2020 has been a year of trials and tribulations. It paid witness to a pandemic that rocked markets in March and then many watched in disbelief as the subsequent rally stoked fires beneath stocks and drove indices to new highs.
Outside of the macro picture, there have been plenty of other interesting narratives worth our attention. It is these stories that the Opto Sessions podcast has delved into, with the help of a fantastic selection of well-informed guests providing their own insightful and interesting reflections.
Opto speaks to Haydn Brain, co-host of Opto Sessions, about just some of the many interesting conversations he’d had throughout the year.
Does behaviour trump analysis?
In episode 33, Brain quizzed best-selling author Morgan Housel about his broad perspective on the world of investing. In his book, The Psychology of Money, Housel digs into an important aspect of trading that is often overlooked — the importance of behavioural traits in investing.
“...what is really important is that if you have analytical skills but not behavioural skills, the lack of behavioural skills can neutralise any of the analytical skills you have” - Morgan Housel
“What really matters in investing and finance is not what you know, it’s not about how smart you are or the analytical skills you have — and it’s not that analytical skills don’t matter — but what is really important is that if you have analytical skills but not behavioural skills, the lack of behavioural skills can neutralise any of the analytical skills you have.”
Making it stick
In episode 28, Chris Camillo, founder of Dumb Money — who has turned $20,000 into $30m and counting — explained one particular trade that helped him net big returns. Camillo explained how by using social arbitrage he gleaned important trading information from a wealth of social data, such as that found on Twitter and elsewhere.
Camillo recalled how he noticed a year-long trend of people making “slime” at home, and that crucially one of the ingredients, white glue, was becoming scarce. After a bit of digging, Camillo found that a major producer of this ingredient, Elmers, was a subsidiary of Newell Brands [NWL].
“What was amazing is that Newell brand stock price went up 17% or 18% over the course of a couple of quarters. It was a trade I’d initiated, it was a leveraged trade, and I made maybe close to 200% on my investment over a very short time,” Camillo said.
“It’s an interesting example where the whole world could have seen this. There were tens of millions, if not hundreds of millions, of families in which there were kids making this slime. How many people were able to make the connection between that and an ingredient, and a company that was investable, based on that trend?”
A big short
One of the biggest trading stories of 2020 involved the downfall of German financial services company Wirecard [WDI] which saw allegations of accounting irregularities quickly unravel into a fraud scandal. Along for the ride was renowned contrarian and short-selling savant Fahmi Quadir, founder and chief investment officer of Safkhet Capital.
In episode 13, Quadir touched on the Wirecard situation as well as divulging the details of her now-legendary short of the Valeant Pharmaceuticals [VRX], a bet that brought a $90bn company to its knees and became the subject of an episode of the critically acclaimed Netflix [NFLX] series Dirty Money.
“When I came to the story five years ago, [Valeant Pharmaceuticals] had completed their acquisition of Salix Pharmaceuticals and they were sitting on a pile of debt. That’s really when things started to unwind… sales had really peaked, so the unwind seemed clear to me when I came in” - Fahmi Quadir
“When I came to the story five years ago, [Valeant Pharmaceuticals] had completed their acquisition of Salix Pharmaceuticals and they were sitting on a pile of debt. That’s really when things started to unwind… sales had really peaked, so the unwind seemed clear to me when I came in.”
For more highlights from Haydn Brain, listen to the Bonus Opto Sessions podcast on 31 December, in which he discusses some of the most interesting revelations from the series with co-host Ed Gotham.
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