The art of execution

Couverture du livre 'The Art of Execution'

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Caractéristiques

Auteur : Lee Freeman-Shor
Publication : 2015
Editeur : Harriman Hose Ltd
ISBN : 978-0857194954
Nombre de pages : 208
Prix : 18,39 euros


4ème de couverture

«I am often asked by graduate students what books I have read that I could recommend to make them better investors. My answer generally is that the student should read The Intelligent Investor and Reminiscences of a Stock Operator; i have now added this book to the list ... I wish I read it 30 years ago! »

DENNIS M. BRYAN - PARTNER. FPA FUND

«Makes a very good point ... the person who knows his character, and is knowing of his environment and his investment horse, is the one that wins over the long term. »

CRISPIN ODEY - FOUNDING PARTNER. ODEY ASSET MANAGEMENT

Over seven years, 45 of the world's top investors were given between $25m and $150m to invest by fund manager Lee Freeman-Shor. His instructions were simple. There was just one rule. They could only invest in their ten best ideas to make money.

It seemed like a foolproof plan to make a lot of money. What could possibly go wrong? These were some of the greatest minds at work in the markets today - from top European hedge fund managers to Wall Street legends.

But most of the investor's great ideas actually lost money. Shockingly, a toss of a coin would have been a better method of choosing whether or not to invest in a stock.

Nevertheless, despite being wrong most of the time, many of these investors still ended up making a lot of money.

How could they be wrong most of the time and still be profitable?

The answer lay in their hidden habits of execution, which until now have only been guessed at from the outside world.

This book lays bare those secret habits for the first time, explaining them with real-life data, case studies and stories taken from Freeman-Shor's unique position of managing these investors on a day-to-day basis.

A riveting read for investors of every level, this book shows you exactly what to do and what not to do when your big idea is losing or wining - and demonstrates conclusively why the most important thing about investing is always the art of execution.


About the author

Lee Freeman-Shor currently manages over $1bn in high-alpha and multi-asset strategies. Lee was ranked as one of the world's top fund managers in Citywire 1000 in 2012. He has been AAA-rated by Citywire, Gold-rated by S&P Capital IQ fund research and is Bronze-rated by Morningstar OBSR. He has been at Old Mutual Global Investors since October 2005 and was previously Co-Head of Equity Research.

Prior to joining Old Mutual Global Investors, Lee worked for Schroders, Winterthur and in private client wealth management and has over 16 years' investment experience. Lee holds the Investment Management Certificate and has an LLB (Hons) Law degree from Notthingham Trent University. He currently lives in Maidenhead, England, with his wife Michal and their son Adam. In his spare time he enjoys going to the movies and having fun with his family.


Inroduction

«Hope you weren't planning on a long career in the investment industry.»

My colleague gave me a look of concern as he finished reviewing my research - an investigation into the performance of some of the very best City and Wall Street investors.

«Make sure you double check your findings,» he continued. «If they're correct, you have made a discovery that will shock the public and make waves throughout the financial world.»

I double-checked my findings. The results were confirmed. This book was born.»

THE 'WOW' MOMENT

Over a period spanning more than seven years, from June 2006 to October 2013, I examined 1,866 investments, representing a total of 30,874 trades made by 45 of the world's top investors - all of whom I had the privilege of managing as part of my job as a fund manager at Old Mutual Global Investors.

What was unique about these 1,866 investments was that each one of them represented the best money-making ideas of these investment titans during those seven years.

I had given each of these leading investors between 20 and 150 million dollars to invest for my Best Ideas fund, with strict instructions that they could only invest in ten stocks that represented their very best ideas to make money.

The rationale for doing so was the simple belief that the greatest possible returns on capital could be achieved by hiring the best investors in the world and getting them to invest in their best ideas.

These were ideas that they had significant confidence in, and were often the result of hundreds of hours of research by some of the smartest people on the planet.

Given this, I was sure that I would make a lot of money.

I might surprise you, then, to be told that most of their investments lost money.

WHEN THE BEST FAIL

Personnaly, I was shocked to discover that only 49% (920 investments) of the very best investment ideas make money.

Even more shocking was that some of these legendary investors were only successful 30% of the time.

I had employed some of the greatest investment minds on the planet and asked them to invest in only their very best, highest-conviction, money-making ideas. And yet the chances of them making money were worse than tossing a coin and betting on heads coming up every time.

«[A]fter studying forecasting day and night for over 30 years... I've yet to find anyone who could consistently and reliably forecast an uncertain future.»
- Ned Davis

What really surprised me wasn't the discovery that so many investing legends - earning tens of millions every year and appearing in annual rich lists - had feet of clay. What really fascinated me was the fact that, despite some of them only making money one out of every three investments, overrall almost all of them did not lose money. In fact, they still made a lot of it.

This beg the question :

How are they making lots of money if their ideas are wrong most of the time?

How are most of these investment legends able to be wrong more often than they are right and still make incredible profits?

What was the secret of their success if it wasn't down to an elusive Midas touch?

This question made me burn with curiosity. It led me to analyse every single trade they had made over a seven-year period to try and uncover their secrets. I simply had to know what it was they did.

The results of my investigation are revealed in this book.

In the process I discovered that successful stock market investing is not about being right per se - far from it. Success in investing is down to how great ideas are executed.

I have come to understand that if successful property investing is all about 'location, location, location', success in equity investings is all about 'execution, execution, execution'.

«Vision without execution is hallucination.»
- Thomas Edison

I have also learned that investing need not be the preserve of the so-called experts. Until now, the skill of good execution in investing has been largely hidden from the general public. This has led to a widespread false belief that great investors are great because they have ideas that at the time elude the rest of us mere mortals.

This could'nt be further from the truth. It is why this book has been carefully written to have appeal to investors of every level, both private and professionnal; no specialist knowledge is required.

As you will see later in the book, you don't even have to worry about whether an investing idea works or not if you focus on how to invest in that idea: how much money you allocate to it and what you will do when you find yourself in a losing or winning position.

Of course, in some ways I am not the first person to discover this.

Leo Melamed, the pioneer behind financial futures, once said: «I could be wrong 60% of the time and come out a big winner. The key is money management.»

Likewise, legendary billionaire hedge fund manager Paul Tudor Jones II - a man who made his fortune from investing - is reported to have said that «the reason for all the Wall Street success stories he knew was down to: money management, money management, money management».

And Georges Soros - a similar self-made billionaire trader - once pointed that:

It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.»

What is different about this book is that, for the first time ever, I have detailed evidence of how investment titans go about their money management.

I know what their secrets are. And soon you will too.

HOW THIS BOOK IS STRUCTURED

My findings show that the key to sucessfully executing great ideas and making lots of money comes down to the actions you take after you have invested in an idea and find yourself losing or winning.

For that reason. I have split this book into those two scenarios.

Part I is called « I'm Losing - What shoud I Do? » The chapters in this part deal with being in a situation where you have invested in a great idea and now find yourself losing money.

To help you make the right decision at such a time I introduce you to the real-life investors who worked for me and examples of their real-life investments.

Throughout the book I have broken down those investors into tribes. I hired them as individuals but as I pored over the data it became clear that there were obvious behavioural groupings among them. They might have operated individually, but their decisions put them into distinct gangs.

In part I we meet three of them: the Rabbits, the Assassins anf the Hunters. Each of these groups of elite investors found themselves in many losing situations. Two of the tribes went on to make a lot of money. One of them didn't.

We'll look in detail at the powerful habits of the winners, the Assassins and the Hunters.

We'll also explore the failings of the Rabbits - shortcomings which meant they lost a lot of money and I ultimately had to fire them.

All of us will be able to identify with the Rabbits' weaknesses. The good news is that none of us have to be stuck with them and made the choice.

While both the Assassins and Hunters were masters at turning losing situations into winning ones, they adopted vastly different methods to get themselves out of a hole. It is for you to decide which group you feel most at home in.

Part II is called « I'm Winning - What Should I Do? » and, unsurprisingly, deals with being in the situation of having invested in a great idea and finding yourself sitting on a paper profit.

To help you make the right decisions I show you the mistakes and virtues of the Raiders and the Connoisseurs. Many of you will likely identify with the Raiders, who had a nasty habit of turning winning situations into losing ones. The Connoisseurs, on the other hand, are the role models we should aspire to.

As the tribes describe what investors did in losing and winning positions, some investors belonged to more than one; as you might imagine, a good Assassin could also be an excellent Connoisseur. But a Rabbit was by definition never a Hunter.

For the purpose of anonymity, no individual investor is identified or identifiable by any detail in this book. But all the important information - including the investments - is real and accurate. Every investment described in this book had many millions of pounds, dollars or euros behind it.

When you see big losers and big winners in this book, those losses and wins are real, and one or more of my real-life investors made or lors all that money.

I will demonstrate how legendary investors have been easily led astray by temptations such as new idea, love or fear - and how the successful ones were able to escape and recover. Anyone who reads this book will be able to use the exact same methods themselves.

Lee Freeman-Shor
London, 2015

«If I have seen so far it is because I have stood on the shoulders of giants.»
- Sir Isaac Newton

Table des matières

INTRODUCTION1
The 'wow' moment3
when the best fail4
How this book is structured8
PART I. I'M LOSING (WHAT SHOULD I DO?)11
1. The Rabbits: Caught in the Capital Impairment15
Jumping in 18
What the Rabbits did wrong 21
What the Rabbits could have done differently35
It's all about capital impairment 48
The lessons of poker 53
2. The Assassins: The Art of Killing Losses55
Never lose money 57
The code of the Assassins 60
Don't sell too soon 71
Be careful on your next investment 74
An elusive cadre 76
3. The Hunters: Pursuing Losing Shares79
Success starts from failure 82
Snatching victory 84
Hunting for the compounding effect 88
The advantages of a Hunter 92
A rare investing style 95
Conclusion to Part I101
PART II. I'M WINNING (WHAT SHOULD I DO?)103
4. The Raiders: Snatching at Treasure107
Investing on the zdge of ruin 110
Why do investors sell too soon? 115
Why you shouldn't sell early 121
Is it ever right to sell a winner? 127
Too professional 127
Why ws one Raider such a successful hedge fund manager? 130
Resisting the raid 132
5. The Connoisseurs: Enjoying Every Last Drop133
How to ride winners 136
Clues from the Forbes rich list 146
Why many fund managers are doomed to fail 149
Academic support for 'best ideas' investing 150
Dangers of being a Connoisseur 153
Are you ready to be a Connoisseur? 156
CONCLUSION: THE HABBITS OF SUCCESS157
A dinner to remember 161
THE WINNER'S CHECKLIST165
1. Best ideas only 167
2. Position size matters 168
3. Be greedy when winning 169
4. Materially adapt when you are losing 169
5. Only invest in liquid stocks 170
THE LOSER'S CHECKLIST171
1. Invest in lots of ideas 173
2. Invest a small amount in each idea 174
3. Take small profits 174
4. Stay in investment idea and refuse to adapt when losing 175
5. Do not consider liquidity 175
ENDNOTES177
INDEX183

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