Public Investing in Long-Term Theses

I’ve invested in public markets both professionally and personally for a good portion of my “adult” life. Since I started investing with more material sums of capital, my main focus has been shorter-term event driven strategies, revolving around derivatives. paired with long-term, steady growth allocations to give me exposure across a variety of asset classes and geographies. Over the past year or so I have taken a different approach while focusing on equities that, has proven beneficial financially and mentally thus far.

When I wrote a post last year about my Tesla trade, I came to the conclusion that I was more focused on investing vs. trading. As I started to craft an investment thesis for early-stage startups at Crane, I began thinking a lot more about overall industry directions and trends that we might see from consumers within those industries. With more of my time devoted to that way of thinking, I identified a variety of trends I felt strongly about across a wide range of sectors, and in the end of 2013, started to put those thesis’ to work in my personal public markets portfolio.

Initially, I found that most of my theses were bearish. I think it was a combination of optimism for the future of private companies and the great run that public markets saw in 2013, leading to many stocks near all-time highs. My first big trade was shorting Best Buy (BBY); An overpriced company that was operating in an industry being overrun by the Amazons and Walmarts of the world. I didn’t see a plan for long-term success, and my event-driven experience saw a potential short-term catalyst in their upcoming holiday sales. I shorted BBY at $40.59/share on 1/2/2014. On 1/16/14, just 14 days in to my trade, Best Buy missed huge on earnings and tumbled over 30%. My first “long-term” thesis was over in a mere 2 weeks, as I exited the position for the time being.

As I’ve continued to do this, not all thesis’ have come to fruition that quickly. Realistically, even my BBY thesis hasn’t come full circle yet, but I felt I had made enough of a dent in the short term to allocate to other ideas. Currently I’m short Darden Restaurants (DRI) as well as a few other positions. The thesis behind DRI is the change in consumer’s affinity for a uniform experience, and the lack of quality associated with many of their brands moving forward. Something that is a complete 180 from their current brands and business model. In general I feel we are moving towards an appreciation for the one-off craftsman of industries. The “artists” within the food and beverage industry have gained major traction, even outside forward-thinking cities such as NYC, and I only see this trend accelerating in the near future as brands such as Starbucks and Darden deteriorate due to massive scale and standardization.

I’ll be interested to see how this investing strategy plays out in the long-term. Frankly, there are so many variables and obstacles against you that make short-term trading very difficult to do on a personal account, it’s almost a relief to not be executing and monitoring positions multiple times a day.  Having said that, it’s hard to watch positions move against you, but with anything, you have to learn to deal with the ups and downs and have a long-term conviction in your decisions.