Everybody's yelling at you because you're trailing the market. It's important not to get carried away with yourself when times are good, and to be able to admit your mistakes and move on when they're not so good. If you are intellectually honest and not afraid to be visibly and sometimes painfully judged by your [...]
I'm playing golf in a foursome that includes someone who's a terrible golfer. He's teeing off and takes a big swing and misses, digging up a divot off to the side of the ball and tee. He regroups, takes a deep breath and then does the exact same thing again, digging an even bigger divot [...]
We're a long-term, low-turnover manager, so the office routine doesn't change much [in bad markets]. Outside the office may be a different story, say, with respect to sleep patterns and eating habits. But we always say, “When the going gets tough, the tough do research.” One of my biggest jobs is to keep everyone focused. [...]
We don't have many rules, but when a stock is down materially relative to its peer group we assign another analyst to formally review it and then force ourselves to buy more or get out. Not surprisingly, the analyst who originally recommended the stock is the last person to want to sell it.
The only way to add value as an active manager is to be persistently different than the index. We tell prospective clients that if their main goal is to minimize standard deviation around the index, save money and buy an index fund.
We cap a given industry's exposure at 25 percent of the portfolio, which is a check on the innate lack of humility we often have as investment managers. Owning five or six 4 percent positions in an industry is a good, strong bet, but also isn't betting the house on how smart we are relative [...]
We have three analysts, including myself, and for every idea we pursue in depth, two of us will make the purchase case and one makes the case for selling the stock short. There are behavioral biases that can kick in when you pursue what you think is a good long idea, and by expressly tasking [...]
My analysts are now saying, “I know you're going to hate this, but …”. That's a great thing. If my initial reaction is to hate it, so is the market's, and that probably means it's something we should look at more closely.
If I was stuck on a desert island and had to make a decision on management talent, I'd chose a summary of past returns on capital over a cell phone to call people.