Submitted by QTR's Fringe Finance
One of my favorite investors that I love reading and following, Harris Kupperman, has offered up his latest thoughts on the market this week.
Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection.
Harris is one of my favorite follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same.
Please be sure to read both my and Harris’ disclaimers, located at the bottom of this post.
The Culling
I’m known as a hyper-concentrated investor. I take my best ideas, bet them big, and ignore the volatility along the way. While it’s usually my top 5 or so positions that effectively determine my performance results for the year, I also tend to have lots of other positions on the books. These enter the books for a variety of reasons; interesting ‘tracking ideas,’ stocks that moved before I could get a full position, Event-Driven ideas where the event hasn’t yet played out, and all sorts of other assorted tickers. I also end up with a healthy collection of inflection ideas where the inflection always seems to be postponed another quarter, or the strength of the inflection is feeble, but it may accelerate in the future.
For some reason, these things seem to accumulate like cobwebs in the attic. While the positions are individually rarely more than a few hundred basis points, in aggregate, they end up tying up a lot of capital. More importantly, they clutter my mind and take up time. Why is this thing not inflecting yet? When will this Event-Driven setup finally play out? Let’s get that CEO back on the phone and ask him a third time about a 50bps position. Then, there is always that stock that’s up a few hundred percent, but I only got a starter position, since I was too greedy to pay up 5% when we were buying it—those are the winners that just sit there, mocking me.
Eventually, the clutter becomes overwhelming, and I have a culling. I know I need to be ruthless. If I wouldn’t buy more today, then it needs to go. If it’s been there for more than a few quarters, and it’s not playing out, then it needs to go. If the trend has been pushed back by yet another quarter, then it needs to go. It doesn’t matter if it’s cheap, or if I like the CEO. Nothing matters, except freeing up capital and freeing up mental bandwidth. I want to be focused on positions with raging tailwinds, not the dregs of the book.
Mistakes are super easy to deal with, as there’s only one rule—when the thesis changes, I sell. It’s the ones that never seem to play out—those are the hard ones. Those are the reasons for the cull, and rather than only selling one or two names, I like to get it all done at once. I clean house—all the non-core positions—I don’t leave any stragglers. Then I go on vacation for a re-boot. Trust me, it feels so amazing to come back with a bunch of capacity on my balance sheet—ready to swing hard at the next great idea. Otherwise, I’d be coming back to a quagmire of stagnating and irrelevant positions that I need to catch up on.
This time, the culling has been deeper and wider than normal. You see, ever since the COVID bottom, I’ve had this view that obscene amounts of fiscal stimulus would trump everything else, and lead to explosive nominal GDP growth. At the time, that was a very contrarian view. Even in 2022, when everyone panicked that we’d roll over into a recession, I remained steadfast that the magnitude of the fiscal spending would overwhelm the normal business cycle. It was contrarian to say that then, it’s become consensus now. Oddly, as the herd moves to this viewpoint, I’m increasingly worried that...(READ THIS FULL ARTICLE HERE).
QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.
