Netflix’s moment of truth
Last week, Netflix reported that U.S. subscribers in 2Q19 declined for the first time in nearly a decade, erasing over $20 billion in market capitalisation as investors fretted over the looming “streaming wars”. The company’s dominant position in programmed video streaming will soon be tested by the launch of streaming services from Disney, NBCUniversal and […]
A New Paradigm in Book Retail or Destined to Repeat History?
Elliott Management, the activist U.S. hedge fund, famous for seizing an Argentinean ship after the country refused to make good on a bond payment, once again acquired a somewhat unusual asset, this time a chain of bookstores called Barnes & Noble. While most would agree, the nostalgia and whimsy of walking the aisles of a […]
Who’s selling you that stock?
“We regard investing as an arrogant act”, Seth Klarman, the brilliant investor at the helm of The Baupost Group, once mused. While people typically eschew arrogance in their everyday demeanour, it is in fact a necessary, albeit incomplete, part of being successful in investing. The explanation for this dynamic lies in the nature of transacting […]
Beware of “Network Effects”
The term network effects gets thrown around a lot, particularly when describing tech platforms. However, only a select number of businesses experience genuine network effects, and not all network effects are created equally. A recent video by venture capital firm Andreesen Horowitz sheds some light on this topic, and provides useful information to build out a […]
Adding to the long/short equation
In my previous post I delved into some of the technical terms and mathematical relationships that are necessary to understand the performance of long/short funds. Since then we have had some great feedback from a range of readers which has prompted me to expand on the topic – with a few more equations and numbers. This […]
How do we get to our net? (Part II)
In Part I, we described Montaka’s top down process which helps determine the appropriate positioning of our long portfolio, short portfolio and the resulting net market exposure. The framework described can be simplified by the framework illustrated below. Put simply: When stock prices are implying undemanding valuations AND the global risk environment is improving: we […]
How do we get to our net? (Part I)
Montaka’s net market exposure is the difference between our long portfolio exposure and our short portfolio exposure. It tells us something about how Montaka is exposed to the overall movements of global equity markets. For example, since our inception nearly four years ago, for every $100 of investor capital, we have positioned the Montaka portfolios […]
The Mathematics of Long/Short
Over the past few weeks we have had the pleasure of meeting with clients and friends of the firm around Australia and New Zealand. We are fortunate to have such sophisticated advisers and investors as clients. It makes our discussions detailed and insightful. One subject of interest recently was the performance drivers of, and expectations […]
The Uncertainty of Investing
In a previous blog post, Digging Deeper, I discussed the often underappreciated downside of spending long periods of time analyzing a single stock. At its core, the issue relates to the diminishing marginal returns of in-depth analysis. That blog post touched on an interesting point, namely: is it possible, through spending greater amounts of time […]
Digging deeper
A critical component of generating investment outperformance, known as alpha in industry parlance, is to uncover insights that the market has overlooked. As Peter Lynch famously said of investing: “The person that turns over the most rocks wins the game”. The harder one works, the greater the chances of them finding insights about a company […]
