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Cloning Strategy


Guest notorious546

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I'm definitely not above getting ideas from someone else. I just can't figure out how to do it successfully. Every freaking time I've tried "cloning", EVEN with doing my own work, I fuck it up because I figure, "well XYZ is invested and they probably know more than me so even despite all this bad stuff happening it will probably work out", and then I lose my shirt.

 

So now I do stupid lazy screeners and some basic fundamental analysis and don't try to shoot the moon.

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  • 4 weeks later...

I run 3 clones in addition to my own work..I take top 10 positions of Tepper, Simpson, and Richard Fullerton.. Has worked out well so far..

 

I also run 1 more "clone" ValueAct 13D strategy.. I buy whenever they issue a new 13D on a company and close the position when they no longer own >5%.

 

 

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Guest longinvestor

 

Buffett's suggestion to buy BRK instead of trying to clone their portfolio is a good one. It is simply a bet that overall, they will make fewer mistakes than you.

 

Of course, cloning is done for other reasons: Ego, wanting to stay busy, analyzing stocks is sexy, market timing skills after the initial clone, they are too big versus me etc.

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One other thing to keep in mind is non US holdings:

 

http://www.dataroma.com/m/holdings.php?m=PI

 

Pabrai has mentioned in recent interviews he is finding value outside the US. The link above shows around 300m in positions when we know he has more capital to work with. So the gap is made up by international holdings or cash or some of each. So you won't be truly cloning.

 

I prefer to use cloning as yet another source of ideas and would not purely clone because I couldn't deal with owning something where I am not clear what the thesis and IV is. If I had to clone to some entity identically based on the information that is publicly available it would be the non WEB holdings at Berkshire. Specifically because Ted/Todd are working with less capital than WEB and if I had to hold something where I was not clear on the thesis I would want to know their level of DD was being done. I think they were selected primarily because of their history of not breaking rule #1.

 

So true.  Tending stocks is a bit like raising children (although I don't have kids yet, I was oldest of 5 so I can at least pretend to have 2nd-hand experience).  You couldn't adopt someone else's children and expect them to instantly do what you want.  You have to take the time to get to know them and understand what makes them tick - only then will you be in a position to manage them.  There is a platform out there called Instavest that lets you create a mirror account to a stock picker who trades on their platform.  Their selection of PMs and trading vehicles is limited right now.  Short of something like that, mimicking someone else's process is downright dangerous - like trying to operate someone else's handgun.  Hell, even Warren might disappoint if you don't have the right expectations going in!

 

I'm a great believer that the "right" portfolio is different for everyone, just like the "right" family.

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Speaking of cloning someone, how about Michael Burry vs his new 13-F?

 

http://www.fool.com/investing/general/2016/04/02/hedge-fund-manager-from-the-big-short-owns.aspx

 

Mike may have non-stock positions that are not reflected in 13-F. So your sizing from cloning 13-F may not reflect his thoughts.

 

OTOH, he has some positions that are attractive (and widely discussed on this board).

 

Disclosure: I hold AAPL, BAC from his list and IBM via BRK.

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I read it and preview copy before it came out..

 

It brings up some good points that people on this board probably already know:

1. Cloning people like Renaisance and Steve Cohen is a bad idea because they are in and out of stock so much

2. Look for "value investors" who hold the same stock long periods of time

3. He gives a list of people who would be good ideas to clone(this takes up the majority of the book)

4. Strategies about putting multiple clones together...

 

Not terrible not great...more like "eh"

 

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How do people get free copies of books to preview?

 

I think there are two sources: be a good Amazon reviewer and they may put you into their whatever-it's-currently-called preview program; know the author and they may send you preview copies.

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I read it and preview copy before it came out..

 

It brings up some good points that people on this board probably already know:

1. Cloning people like Renaisance and Steve Cohen is a bad idea because they are in and out of stock so much

2. Look for "value investors" who hold the same stock long periods of time

3. He gives a list of people who would be good ideas to clone(this takes up the majority of the book)

4. Strategies about putting multiple clones together...

 

Not terrible not great...more like "eh"

 

Thanks

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  • 1 month later...
Guest notorious546

Here's an brief excerpt from a CFA publication...

 

Question: Which of these biases has the most detrimental

impact on crisis decisions: overconfidence,

priming, the endowment effect, excessive focus,

groupthink, or deferral to experts?

 

James: I do not know which one is most powerful,

but deferral to experts is an important one that

I did not discuss. We sometimes have a tendency

to believe that because someone is the expert,

she knows all. We can end up abdicating responsibility

for our decision making to the experts

cp%2Ev32%2En4%2E4.pdf

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  • 8 months later...

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