Moneyball
I was up late last night trying to decide what to write about this week when I stumbled upon a miracle. I was just flipping around on the television when I came across a movie playing on AMC: “Moneyball“. Somehow the universe had conspired to provide me with the ultimate article inspiration and it was playing right in front of my very eyes. Thanks universe.
The Story
Moneyball is about an MLB team, the Oakland A’s, who can’t afford the caliber of players that their competition can. They just don’t have the money in their budget to compete with the likes of the Boston Red Sox or the New York Yankees. While these teams have budgets upwards of $120 million, theirs is more like $40 million. The story focuses in on Billy Beane (Brad Pitt) and his failing attempts to acquire the big names.
Billy stumbles across timid player analyst Peter Brand (Jonah Hill) and sees something in him that could help his team. He poaches Peter from the team he currently works for and hires him on.
Peter is not like the other baseball analysts/scouts. In fact, he doesn’t care that much about what any of those guys think, he focuses on the stats. Some scouts might discount a guy because of a bad reputation, or because they look kind of funny. Not Peter. He knows that those things don’t matter as much as people think. Moreover, it’s not about one player or a handful – it’s about the team as a whole.
Peter is a classic contrarian. He identifies these Diamonds in the rough and acquires them for cheap. He builds a winning team on a budget – at least I think that’s where the story was going. Although I didn’t see the end of the movie, I assume it ends well. I don’t know why they would make a movie about it otherwise.
For me, this movie underlines the importance of contrarian investing. It also underlines the importance of finding a great stock analyst who you can trust like Jonah Hill. It is also about discounting the opinions of the vast majority of analysts, who probably don’t really know what they are doing. Ultimately it boils down to:
Know who to trust
So… Who To Trust
So I took to the internet to find the Jonah Hills of the investing world. I found a great analyst screening tool called “TipRanks“.
TipRanks
I really like this website because it ranks analysts quantitatively based on their performance. It tells you how often the analyst was right, and how much their average pick would have made you. This is what you need to know when choosing analyst. It doesn’t matter what they look like or if they are a certain demographic. What matters is their performance. That is what TipRanks tells you.
I highly recommend that you take a look at this website for yourself. The major limitation (for our purposes) in my mind is that the website is mostly focused on US equity analysts.
Using TipRanks, you can identify the very best performing stock pickers so you can know who to trust. Obviously, by doing so you can choose to buy the stocks that they recommend and make bank.
Fortunately somebody already did the leg work for us and delivered a list of the best performing Canadian stock analysts of 2020. Give it a look.
Hedge Funds
Of course you can’t trust all of the hedge funds. But some really know what they’re doing, and they get awarded for it.
Like, really, there is an award for it called the “Canadian Hedge Fund Awards“. Every year, Canadian hedge funds are rated on their performance.
Here are the most recent winners in the “equity” category (2020):
If there is anyone to listen to it would be these guys because their performance speaks for itself.
Unfortunately for us these companies do not have to disclose their holdings. This means that you will have to look at their market commentary, press releases, or interviews. Many of these hedge funds are very passionate about the market and freely offer their market commentary and insights on their websites. While this might not be as good as the stock picks themselves, it is second best. When they tell you their opinions on the market I would say it is worth listening to. For instance, Steve Palmer whose Alpha North Partners Fund returned a stunning 188% last year, gives media interviews on a fairly regular basis.
The takeaway here is that, even though they don’t have to disclose their earnings, you can find some quality info if you do some digging.
Trust Yourself
Don’t be a sheeple and follow the herd. Trust in your ability to identify undervalued companies, especially with the aid of screeners and fundamental analysis. By doing so, you can become like Jonah Hill and build a great portfolio with the resources that you currently have.
If you think you need to buy the super expensive companies – the Tesla’s and the Shopify’s – then you’re doing it wrong. Invest on a budget – victory to the stingy.
I hope you learned something today my friends. Find those great stock pickers and make them your ally – your trusted compadré.
Happy Investing.
Best view i have ever seen !