Druckenmiller: Make high conviction plays...

[JohnTChance]

In a recent interview, top Wall Street investor Stanley Druckenmiller says: Make concentrated bets in high conviction plays. Don’t practice the business school teaching of diversification.

That’s great advice. A lesson I\'ve often had to relearn. Especially this time of year as two-yr. olds come out [and we encounter those void boxes ahead from Jerry. Ugh.]. Why spread in a race “hoping something stupid happens” in fields full of unknowns WHEN YOU KNOW Mike Maker is going to win a turfer at 4-1, like he did yesterday? It’s stunning the money we waste betting races we shouldn’t.

Druckenmiller quoted below:

“When I’ve looked at all the investors (that) have very large reputations â€" Warren Buffett, Carl Icahn, George Soros â€" they all only have one thing in common. And it’s the exact opposite of what they teach in a business school. It is to make large concentrated bets where they have a lot of conviction. They’re not buying 35 or 40 names and diversifying.

I don’t know whether you remember that Icahn a few years ago put $5B into Apple. I don’t think he was worth more than $10B when he did that. [In 1992] when I went in to tell Soros that I was going to short a 100% of the fund in the British pound against the Deutschmark, he looked at me with great disdain. He thought the story was good enough that I should be doing 200%, because it was sort of a once-in-a-generation opportunity. So, [these investors] concentrate their holdings. This is very counterintuitive. In my thinking, [concentrating your bets] decreases your overall risk because where you tend to be in trouble is if you have 35 or 40 names. If you start paying attention to one. If you have a big massive position, it has your attention
 
My favorite quote of all time is maybe Mark Twain: “Put all your eggs in one basket and watch the basket carefully.” I tend to think that’s what great investors do.”

[hellersorr]

Of course Twain put all his eggs in one basket (a typesetting machine) and went . . . bankrupt.

[HP]

Spot on. This is why ETFs and hedge funds have taken over. Focused investing vs. all over the map in a “growth” mutual fund. Hedge funds make big bets and ETFs are concentrated in sectors.

[johnnym]

By what you think are the top 5 stocks in any sector you are interested in.
Have your own etf.

[belmont3]

HP,

Probably agree that Modern Portfolio Theory (MPT) has flaws and probably overrated. (that could be a long debate etc. and not related to racing and wagering)

And you are correct in that MPT is what is taught in Biz schools etc.
It is also what is referenced in most Continuing Ed courses and by regulators (FINRA SEC etc.).

Over my 50 years of playing the races, I have learned much from many.

Like most, the biggest struggle I have is betting strategy and ticket construction. (which is really the point of the original post)

One of the things I have learned from TGJB and TGAB comes from what I call The TGRAPH BIBLE for BETTING. Found in the Archives)

Think this may have been posted recently but the 1st Commandment reads:

WHAT DO I LIKE ABOUT THIS RACE?

If one cannot answer this question, then one should Title to Shofner (showing my age   and PASS.

As far as concentrated bets go, I try (not very well at times) to grade my degree of Conviction.

Interesting topic.

[Strike]

From Warren Buffet\'s business partner and Vice Chairman of Berkshire Hathaway --

To us, Investing is the equivalent of going out and betting against the pari-mutuel system. We look for the horse with one chance in two of winning which pays you three to one. You are looking for a mis-priced gamble. That is what investing is. And you have to know enough to know whether the gamble is mis-priced. That is value investing.

Charlie Munger

[JimP]

Warren Buffett, Carl Icahn, George Soros â€" they all only have one thing in common.

Survivor bias.

[Roman]

Buy GameStop and AMC , this is not financial advise.

Wagering structure is by far my weakest point. Always zig when I should zag!

[billk5300s]

We’ve all been there.  Find a solid angle on a race.  Load up and they get beat.  Then 3 races later and your bankroll is in shreds, you take a stab and hit a $30 winner with a nice exacta.  Honestly, I’ve been dong this for 40 years and my win% isn’t what it should be on locks.  Anyone else feel that way?

[Boscar Obarra]

very few people that walk the earth know the diff between a lock and stab

[johnnym]

Who hasn’t?
Shit I’ve bet the wrong track before and hit the winner
But that was in Vegas and I don’t think I was sober?

[jerry]

Bulletproof locks are usually pretty reliable. They just don’t pay well enough to offset the odds of the unusual event.

Follow Munger’s advice. Find a mispriced asset and buy it.

[JohnTChance]

Yelberton Abraham... \"Tittle to Shofner!?\"

Woah. I suspect we\'re among the 1% here that understood that reference. [Sometimes I can\'t believe I\'ve been a ThoroGraph customer for (gulp) over 33 years. And still plugging.]

[Boscar Obarra]

you can probably get 4/5 on 3/5 shots often enough, if you\'re good at multiple disciplines  , its just a boring way to play

[jerry]

There in lies one of the keys to winning or losing. Boring. Winning should be boring. If it’s exciting there’s probably too much risk. Just ask a bond trader.