Introducing a new category--Judging Investment Pitches:
As a soi-disant (a word I learned recently) judge of money managers, I try to hone my judging skills to razor sharpness. One way to do this is to read and evaluate the various investment pitches available in the media. I define an investment pitch as a reasonably long (that rules out a lot of what's on Seeking Alpha) and detailed argument by a professional investor in favor of a particular position he/she holds. Sometimes you'll find them in the popular business press, which have free websites, but more often in more specialized publications like Outstanding Investor Digest or Value Investor Insight. These latter two are not (at all) free so I will do my utmost to respect their intellectual property--I don't want a rabid Whitney Tilson knocking down my cyberdoor.
In my opinion, you can't evaluate a money manager, especially a young one with little to no track record, only by his numbers. There is no substitute for the hard work of trying to figure out how he thinks, how smart he is, how he makes decisions, his integrity. These unmeasureable factors ultimately matter more because
- By the time the measureable factors--historical returns, volatility of returns, etc.--become meaningful, it's often too late for you. Either the fund is closed, or everyone knows it's good, or it's gone and raised so much money that it won't likely repeat its past record.
- The measureable factors are commodities. Too many people can calculate the return statistics of a hedge fund or PE fund, and if they can't their computers can. You're not adding value as a judge of money managers if you're just doing that.
Short of a face-to-face meeting, reading investment pitches is the best way to measure these important intangible factors. So I'll judge them, and you can judge me.