Are you a Lynx Investor?
Looking for an Apex Predator
Wouldn’t it be nice?
Let’s run a quick thought experiment.
Imagine you are running a $10B hedge fund. You have your pick of the smartest, most ambitious analysts from the best schools, who are willing to work untold hours on any assignment of your choosing. Your headquarters sit at the heart of Wall St / The City / [Enter your preferred investing hub], and corporate executives and big-name investors are only a phone call away. You have an eight-figure IT budget and access to all the subscription services known to mankind. You have every conceivable advantage to beat the market. You are at the top of the food chain.
Or are you?
The phone rings. It's a hot tip from a fellow investor. The investment looks like a total no-brainer. There’s only one problem: you can only invest $1M. In case you need to brush up on 4th grade math (the only math we’ll use in this newsletter), that’d be 0.01% of your portfolio. It doesn’t move the needle, so you’ll have to pass.
The phone rings again. It’s another hot tip. Isn’t it great to sit at the top? There is a biotech company that you can buy for half of the cash on its balance sheet that is in the process of liquidating after its drug trial failed. Unfortunately, your biotech fund is not allowed to invest in companies that don’t have a drug going through trial. You’ll have to pass.
The phone rings yet again. This time it’s about a portfolio company getting acquired. Usually you like your investments getting acquired because the buyer pays a premium, but in this case, the premium is being paid in bonds. You run an equities (stocks)-only fund, so you’ll have to sell those bonds at fire-sale prices since you are not allowed to keep any bonds in the portfolio.
You get the picture.
Maybe size and might have their drawbacks. Maybe you are not at the top of the food chain after all. But if not you, then who?
The Lynx Investor
Lynx investors - like myself - are individuals who study the market and can take advantage of opportunities that the big firms with large capital simply can’t.
It turns out that being small and nimble has incredible advantages:
There are 60K+ stocks trading worldwide, but only about 15K are large enough for our imaginary hedge fun manager to invest in them. The other 45K+? Those are our private hunting ground.
Most funds have ‘mandates’ that restrict the kind of companies they can own (industry, minimum size, minimum daily trading volume, etc.). This means they are completely barred from certain opportunities. Better yet, when securities (stocks, bonds, warrants, etc.) outside of their mandate fall on their laps like in the example above, they are actually required to sell them at any price! And guess who will be waiting to pound on those sales? You guessed it, us.
Most fund managers are judged on their short-term performance relative to other funds or a broad-based index like the S&P 500. A couple bad quarters can cost them their cushy jobs. They often can’t afford to patiently stalk the most promising opportunities like we can.
The goal of this newsletter is to help you take advantage of your natural advantages as an individual investor. I will be looking far and wide and sharing my most promising finds with you. I will share both ideas I am investing in and ideas I discarded, as well as the reasons behind my decisions.
My hope is that together we will build a community. I am looking forward to engaging with you and challenging each other to become better investors. Lynx hunt alone, but you and I don’t have to.