Batting Averages

Ramblings on Being Wrong When Investing

Disclosure: Not financial advice. Do your own research.

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The best performance ever in the history of the stock market is Renaissance Technologies Medallion Fund. Nearly 66% gross CAGR over 30 years from 1988 to 2018. That record will likely never be replicated again.

But even Jim Simmons will tell you, when the Renaissance team went back and looked at their historical trades, they calculated only 51% of trades were successful. That means, Renaissance lost money on 49% of their trades. Now, think about that for a moment. How many stocks do you have in your portfolio? If you’re as good as Renaissance, 49% of those are losers. (that’s exaggerated, but you get the point).

As Josh Brown says, “it isn’t a game of batting averages.” And Josh Brown knows everyone on the street; he’s not pulling that out of thin air. From the best analysts to the top fund managers, Josh explains everyone is at the end of the day a fallible human. And people make mistakes. Anybody who’s a professional has made mistakes — the battle scars are part of the journey.

It’s why you don’t see a fund manager with $3 billion AUM criticizing a hand full of equities in a $6 billion fund’s portfolio. Professionals don’t throw stones at each other. So when you see people subtweeting others on X, just know they’re not professional. It’s amateur hour. Critiquing a thesis to deepen your own understanding isn’t what we’re talking about here, it’s blatant attacks of an idea and even person. Frankly, it shows the world of finance still has a long way to go.

The point is two fold. You’ll have mistakes, so don’t think you can get everything right. Even the best have many battle scars. Don’t let a single or even a few theses that someone posts form your entire view of that person. Odds are, they’re not constructing the same portfolio that you are. Maybe they’re only focusing on getting a few 100 baggers in their life, and that’s enough to do extraordinary. Just take Walmart, which from 1972 to 2012 turned $10,000 into $10.4 million. And that’s just one thesis.

So don’t play the losers game of batting averages. Don’t try to one-up the Fintwit influencer. One thing you could do instead is spend more time thinking about where the world will be in the long term. Then, just position yourself to ride those tailwinds. All you need is one company, like a Walmart, that compounds fantastically. It’s not impossible. Good luck.