The late Jim Simons' incredible investing returns; Investing lessons from Simons and Warren Buffett; I just finished the new book about Amazon: The Everything War; The business world's 'favorite podcast'

1) Friday's death of billionaire and investing pioneer Jim Simons was front-page news in both the Wall Street Journal and the New York Times.

He was an incredible investor, but I don't think he takes the title of the best ever...

Simons was a prizewinning mathematician and then left academia to apply his math skills to investing. He founded the famed hedge fund Renaissance Technologies and used advanced computers to deliver some eye-popping returns.

Here's the New York Times with more details: Jim Simons, Math Genius Who Conquered Wall Street, Dies at 86. Excerpt (emphasis added):

So at age 40 he opened a storefront office in a Long Island strip mall and set about proving that trading commodities, currencies, stocks and bonds could be nearly as predictable as calculus and partial differential equations. Spurning financial analysts and business school graduates, he hired like-minded mathematicians and scientists.

Mr. Simons equipped his colleagues with advanced computers to process torrents of data filtered through mathematical models, and turned the four investment funds in his new firm, Renaissance Technologies, into virtual money printing machines.

Medallion, the largest of these funds, earned more than $100 billion in trading profits in the 30 years following its inception in 1988. It generated an unheard-of 66 percent average annual return during that period.

That was a far better long-term performance than famed investors like Warren Buffett and George Soros achieved.

Here's a table of the performance of his flagship Medallion fund from Gregory Zuckerman's excellent biography of him (which I highly recommend), The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution:

Those are truly astounding numbers – but do they make him the best investor of all time?

Reasonable people might disagree on this...

While the percentage returns – even after staggering 5% management and 44% performance fees – are unrivaled by anyone in history to my knowledge, note that he did it with a relatively small pool of capital. As you can see in the righthand column of the table, this figure never exceeded $10 billion.

In other words, Simons distributed the profits each year – and they were presumably all taxed at short-term capital gains rates.

Over the same time frame, the share price of Warren Buffett's Berkshire Hathaway (BRK-A) rose from $2,950 on December 31, 1987 to $306,000 on December 31, 2018 – a gain of 104 times, or 16.2% compounded annually for 31 years.

That's a far cry from Simons' 39.2%. But Berkshire's market capitalization – the wealth Buffett created for his investors – rose by a staggering $498 billion (the $303,050 gain in the share price times 1.643 million shares) – and it was all 100% tax deferred for those who simply held the stock!

So Buffett is still No. 1 in my book...

2) I also want to underscore an important lesson for average investors...

Simons generated those astonishing returns by being one of the world's top mathematicians, hiring hundreds more, and then buying the world's fastest supercomputers to make thousands (perhaps millions?) of trades every day.

If you think you're going to be able to compete with these folks and their supercomputers – and the many other similar quant funds – by playing the same game of rapid-fire trading that they're playing, I've got some bad news...

You've just walked onto a basketball court and challenged LeBron James to a game of one-on-one, or Steph Curry to a three-point shooting contest. You're going to get crushed.

As Buffett once said:

I don't want to play in a game where the other guy has an advantage. Somebody asked: "How do you beat Bobby Fischer?" The answer is you play him in any game except chess.

Similarly, if you want to win at the game of investing, you need to buy the stocks of good companies and hold them for the long run.

In that way, you're investing alongside the world's smartest investors, like Buffett, rather than going head-to-head with them, as you're doing when you trade stocks and options with super-high frequency.

In fact, our flagship newsletter, Stansberry's Investment Advisory, has been successfully helping its subscribers buy and hold quality stocks for more than two decades.

We've also made our research affordable for average folks – right now, you can become an Investment Advisory subscriber for just $49 for the first year. Get the details by clicking here.

3) In my April 16 e-mail, I wrote about a new book about Amazon (AMZN) that was due out in a week: The Everything War: Amazon's Ruthless Quest to Own the World and Remake Corporate Power.

In that same e-mail, I also shared an excerpt that the WSJ published: Inside Amazon's Push to Crack Trader Joe's – and Dominate Everything. Subsequently, the WSJ published more salacious details about Amazon's operations here: Inside Amazon's Secret Operation to Gather Intel on Rivals.

I've now listened to the entire book, in which the author, Dana Mattioli, attempts to make Amazon look as bad as possible by highlighting how the company puts traditional retailers out of business, bullies other online sellers, overworks its employees, steals information from competitors, thumbs its nose at politicians and regulators, etc.

My view is mixed...

Amazon's hard-driving culture and dominance are why I've liked its stock for years. I would rather see a company pushing boundaries than becoming fat, lazy, and complacent – which is what typically happens to highly successful companies.

That said, I think it's healthy that journalists, politicians, and regulators keep a close eye on Amazon to make sure it's competing fairly and not using its position to harm our economy and country.

Overall, Amazon remains one of my favorite tech stocks.

4) After reading this WSJ article, The Smartest People in the Room Are All Listening to the Same Podcast, about the Acquired podcast, I started listening to it and am really enjoying it. Excerpt:

It's a wonky podcast about business history and strategy with four-hour episodes that drop once a month. And people from Silicon Valley to Wall Street are completely obsessed with it...

Acquired's hosts treat Taylor Swift and TSMC with equally nerdy enthusiasm. And no topic is too esoteric for them. The geekier, the better. They did three hours on Costco, seven hours on Nvidia and nine hours on Berkshire Hathaway in a three-part series as long as the "Lord of the Rings" trilogy.

To get a sense of the show's range, just look at the last five episodes: Visa, Novo Nordisk, Hermès, Renaissance Technologies and Microsoft. The only thing that companies making credit cards, Ozempic, scarves, algorithmic trades and enterprise software have in common is that two earnest hosts wanted to know every nuance, complexity and nitty-gritty detail of how they do it.

In addition to the ones mentioned above about Renaissance Technologies (Jim Simons' firm) and Berkshire Hathaway, here are links to the podcast episodes on Charlie Munger and Amazon.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.