Behavioral Investing Class at Columbia University with Brian Waterhouse and Alix Pasquet III

Introduction

The speakers introduce themselves and their backgrounds, and explain the importance of behavioral investing.

Backgrounds

• Brian spent five years in Venture before joining Blue Ridge for four years. He then launched his own fund with a colleague three years ago.

• Alex used to be a professional gambler before running a public book for six years. He then launched his first hedge fund which failed two years later. He relaunched the fund again in 2016 and has been doing that for five years.

Importance of Behavioral Investing

• As students move into thinking about stock selections, it's important to focus on both quantitative and qualitative elements of research.

• Today's presentation will cover what is behavioral investing, why it matters, and how to implement it over time.

Case Studies

The speakers present case studies that demonstrate the importance of understanding investment behavior.

Investment Behavior Examples

• A company's stock went to zero because investors couldn't handicap the CEO's behavior.

• Buffett checks out personal lives of people who run companies he invests in, including their marital status, personal habits, and motivations.

• Understanding people and setups is crucial in addition to numbers when making investment decisions.

Conclusion (not included in transcript)

The speakers conclude their presentation by emphasizing the importance of behavioral investing in making successful investment decisions.

Management Schemes and Value Creation

The speaker discusses how management schemes in terms of bringing parents on value creation is systemically underappreciated. He emphasizes the importance of focusing on putting winners and losers, being able to strength and significance or not is still there.

Importance of Judging a Management Team

• Judging a management team is a skill that can be acquired.

• Columbia business school students lack the ability to show their work on management.

• Being able to judge a management team is something you need to work on and it is possible.

What Drives Investment Returns?

The speaker talks about what drives investment returns, starting with sentiment changes or multiple changes then moving onto sustainable fundamentals or the reinvestment of invested capital. Beyond that, it's all about people and culture.

Factors That Drive Stocks

• In the short term, stocks are driven by sentiment changes or multiple changes.

• Over time, stocks are driven by sustainable fundamentals or the reinvestment of invested capital.

• Beyond that, it's all about people and culture.

Understanding Market Trends

The speaker emphasizes the importance of understanding market trends when investing. He also talks about oscillating between where Mr. Market is loving and worrying.

Understanding Market Trends

• Be aware of where Mr. Market is loving and worrying.

• Oscillate between where Mr. Market is loving and worrying.

• Both can be great tools for shorting as well as going long.

Culture of Success

The speaker stresses the importance of having a culture of success within a company. He notes that mediocrity should not be allowed in any way since it allows people to check out early.

Importance of Culture in Success

• A culture of success is crucial for a company's growth.

• Mediocrity should not be allowed in any way since it allows people to check out early.

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