Source: Qile Club
Introduction:
Robertson is a typical value investor. In his view, the essence of the hedge fund industry is to patiently seek out those 'undiscovered companies with potential for value realization' at bargain prices, thoroughly research them, invest heavily, and then wait for returns. Once Robertson is convinced of his judgment, he places significant bets. Overall, Robertson’s investment strategy centers on value investing, and his investment philosophy is widely admired. Below are his twelve investment maxims.
As a new generation of 'Tiger Cub' fund managers has established 'Little Tiger' and 'Cub' hedge funds, Robertson is considered a pioneering figure in the hedge fund industry.
Robertson believes that making money in the stock market is not particularly difficult. The main investment philosophy of this Wall Street genius is: 'Avoid major losses while placing big bets when you feel confident.'
Overall, Robertson’s investment strategy centers on value investing, and his investment philosophy is widely admired. Below are his twelve investment maxims.
1. Inspiration strikes, conduct thorough research, and place big bets
A colleague of Robertson once said that once Robertson is convinced of his judgment, he places significant bets.
Robertson is a typical value investor. In his view, the essence of the hedge fund industry is to patiently seek out those 'undiscovered companies with potential for value realization' at bargain prices, thoroughly research them, invest heavily, and then wait for returns.
2. Avoid competition to improve success rates
Robertson stated that the average outcome of each hedge fund trade determines the final returns, 'In a market with relatively weaker competition, there is a greater chance to make profits.'
Take baseball games as an example: it is easier to improve batting averages in lower leagues compared to higher-level leagues because the competition is not as strong. Robertson once said:
In baseball, you can hit 40 home runs for a Class A league team and never get paid. But in a hedge fund, you get paid on your batting average. So go to the 'worst' league you can find and stand out with less competition.
3. Long-Short Strategy
Robertson believed that, from a hedging risk perspective, the best practice for a hedge fund is to go long and short different stocks. He once said:
Our job is to identify and invest in the 50 best companies in the world, and to discover and short the 50 worst companies. If the 50 best-performing companies you've identified are still underperforming compared to the 50 worst ones, it means you're probably not cut out for this job.
4. The key to long-term profitability lies in avoiding major losses.
Robertson believed that the key to long-term profitability for hedge funds lies in how to outperform the market when market performance is poor.
In addition to the long-short strategy offering some degree of hedging, there is another way to avoid significant losses: seize the opportunity during unfavorable market conditions to buy companies that are clearly undervalued.
Robertson pointed out that when investors make mistakes in finding the right entry point based on price, the company's financial health appears more reliable. “One thing is certain: it’s better to be safe than sorry.”
5. Selecting the Right Companies to Short
Many hedge funds do not engage in any real hedging, but Robertson was particularly fond of shorting stocks that were significantly overvalued. His view on short positions is as follows:
In my short-selling activities, I look for companies with poor management or those in declining cycles or industries that are misunderstood by the market and significantly overvalued.
6. Becoming the Sole Decision-Maker
Robertson delegated much of the research and analysis work to others, but he was always the one making decisions.
He believed that a good researcher does not necessarily make a good decision-maker, and the person who ultimately makes the call needs excellent emotional control. Often, investors' mistakes are not due to faulty analysis but rather psychological fluctuations. He stated:
Not many people have the ability to pull the trigger, and I am usually the one pulling it.
7. Avoiding Gold
In Robertson's view, gold trading is often based on predicting human behavior, which is not investing but speculating. He said:
I don't like investing in gold because its investment logic lies less in analyzing whether gold itself has value and more in analyzing the psychology of gold investors.
8. Full Commitment
Robertson previously said:
When you are managing funds, it may dominate your entire life. You might need to be fully committed 24 hours a day. The hedge fund industry is certainly not a place for the lazy.
9. Accumulation and Breakthrough
The hedge fund industry is one where reputation accumulates over time. Robertson stated:
The hedge fund business is about success breeding further success. The achievements accumulated over time will ultimately contribute to your success, and that is how we grow.
Moreover, the Matthew Effect, where the strong get stronger and the weak weaker, implies that only consistent profitability can lead to an ever-growing fund size, creating a virtuous cycle.
10. Having a Clear Understanding of Oneself
Robertson believes that falling from a high position to rock bottom can help one gain self-awareness. External praise or criticism is not as important as it seems, and allowing others' opinions to influence one's judgment is quite ridiculous. He noted:
I remember once being featured on the cover of BusinessWeek as 'the greatest analyst in the world.' However, three years later, I was harshly criticized.
It would be extremely foolish to let media opinions shape your perception of yourself or what you do. Trust me, these comments are irrelevant; don't let jerks bring you down.
11. Knowing When to Advance and Retreat
Robertson stated that markets are constantly evolving, and strategies that worked in the past may lead to failure in the future. He believes that:
Many successful investors understand the principle of knowing when to step back. For instance, in 1969, Buffett also mentioned in his letter to investors that he decided to liquidate the fund because he could not find suitable opportunities.
12. Cultivate interests from a young age.
Robertson once said:
I still remember the first time I heard about stocks when I was six years old. At that time, my parents were traveling, and my aunt showed me a company called UnitedCorp. (United Air Transport Corporation) listed on the New York Stock Exchange, trading at approximately $1.25.
At that moment, I realized that perhaps I could save enough money to buy stocks, which gradually sparked my interest in investing.
If you wish to cultivate a child's interest in investing, it is best to subtly instill some key concepts early on. Give them some real money—not too much—as real experience matters. The earlier one engages with a field, the greater the chances of future success.
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Editor/Jayden
