Joe Weisenthal is right about the Ira Sohn conference
Joe Weisenthal says I’m wrong about the Ira Sohn conference. But that doesn’t mean he thinks that David Gaffen is right. Gaffen reckons that people go to these events so that they can trade in and out of stocks in the space of 10 minutes. Weisenthal, by contrast, sees value somewhere else entirely:
It’s not often that you get to hear the thought process and reasoning employed these financial professionals. Within the broader scope of financial media, you hear a lot of managers and pundits making their arguments in broad strokes, with lines like “We’re bullish on US banks because of low rates, yada yada yada…“And that kind of stuff really is useless. But these are professionals who usually have portfolios of just a handful of stocks, who have done a tremendous amount of research on each one before pulling the trigger, and frequently they do have original insights.
So you shouldn’t go out and by MBIA just because a manager likes it. But if you’re looking for original thinking on stock selection, the speeches, presentations, and letters of big hedge fund managers is frequently some of the best stuff around.
This is a good point. The best way to extract value from Ira Sohn presentations is to concentrate not on the stocks that the hedge fund managers are talking about, but rather on their methodology. At the very least, you’re likely to learn a few ways of looking at a company that you hadn’t thought of before. These fund managers, then, can improve the way that investors do their own research on companies, even if they’re not going to be delivering up great investment ideas on a plate. Use their methodology on a stock which none of them are looking at, and you might just be able to find a hidden gem.
There’s another way to look at the fund managers’ investment techniques, and that’s as a way to evaluate the managers. The idea here is that the managers who have the smartest techniques are likely to be the best managers to invest in. On this front, I’m far from convinced: as I told Gaffen, the analyses presented to the Ira Sohn conference are really sales pitches more than they are transparent views into how hedge fund managers think and invest in the real world. For all their joined-up thinking at Ira Sohn, most successful fund managers in reality use techniques which they would hesitate to admit to in public.
But in any case, you’ll never get the important nuance about how these fund managers think from reading news reports about the conference. So I still don’t see the point in sending a bunch of reporters to cover it.