How did RenTech do it? – Book Notes of “The Man Who Solved the Market”

Jim Simons’ shop Renaissance Technology, or as insiders call it “RenTech”, is the hallmark of quant fund managers. I’ve been longing to learn about how they achieved it and can’t wait to read this Greg Zukerman’s new book on Jim Simons.

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As usual, I tried to put some lessons/thoughts useful for myself, hopefully for my readers as well.

[Bonus] I also dug up some RenTech job descriptions that no one ever (at least I didn’t see) found regarding what type of talents RenTech has been hiring (thus what type of new techniques they may be using) more recently. Go straight to the last point if that is your only interest.

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Book Notes – The Outsiders

I recently finished William Thorndike’s book “The Outsiders – Eight Unconventional CEOs and Their Radically Rational Blueprint for Success”, and think it is a great read. As usual, I jotted down the most important lessons & thoughts to me and document them below.

To get an initial understanding of the quality of this book, it is worth mentioning the origin of this book. Thorndike is a PE investor and a founding partner of Housatonic. When he was preparing a presentation to CEOs of their portfolio companies about “what makes an exceptional CEO” circa 2004, Thorndike wanted to do a case study of Henry Singleton, whom he regarded as one of the best CEOs, with the help of a HBS second year student. From there, Thorndike and subsequent then-HBS second year students continued studying 7 more CEOs who had pass his rigorous test (beat annualized returns of both peers & Jack Welch’s GE during their tenures by large margin), one CEO a year. Note that GE during Welch’s tenure has 20~% annualized return, which itself is a very high bar. Along the way, Thorndike found striking similarities between these CEOs and decide to make a book on these traits. Here is a Harvard Business Review short podcast in 2014 about the book & its origin [Link].

TheOutsiders

Below are important points & thoughts to me:

  • How to avoid Valeant: An inversed thought, but I think this is the most important lesson/thought I have from reading this book. It’s no coincidence that so many renowned value investors (Bill Ackman, Ruane Cunniff & Goldfarb, etc.) fell for Valeant – as J. Michael Pearson basically tried to model himself to these CEOs. Ackman had a pitch presentation for Valeant with the title of “The Outsider” with explicit reference of this book and nominating Pearson to be the ninth CEO fitting this book, you can see it here [Link]. William Thorndike, during a Motley Fool interview in 2014, also called out Valeant when asked about any younger generation CEOs he liked. Below is an excerpt where Throndike compared Pearson to Malone in their “roll up” strategy. [Link]

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Book Notes – Big Money Thinks Small (by Joel Tillinghast)

Joel Tillinghast is a tenured Fidelity portfolio manager for its Low-Priced fund, however his name was known by few, including me, until recently. Tillinghast recently published his first book – Big Money Thinks Small last month, and was featured in a Barron’s interview in 08/12/2017 (Link here). When I first saw his interview, I found this manager interesting for his ability to consistently beat his benchmark, Russell 2000, for years with 100+ holdings. This diversified approach is very different than the “traditional” school of value investing, who advocates concentrated bets. Another impressive trait of Tillinghast’s fund is the extreme low turnover – only 9% a year. This means he on average holds each position for over 10 years!

For the sake of these special traits, I decide to pick up his book and try to see if there is anything I could learn from him.

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Overall, I think it is a valuable book, especially for someone had some investing experiences and is eager for historical investing case studies. Here are my key thoughts/lessons:

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All About Moats – Book Notes of Pat Dorsey’s Two Books

If you haven’t heard of Pat Dorsey, here is a quick intro for you: He started his career at Morningstar as a sell side analyst, moved up to the head of the reach team in a few year and stayed there for about a decade. After leaving Morningstar, he started his own firm Dorsey Asset Management in 2014. Although his track record as a fund manager is yet to be tested, I found his books very insightful, especially for firm’s economic moat/competitiveness study.

 

Dorsey is the author of below two books:

Image result for The Five Rules for Successful Stock InvestingImage result for The Little Book that Builds Wealth

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Howard Marks and his Buddhism-based Investment Philosophy – Book Note of [The Most Important Thing]

I always liked Howard Marks’ famous memo and his thoughts in various interviews, but only got chance recently to read his book [The Most Important Thing – Uncommon Sense for the Thoughtful Investor].

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Below are some topics that are most insightful for me.

Oriental philosophy on cyclicality

Within this book, as well in Marks’ past interviews, pendulum, which continuously swings from one end back to the other, was mentioned many times as a metaphor to illustrate his view of world, markets and human sentiments. Marks also revealed his spiritual root for such a philosophy, dating back to his Wharton days when he picked up Japanese Studies as the obligatory non-business major and learned Mujo (無常, a Buddhism doctrine means “Impermanence”). Not only Marks credited his Japanese Study by claiming “they contributed to my investment philosophy in a major way”, I believe he also passed along such philosophy to his decedents, as indicated by his son Andrew Marks’ plan to name his new money managing business after “Anicca”, which is Impermanence in Pali, the “native” language of Buddhism.

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Book Notes – So You Want to Start a Hedge Fund

I know it sounds like a cheesy book name, but like Joel Greenbaltt‘s classic “You Can Be a Stock Market Genius“, this is another great book with cheesy name. The author Ted Seides is one of David Swensen‘s proteges, having worked on both asset owner and money manager sides. Therefore, this book offers unique perspectives (from both capital allocator and money manager angles) on how to build a great money managing business. Lastly, although the book name may be alluding to step by step how-to guidance on starting a hedge, it doesn’t have anything like that. Rather it is fully loaded with real cases, about how start up funds succeeded or failed,  which are invaluable lessons for anyone considering starting their own money managing businesses.

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I think I probably read this book too early as it could serve these readers with more experiences and are closer to the point of setting up their own funds. Nonetheless, following are the lessons I found most valuable to me. They either significantly changed my existing views or offered brand new insights to me. Continue reading

How to live a playful life – Notes from The Education of a Value Investor by Guy Spier

[Update on 4/13/2016: Thanks Mr. Spier for your reply and kind compliment on Twitter]

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Spoiler alert: This is not a book review, instead this is more of notes for the most meaningful things (for myself) from Guy Spier’s book The Education of a Value Investor, thus it may contain details about the events described in the book.

I just finished reading this great book, following are a few sporadic things that made me thinking the most.

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