Wednesday, February 14, 2007

Back From Boston

GMO Investment Strategy Competition

I flew up to present to GMO on spinoffs, a very Greenblatt-inspired idea. I'll try to find a way to post a copy of my presentation slides, but the meat of my strategy is as follows:

  1. Spinoffs / parent companies tend to improve operation metrics.
  2. This causes spinoffs to outperform the market in the 1-3 year time window.
  3. Mass institutional selling in the short-term can create attractive entry prices.
I was a little intimidated that my strategy wasn't as quant-driven or financially sophisticated as some of the others. However, at Goizueta we are taught the power of stories, a sentiment often echoed by Bill Miller of Legg Mason fame. With the help of classmates and professors, I was able to form a cohesive and logical argument that the judges liked.

We were also treated to lunch with Jeremy Grantham. I was incredibly impressed by the breadth of his macroscopic thought, in contrast to my bottom-up stock picker's perspective. He quizzed us on a variety of topics I had never even thought of considering, such as the reasons why timber outperformed other commodities, and which discount rates would be appropriate in cost/benefit analysis of environmental action.

Unfortunately, I wasn't able to secure an internship through this process. But hopefully this success can serve as a positive signal to other prospective firms. Several classmates were confused that I was still quibbling over $100 price differences in airline tickets, and that I had no plans to spend my prize money. What can I say, I'm a value guy through and through.

1 comment:

Mark said...

Sounds like you are gaining some great experience and perspective. Good lck on the internship.

Hang in there.

Happy Trails,

Mark