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Jim Simons rennaisance technologies - is value īnvesting not the only way ?

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I was reading this

Over 30 years (an investing lifetime) he beat Buffett and Soros.
By a big margin.

And he did not use value īnvesting.
Just the opposite . He used technical analysis and computer trading.

So is there a better return to be had than value īnvesting?
What I want to know is not a justification for why quant doesn't work but rather if it works equal or better than value īnvesting is there another game in town and is it easier and or more lucrative?

Value investing is hardly the only way to make money. Thats like walking into a garage and declaring a screwdriver the only way to fix things.

Many smart guys just prefer it because it acts as a mental valium during turbulent times; thinking they know what the business is "really" worth.

My understanding of what Renaissance does is value investing. The only way to make money is to buy high and sell low. If you want to keep the money you make, buy below fair value and sell higher.

They have automated what people like Buffett used to do manually. Scan a huge number of documents, scan every company, and build the ultimate contrarian investor by programming a machine to do it. What you get out of this process of:

   scanning every document/piece of data + a machine-trader   =   a super-Buffett.

What I see is hedge-funds who cannot build such a program resort to momentum investing. The "quant" funds such as Renaissance, Two Sigma, Millennium lack the momentum stocks in their 13-Fs. Munger is right that investing has become a lot more competitive.

We can all learn to be a bit better at some timing dynamics
For example, I bought Antero Midstream recently.  It was an year end tax loss harvesting candidate.  I bought some at $7 and it started to go down on very little fundamental.  Sure nat gas prices are low.  The stock started out the year at $14 and at $5, it has a ton of tax loss value. So understanding that this tax loss selling wasn't likely to abate until the new year was a key trading decision.  This was literally to avoid "catching a falling knife".  Then they announced a fee reduction in the amount of $50mm which is way less than what people predicted and the shares rallied.  I made a gut call that this is a fundamental development.  It doesn't hurt that the shares were bought at $5.25 or 23.4% yield. 

After you own a company for 2 years, you tend to have a pulse on the trading ranges.  With HHC, I would buy everytime it hits 50% of my estimated NAV.  One of the mistakes that I made with FRPH in late 2018 is not realizing that the new support is really in the low $40s.  When the shares traded from low $30s to mid $60s, the story is now out.  Gregmal has mentioned that GRIF now has a support in the $40 range.  There are more investors who understand the thesis.  So I probably should not expect the shares to trade to high $20s and low $30s again like it did in late 2018.  Is this technical?  Or is it really knowing 80-90% of the shareholder base and having a vague understanding of the price that they will be willing to buy at. 

Another example is with Berry Global.  It's a good business but most investor are very quarterly oriented.  If you pay attention to the questions that other investors ask, they are constantly trying to model out the next quarter.  Volumes are down in 2019.  But it is very easy to grow volume when they are down 6% in the following year especially if you believe that they are temporary in nature.   These are little things that you improve as an investor over time.  I don't have any advice on long term compounders that could run away from you.  You probably shouldn't trade those too much.  But for normal assets where there is a price where you are a buyer and there is a price where you are a seller, it's not a bad idea to keep 70-80% and trade around 20-30% especially in a range bound market.  If anything, it will serve to help you manage risk as the shares trade up 20-25%, it is probably correct to reduce the position size.  Again, these are for normal companies, but not the GOOG or FB of the world. 

Look at the world of MMA.  Years ago, it was all "style vs style."  Now wrestlers are strikers and strikers can defend take downs.  If you don't evolve, you get left behind as roadkill.  But the value framework is still the one that I want to stick to just like a wrestler will rely on his grappling.  Frankly, it does make logical sense to pay up for something that could grow 20% topline with operating leverage.  There is a DCF where that makes sense.  But you need to make sure you are very certain of the ability of these companies to improve their returns and expand margins over time.   


--- Quote from: Gregmal on December 27, 2019, 08:35:30 AM ---Value investing is hardly the only way to make money. Thats like walking into a garage and declaring a screwdriver the only way to fix things.

Many smart guys just prefer it because it acts as a mental valium during turbulent times; thinking they know what the business is "really" worth.

--- End quote ---

I like the screwdriver metaphor.

Ed Thorp's autobiography opened my mind up to alternative approaches to investing. So too have people like Ray Dalio. That being said, a value approach resonates with me. It provides a framework for thinking about investment decisions. I think Michael Burry has said that every individual needs to pick an approach that works for their personality type. I couldn't agree more. I'm never going to have the math skills to be a Jim Simons or Ed Thorp. Nor am I going to be a macro trader like Dalio or Druckenmiller. But I do understand market psychology and have the fortitude to go against it if the logic makes sense.


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