“Humility Is More Important than Confidence”- Scott H. Young
The markets are a continuous teacher, and drawing from lessons as an active participant both professionally and personally over the past twenty years – such as the Mexican “Tequila” Crisis (1995), the Asian Contagion (1997), the Internet Bubble of 2000 and finally the GFC – one of our key takeaways is you always learn more from your losses than your wins. The goal of these newsletters is not to attract clients for money management, but to highlight ideas invested in a long and short fund (launched July 2017), which provides us aligned interest or “skin in the game”, to better serve one of Aquamarine Value’s services: market commentary for funds for emerging hedge fund managers.
The ideas will predominantly be global consumer discretionary and global staples ideas, as well as options on stocks and/or options on commodity and currency futures for both tactical and strategic positions in the fund. Our investments will be in long-only names from global strategic themes and short ideas for tactical trades. We will also generate these ideas from non-mainstream media, with the primary source of these portfolio ideas being our Partners – global macro and fundamental research firms listed in our Partners Webpage. Their research will provide a baseline framework for the portfolio ideas from which we will conduct further analysis. Over time, we hope to showcase smaller, Asia-based research firms that are yet to be known outside their local markets.
The premise is not how much is allocated to a single idea but the investment process behind the idea. In this regard one needs have the Three C’s: Consistent investment process, and Continued Conviction and the endeavor to emotionally disconnect between the market and one’s narrative. There must be an asymmetrical upside or downside with a risk / reward analysis for both long and short trades, a strict stop loss for trades – especially on the short side, and avoidance of crowded trades. We need to be aware of the dynamic risk on vs. risk off environment and invest accordingly. At the same time, we will do our best to avoid common behavioral investing biases such as: herding, overconfidence, and anchoring.
Aquamarine Value’s main mission is to always be transparent with clients with respect to the investment process behind an investment in the fund. We want to build long term relationships with our emerging manager clients built on a strong foundation of transparency. We wish everyone the best of luck and success in 2018!