From Bob to Bob
Disney mgmt change; Howard Marks' memo
Hello there! My call DIS 0.00%↑ Disney starting to see some positive newsflow after the 3Q22 earnings miss 2 weeks ago.
Firstly, Bob Iger is back, replacing Bob Chapek as CEO. Would highly recommend Disney investors to watch The Imagineering Story on Disney+ (can you really consider yourself a Disney investor if you don’t have Disney+???)
Secondly, Avatar 2 will be released in China - one of the few major Disney films granted access to China. WSJ
Howard Marks’ latest memo, What Really Matters?
Forget the short run – only the long run matters. Think of securities as interests in companies, not trading cards.
Decide whether you believe in market efficiency. If so, is your market sufficiently inefficient to permit outperformance, and are you up to the task of exploiting it?
Decide whether your approach will lean more toward aggressiveness or defensiveness. Will you try to find more and bigger winners or focus on avoiding losers, or both? Will you try to make more on the way up or lose less on the down, or both? (Hint: “both” is much harder to achieve than one or the other.) In general, people’s investment styles should fit their personalities.
Think about what your normal risk posture should be – your normal balance between aggressiveness and defensiveness – based on your or your clients’ financial position, needs, aspirations, and ability to live with fluctuations. Consider whether you’ll vary your balance depending on what happens in the market.
Adopt a healthy attitude toward return and risk. Understand that “the more return potential, the better” can be a dangerous rule to follow given that increased return potential is usually accompanied by increased risk. On the other hand, completely avoiding risk usually leads to avoiding return as well.
Insist on an adequate margin of safety, or the ability to weather periods when things go less well than you expected.
Stop trying to predict the macro; study the micro like mad in order to know your subject better than others. Understand that you can expect to succeed only if you have a knowledge advantage, and be realistic about whether you have it or not. Recognize that trying harder isn’t enough. Accept my son Andrew’s view that merely possessing “readily available quantitative information regarding the present” won’t give you above average results, since everyone else has it.
Recognize that psychology swings much more than fundamentals, and usually in the wrong direction or at the wrong time. Understand the importance of resisting those swings. Profit if you can by being counter-cyclical and contrarian.
Study conditions in the investment environment – especially investor behavior – and consider where things stand in terms of the cycle. Understand that where the market stands in its cycle will strongly influence whether the odds are in your favor or against you.
Buy debt when you like the yield, not for trading purposes. In other words, buy 9% bonds if you think the yield compensates you for the risk, and you’ll be happy with 9%. Don’t buy 9% bonds expecting to make 11% thanks to price appreciation resulting from declining interest rates.
In sum, asymmetry shows up in a manager’s ability to do very well when things go his way and not too bad when they don’t.
When you think about it, the active investment business is, at its heart, completely about asymmetry. If a manager’s performance doesn’t exceed what can be explained by market returns and his relative risk posture – which stems from his choice of market sector, tactics, and level of aggressiveness – he simply hasn’t earned his fees.