Running OPM fundamental value based

Quote from jj90:

...@MTE: I was actually surprised when industry people running the same Graham-Buffett LP strategy as I try to, told me a 3 year record was enough. I had always thought the min was 5 years. In regards to scalability, I figure it will hit upper bounds at roughly 35-40M, but there's always the private equity route. Listed ideally, but I don't see a reason to have my hands tied. If I ever do hit a level where AUM forces my hand to go the post Munger Buffett buy forever approach, I will either make the transistion or close the firm.
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Well, I don't know who those "industry people" are, but I doubt that anyone would commit serious money to a relatively long-term strategy like this based on a 2-year track record.

With respect to scalability, I have quite a bit of experience in trying to move size in small/micro cap stocks and I can tell you that it can be a nightmare, especially on the way out. So, I strongly suggest that you review the liquidity of stocks that you have invested in in the past two years and see what sort of size they could handle. Also don't forget that a stock that is liquid today can become completely illiquid in a couple of months just when you need to get out of it.
 
Quote from jj90:

@oldtime: institutional funds have a mandate to invest. Correct me here but none of them as I'm aware are trying the Graham early Buffett method. There are firms using this specific method, but most are closed to the public, at least the retail public.

@MTE: to play devil's advocate, define how 11' was a bull year. I'll give you 10' but only certain select areas made it out of 11 with a healthy positive margin. Especially targeting the small/micro caps.

Good stuff, keep it coming.
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Russell2k is 668 to 794, 18.862% return in the last two years.

20% is not significantly different.

Drawdown 868 to 601, 30.76% drawdown, so on drawdown, there's somewhat of a beat, but the 20% net isn't any better than what you could have had even with the microcap discretionary bets you took.

Fees take away 2% per year, so you'd still be underperforming at 16%.
 
Quote from jj90:

@flipside21: as you may be aware Buffett (and Graham I'm sure) has said if he went back to managing a few million he could do 50% per annum fairly consistently. I'll have to look up in my copy exactly what strategy Walton was running, but my quick google search shows me he was trading NOT investing.

@MTE: I was actually surprised when industry people running the same Graham-Buffett LP strategy as I try to, told me a 3 year record was enough. I had always thought the min was 5 years. In regards to scalability, I figure it will hit upper bounds at roughly 35-40M, but there's always the private equity route. Listed ideally, but I don't see a reason to have my hands tied. If I ever do hit a level where AUM forces my hand to go the post Munger Buffett buy forever approach, I will either make the transistion or close the firm.
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Buffet can hold forever because it's a public company that's largely his. He doesn't have to worry about redemptions unless the insurance policies require a big payout. A fund is a different animal. How will you hold forever unless your investors are willing to give you their money forever?
 
Quote from newwurldmn:

Buffet can hold forever because it's a public company that's largely his. He doesn't have to worry about redemptions unless the insurance policies require a big payout. A fund is a different animal. How will you hold forever unless your investors are willing to give you their money forever?
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Hedge fund investors are not known to be a patient group of people. Like MTV, they want to see their returns and they want to see them now.
http://www.youtube.com/watch?v=C_jVFjYTi78&feature=relmfu
 
Quote from flipside21:

Hedge fund investors are not known to be a patient group of people. Like MTV, they want to see their returns and they want to see them now.
http://www.youtube.com/watch?v=C_jVFjYTi78&feature=relmfu
More...

Yeah. Very few people can get away without that. And those that can either have a 20 year track record or a very select investor base. Warren is good at exploiting it too. CEO's love to sell out to Warren because he gives them very long time horizons. PE shops need out in 5 years and will put a lot of pressure for value creation today so that they can appease their investors.
 
@MTE:I'm not looking for serious money actually. Serious as defined by 5M and up. Few 100Ks to 1M in aggregate is actually at this point probably the max I'd like to work with until investors get comfortable with me and my style. I spoke to 3 groups in my city, 1st guy is GP of a small shop running approx. 17M with around 11 outside investors. 2nd group was a business consulting firm that expanded into asset management in 09' and is running about 30-40M, mostly partners money. 3rd guy was director at a FoF who gave me color on the industry. Duly noted on liquidity.

@bwol:Your point on R2K is taken and am aware of, I can argue however as you pointed out that the real value lies in downside susceptibility. FWIW, I believe (maybe foolishly) that most investors wouldn't mind just a small positive spread over the index if the downside is mitigated to an extent.

@newwurld:I'm not looking to be structured after Berkshire today or even at its inception. I'm talking Buffett's LP days, and I'm wondering even if I want to go the fund route as there are massive regulatory issues that way (if I ever get there). I'm looking to roll as an LP and the core piece of advice given to me is that the investors that come in must absolutely FIT with the strategy and timeframe. That will eliminate the majority of hedge funds.

Great stuff, thanks for the feedback.
 
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