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Alternative Market Briefing

Other Voices: Best investors are good storytellers while great investments are good stories

Monday, February 06, 2017

amb
Alex Gavrish
By Alex Gavrish, Etalon Investment Research .

Alex Gavrish explains why best investments are just like good stories or movies: with three-part structure, important turning points, intrigue, drama, and surprises.

Over past few years we have witnessed tremendous growth of shareholder activism. US is a leader in this field. Not a day passes without reports in financial media about new activist investor campaigns or updates on companies in which activists already invested.

Everybody would probably agree that markets are efficient to a large degree. What is amazing is that despite all these efficiencies, a small pack of activist investors and hedge fund managers continue to come up with great investment ideas. How is it possible? Why these opportunities do not disappear?

I think that great investment managers are also good storytellers. Many investors believe that making good investments requires excellent skills in the analysis of financial accounting statements, building complex and detailed valuation models, forecasting future profitability of companies and otherwise analyzing numbers "to death".

But according to one of the best investment managers of the 20th century, Peter Lynch of Fidelity Investment's Magellan Fund - which achieved a 29% annual return over thirteen years period between 1977 and 1990, good investing is about something else:

"Investing in stocks is an art, not a scien......................

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