RG III vs. Buffett or Why I Don’t Study 13Fs

I don’t ever bother reading 13Fs. I think it is a waste of time.  And, I think RGIII is a great example of why you shouldn’t.

I grew up with the Redskins. To say my father is a fan is quite an understatement. In fact, one weekend, when he was particularly engrossed in a game (most likely during the Joe Theismann era), my mother grew so frustrated with him for not listening that she took his glass Redskins drinking mugs out to our concrete porch and proceeded to not-so-gently drop them. I am not sure my father noticed until after the game was over.

RGIII had a great last year.  Joining the RGIII bandwagon most likely surpassed the popularity of joining the other popular DC bandwagon from 2008.  However, this year has been disastrous, to say the least.  I have no idea what will happen the rest of the year, but a key takeaway from watching “flash in the pan” successes in sports over the years is that it takes a career to prove whether you are truly a great player.  Not one game, not one season, but an entire career.  Sports talking heads love to talk about how great certain players are after one great season, but they have 24 some-odd hours to fill and they are paid by word volume, not quality.

In the investment world,  there would be a SportsCenter program devoted to 13F filers (13Fs list security transactions by investment managers with over $100m in assets under management).  Many people look to these filings for what the “professionals” are doing. I feel that this is a similar problem with “flash in the pan” successes.   A very large majority of these managers have a comparatively short track-record.  5, 10, even 15 years in the investment world is just too short.  5 years in the investment world is probably similar to one season in the sports world.  5 years means nothing in the investment world, because “your style” may have just been in vogue.  If you were a tech-investor in 1997, your 3-year track record would have been amazing in 2000 or a real-estate investor from 2002-2006.  These investors may or may not be great investors, but I don’t really see the point of tracking them until they have a proven track record, like say 40-50 years.  There are very few, maybe a handful of investors that have stood the test of time for this length.  And, after 40-50 years of investing, they have most likely entered into a whole different world of investing, i.e. due to their size (Buffet, Munger, Klarman, Marks, and even Klarman and Marks are a little short on the longevity side) can’t really invest the same way as they once did with smaller holdings and are therefore playing a different game.  That game is harder because the number of opportunities are smaller when you have to invest $10B vs. $10m.

Summary: 13F filers either have too short a track record or those that have a sufficiently long track record are most likely playing a different and more difficult game than you should being currently playing or trying to duplicate.

One Major Caveat: This is a nice story about why I don’t like 13F filers, but the main reason I don’t like studying 13Fs is that I would rather think for myself.  I enjoy the studying, I enjoy the thinking.  When you start copying, you stop thinking and that is a dangerous thing to do when dealing with money (or 5th grade spelling tests).



More to Explore

Returns for Great vs. Bad Businesses

Munger and The Cattle Rancher

Munger’s ability to find great businesses is directly related to his ability to consistently discard bad businesses. He is excellent at inverting, and discarding the bad businesses as quickly as possible.

The Abominable No-Man and Bad Management

Some investors think a business is good, but know that management is bad.  These investors justify the investment based on the idea that the great price of the business is worth the bad management. This is akin to marrying a supermodel who is going to yell at you all day.  Whatever pleasure your eyes may derive from the marriage, your ears will endure a greater amount of pain in the long run. The pocketbooks of those partnering with bad management are likely to see a similar 50%+ decline in their net worth.


Close Menu