years). But think a lot of them either made huge bets that worked like soros or made $ riding beta.
None of them did it through idio-stockpicking with actual factors restricted. In that context a good PM who can consistent make $ at citadel/p72/mill is way more impressive than Buffett, lynch, soros no? Since more repeatable process vs luck
Buffett made his $ on consumer staples (aka quality/value factor) that worked. Same for Robertson with value factor (ironic since the cubs are all growth). Soros was just rotating between factors when they work (momentum factor). Peter Lynch picked stocks before they were discovered (basically index inclusion but easier). Any of us could have made $ then
You are absolutely bang-on correct. Any first-year analyst at the pod shops is better. None of these guys - Buffett, Lynch, Jule Rob, Soros, Drucken, Klarman, Simons, ever got into P72 Academy nor could have if they'd tried. In fact, I think Cohen is trash too cuz he didn't get into P72 Academy
I think people need to think critically and not take clout at face value. Did these guys ever work at Citadel or Mil? No. Did Griffin, Cohen, Izzy, Balyasny ever get into P72 or Mil after college? No. 'Nuff said!
The hindsight bias is strong with this one lol
No, most likely you would not have been comparably as successful as any of these men if you were dropped into the same time period even if you had similar family circumstances as they do. All the resources you have, the learning you've experienced, none of it would have existed in a similar form during their come ups otherwise they wouldn't be so unique compared to their peers of the time. Trying to summarize their decades of experience as "they just did X" is hilariously childish thinking and further demonstrates you couldn't hold a candle to any of them.
Are PMs at MM pod shops better investors than Warren Buffett? If I had the opportunity to go to Berkshire Hathaway and work with Buffett on their equity book vs. a good MM seat, what should I pick? I’m thinking the latter as I’ll be better trained to navigate the current market environment and Buffett’s equity portfolio is just riding beta. Any thoughts?
Most people in finance are like golf instructors. They are paid to criticize / critique / better someone else's swing, because they realized long ago they can't live off their own swings.
OOF every sellside 'strategist' felt that. Michael Maubossin
Mauboussin is not the example I would use… guy is insanely smart and his research is read and respected by a lot of investors
This is a beautiful example of the WSO effect - pod shop market neutral investing is the only pure form of investing now and forever, and everyone else (past and present) is a simpleton who simply amassed assets off factor riding.
I get it, but we live in a very different world today - these "legends" practically invented the mental frameworks and tools you use on a daily basis to analyze stocks. Markets evolve. Would Buffett put up better alpha than the best PM at a pod shop today, probably not. But Buffett put up some pretty extraordinary returns for a solid period, and more importantly, built a large business empire with some wise decision making. He is more of a public persona who preached the basics of value investing in a very digestible from (whilst still building an incredibly successful corporation) vs. being the ultimate and final god for investment approaches that some would make him out to be.
The mental frameworks and approaches preached by Buffett, Lynch, and Robertson are readily accessible these days - in a world where information is rapidly distributed and can be analyzed by anyone with the same tools. Investing approaches have mostly been commodified and finding true security mispricings gets harder everyday; as a result styles have changed, including the benchmarks we use to measure success. Now (according to you at least) anyone with factor exposure is a simpleton. But at the time, they get to where they are by putting up returns that were distinct from the rest of the pack, and by developing somewhat unique frameworks. I don't think you or the majority of us would have been able to generate those returns with the tools, knowledge, and market structure they came up in.
Much smarter academics than you have attempted to disaggregate the return profiles of investors. Sometimes it is luck and factor more than skill. More importantly, each of those people built successful investment businesses exploiting the market for what it was at the time. I think for you to compare yourself to them, you would need to do the same right now. So tell me, what exploitative model have you developed to analyze stocks and generate peer leading returns - enough so to convince investors to give you billions of dollars.
This effect is not limited to WSO discussion. There is an extreme degree of presentism in society nowadays, to the point where a large segment have no real concept of life even 30 years ago, let alone 50 or 100, etc. In the past 8 or so years, the level of intelligence regarding investing topics has noticeably declined on this forum, despite there being more publicly available information. I'm also now seeing new analysts who literally have no idea of any financial history pre 2010, and based off some of their other comments, probably no idea of any general history pre 2010 outside of the 5-10 big things no one will let you forget about. Even some of the "smarter" ones seem to think that machine learning was invented this decade and if you ask them how it was developed, they come up empty handed.
To be honest, I don't expect to see many new exploitive models being generated in the future outside of a select few, and they will probably be well capitalized quant efforts who will never share them.
Buffet would've got blown out of citadel in two months. Robertson would've failed to receive a return offer from Point72 academy. Lynch would've failed to get a first round at millennium with his last name
.
I think there's a difference between the MM "machine" and the MM employees themselves. would I want to be a pension or foundation clipping a theoretical >10% net every single year (albeit on 3-5x leverage)? you bet, it's the perfect product for the alternatives sleeve. still, as an analyst or PM within the machine, you'll still get canned if you blow up. at the end of the day, you're a rockstar if you clip >5% unlevered on a factor neutral portfolio, but how the hell are you going to compound on that? ironically, it's the same return as a money market fund at today's rates. it's an incredible skill to put up those returns while being factor neutral, but what's the point outside of this MM machine?
Buffett and Robertson may have had some factor exposures, but ultimately you would've gotten very wealthy as one of their investors over a 10-20 year period and significantly outperformed benchmarks. and let's (incorrectly) assume their idio alpha was basically zero. does it really matter? they still picked the right factors and did very well for their investors over at least a decade. how many other investors were able to do that?
my 2 cents. don't know what the right answer is, but I think it's misguided to just think "any of us" could've made $ so easily
Not to play devil's advocate but I actually think a successful PM at MMHF is a better TRADER than all those famous investors.
Yes please continue to think that Soros and Julian was not as good a trader as the guy clipping 20mm PnLs trading ideo single name earnings story.
I honestly can't imagine any investor, regardless of how they invest, whose spent even a reasonable amount of time reading the work of Buffett, Snowball, his track record, etc. asking whether he was "a good investor"...
How much of his return was idio vol vs just riding beta? Hard to respect someone for just owning Apple
homie runs a $300b single-name concentrated buy-and-hold equity portfolio thru an insurance company (concentrated 5-10% position is like $15-30b) and your criticism is that he picked the one mega cap tech stock that went 7x since initial purchase?
yeesh, tough crowd
You're missing the forest for the trees here bud
Guys made more money investing than anyone else
This is more about the evolving eras of a global U.S. empire than anything else. These titans of investing made their fortunes during the apex of the golden years of the American empire, c. 1960 - 2000. They were each unique in their individual approach to investing, but all were riding the "ultimate beta" which was the rising U.S. tide. They were successful because they were among the first to have the foresight to recognize the rising U.S. tide and invest long-term during the global spread of U.S. cultural influence. It's hard to say whether the rising tide of economic growth that has carried U.S. markets from the post-war era into the globalization era will continue over next ~40 years. It's possible that advancements in the development of new technologies will usher in a new golden era for the economy and markets, but technology has made the global playing field so much more level than it was during the initial golden years, and thus it is harder to have an edge in anything.
charlie munger and warren buffet are now fans of east asia (japan, china). wonder what that means
As someone else mentioned, multiple books have been written by and about that group of investors. If you read what they actually did and think you would come to a different conclusion.
Every factor blah blah model came from things they created/preach.
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