Last Thursday and Friday saw a number of events here at the University related to investing. The McIntire Investment Institute and the Women's Business Forum at McIntire hosted a panel discussion Thursday on Investing as a Career. On Friday, there were two panel discussions in Old Cabell Hall about distressed debt investing, one of which was on corporate debt while the other was on real-estate investing.
The Thursday discussion on investing as a career was moderated by none other than John Griffin. Griffin attended the University and graduated from the Commerce School in 1985. This Lawn resident went on to work for Morgan Stanley before moving on to Tiger Management, a hedge fund started by now-retired hedge fund manager Julian Robertson. Later, Griffin founded his own hedge fund, Blue Ridge Capital, where he was joined by Yale graduate Carter Simonds and successful female investors Hoda Alibair and Amanda Richardson, who graduated from the Commerce School in 1991.
That evening, the legendary investor Paul Tudor Jones spoke to the audience via a live camera from his office. He shared a bit about what he thought it took to be good at investing and also gave advice on how to cope with failure. As a child, Jones said, he played many board and card games. He believes now that this early experience of thinking critically and measuring risk and return has made him the investor he is today. He also described an ideal personality for investing and stated he believes our genes determine our investing abilities but that failure is always a risk. Jones, starting out as a young cotton trader, lost all of his money on two separate occasions; nevertheless, he sees failure as a necessary lesson, and his advice is to take risks and fail so that "you never go there again, so you know your limits." He also cautioned against focusing on failure, saying "sell out and move on."
Although the panelists presented their successful investment stories, they acknowledged that for every idea that succeeded, there were compensating flops. What is important is to keep an optimistic attitude. "If frustrated, don't stare at the screen; go out and take a walk. Often answers to difficult problems come when you least expect it," Griffin said.
As Griffin noted, most investors are "optimists - perhaps skeptical optimists, but optimists nonetheless." They hold "mostly long positions," meaning they believe a stock's value will increase. This contrasts with the private equity industry, where they "spend most of their time trying to fix ailing firms. Investing is about finding success stories."
Griffin and the panelists emphasized that "investing equals research and intuition; it's not all research. There is a human element [and if] investing could be reduced to a bunch of algorithms, it could easily be outsourced overseas."
The panel also addressed a difference in gender expectations in the investing world. As Simonds noted, "97 percent of Wall Street are men" and thus women, who view the world differently from men, are often particularly successful.
Alibair noted that women are usually more approachable than men and have an easier time finding out information. For example, Alibair attended a trucker's convention to do research on engines for her fund. She asserted that industry experts were more willing to talk to her because she was approachable and because, as a woman, she did not fit the typical Wall Street mold.
Also on Friday, Joel Ramin, an analyst at Bridger Capital, gave a presentation to the McIntire Investment Institute both about derivative products for shorting stocks and the importance of value-added research. Shorting a stock means that you first borrow the shares and then sell them in hopes that the price will fall. The investor then buys back the shares at a lower price, thus locking in a profit. Value-added research involves contacting the suppliers, competitors, customers and all parties involved with the company to get an informative "edge" on the company.
Ramin used value-added-research to short Forward Industries, a company that made leather cases for a variety of products. Because leather cases have fairly constant sales, the company's stock price remained flat for years. When the Motorola "Razr" came out, however, Forward made a leather case that was bundled with these phones. Since Razrs were flying off the shelves, Forward's stock price jumped because of the increased leather case sales. Ramin noticed that the case was a derivative product - sales of phones didn't have to be tied to sales of cases. What would happen if the phone retailers stopped including the cases?
So Ramin did his own VAR and called phone stores in England and China and asked if the Razr included the case, knowing that if the stores said no, it would be the beginning of the end for Forward's growth. The stores said the cases weren't being included anymore, so Ramin knew that the inflated stock price would deflate to the previous lower level. Thus, through value-added research, Ramin was able to find a fad product and make a successful short investment. The user-friendly aspect of VAR is that any clever college student can do this research; it's not limited to financial gurus.
Harrison's column runs biweekly Wednesdays. He can be reached at h.freund@cavalierdaily.com.
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