Admit it, you want to be like Alan Turing.
Or the next Michael Bury, to be featured in the Michael Lewis’ next book.
An elaborate mystery within a puzzle…the key that unlocks great riches.
The Imitation Game is a great film. I hope it wins the Oscar. Watching it, I don’t think you can walk away not wanting to be that smart. Just amazing. I can’t speak to all professions, but I am glad genius is not a requirement for investment success.
Speaking of movies, I love movies. When I was 10, my family moved from Iowa to Ohio. My mom stayed behind to finish packing up and sell the house and I moved out to Ohio with my father and two siblings. My brother and sister watched me during the day and here’s the best part: They worked at a movie theater and an arcade place. Talk about a great summer.
I have always loved the great movies and the blockbusters.
I find movies and the Oscar awards very similar to investments. Let me explain.
In 2014, the top ten grossing movies were:
- The Hobbit
- Guardians of the Galaxy
- Hunger Games
- Captain America 2
- The Amazing Spider Man 2
- Dawn of the Planet of the Apes
And the Oscar nominations for best picture are:
- American Sniper
- The Grand Budapest Hotel
- The Imitation Game
- Theory of Everything
No overlap. It typically happens that way. Avatar and Lord of the Rings are the glaring exceptions.
Usually the most creative and well-filmed stories aren’t that popular at the box office. You can debate that the reasons in your free time, but for my purposes, I want to point this out. There are a lot of “stock picking” contests out there or various ways to give presentations on ideas. These are the Alan Turnings of the world–Michael Bury type investors. I admire these ideas and congratulate the people who put so much effort into these write-ups and presentations. However, looking back at my portfolio over the past 5 years, not one idea would have qualified for an Oscar. No special insight, no creative structuring, not one undiscovered gem in the SEC filings. Just plain vanilla ideas that have performed very well.
The second point is a secret that movie studios know very well. Sequels are great. In the list above for 2014–7 of the top 10 are sequels. If it ain’t broke, don’t fix it. Think about all the movies that have produced big box office hits. Most are sequels. I just saw a preview for another Terminator. Why not?
Same goes with investments. In 2011, I had 5 good ideas, but it was really just 1 idea that played out quickly and then I slowly realized that there were 4 other similar companies where the idea hadn’t played out. 2012 was one new idea–and a similar idea was my biggest winner in 2013. In 2014, it was the exact same idea from 2013. I am hoping I can use the 2013/2014 vintage for 2015….
Bill Ackman, whom I don’t necessarily love (I think he should use Gotham’s results when reporting his track record and I dislike that he is a media hound) commented in this article “At many hedge funds, people are idea junkies. It’s the idea of the week.” I think that comment is spot on. Great work, Bill.
1. The most creative ideas will win you some investment pitching contest, but will these ideas produce box-office beating results….
2. Sequels in movies produce lots of profits and the same applies to investments.
I beat myself up sometimes for not finding any new or great ideas. Indiana Jones 5 or Rocky 15 (?) might be the best for my investment results.
Matt Brice is the portfolio manager of The Sova Group, LLC, an investment firm that manages separate accounts for clients.
I can be reached at firstname.lastname@example.org