I'm right, I think the stock can go to this level. More importantly, we come up with a risk target. If I'm wrong, how much money am I going to lose? In the investment business, it's really that component that I think distinguishes us from other people. In an enormous amount of time, on what if I'm wrong? How much money am I going to lose? If you have a collection of stocks and your upside is 50% and your downside is 10, you don't have to be right more than half the time to make good money. If your upside is 25% and your downside is 25%, well, you've got to be right a vast majority of the time to make money. The framework is that let's try to find things that are intrinsically cheap where our upside to downside ratio is skewed to the upside. That gives me a sense of how much risk I'm taking to the portfolio. I remember coming out of the bubble in 2000 and at one point, stock markets had dropped I think 15% one year and 20% the next year. We got to the point where in a hedge fund, we (19/57)
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