Transcript of 2021 Empire Cannabis Summit; 100 Most Influential Women in U.S. Finance; Evaluating the Dearth of Female Hedge Fund Managers; ARK's Cathie Wood Disrupted Investment Management. She's Not Done Yet; The Man Who Abandoned Value – And Found Tesla; Test drive of the Tesla Model Y
1) If you missed the 2021 Empire Cannabis Summit I co-hosted with my friend Tom Carroll from our sister company Stansberry Research last Thursday, you can read a transcript of the full event here.
Just to recap, here are a few of the things we covered:
- Tom and I revealed four catalysts driving the new cannabis boom
- We discussed why cannabis is likely to grow enormously over the next decade
- And we revealed the details of how to claim 50% off Tom's Cannabis Capitalist research advisory service
Subscribers will gain access to every pick he makes for the next year (including his next one, due out on Thursday), all of his special reports, and his entire portfolio.
You can check out the full details on this offer right here.
2) Over the weekend, Barron's published its second annual list of the 100 Most Influential Women in U.S. Finance.
As the father of three daughters, at least two of whom are interested in careers in business (my youngest starts college in the fall), I'm delighted to see the progress women are making in this industry, which has a well-warranted reputation for being hostile to women.
That said, as I scan the Barron's list, I'm not seeing enough founders of their own firms – which is where the big money is made (think of the dozens of billionaires and hundreds of centimillionaires who started their own hedge funds). Thus, I'm not sure how much has really changed since I wrote two articles on this topic for the New York Times website in 2014, which have lessons for anyone – male or female – looking to break into and succeed in the industry:
Evaluating the Dearth of Female Hedge Fund Managers. Excerpt:
A recent report by the consulting firm Rothstein Kass found that hedge funds managed by women performed better than a broad index of hedge funds.
This shouldn't be surprising, as numerous studies have shown that women take less risks, do more diligent research, suffer less from overconfidence, trade less frequently and are quicker to admit mistakes – all of which lead to higher, and less volatile, returns.
At the same time, the report and other statistics show that few hedge funds are run or led by women. This is reinforced by my own 15-plus years of experience in this business: I've met well over 1,000 hedge fund managers, and only a small handful have been women.
If women are, in general, better suited to be successful investors, then this is a strange market inefficiency. It would be like discovering that tall people were vastly underrepresented in the N.B.A. What could possibly explain this?
A Deeper Conversation on Women in Hedge Funds. Excerpt:
Dozens of people responded to my recent column on Evaluating the Dearth of Female Hedge Fund Managers with thoughtful comments on why the problem exists and some ideas to address it.
Some certainly approached the problem with humor. "It is a standing joke that Wall Street rewards unbalanced personalities, so maybe women are astutely steering clear of all the outrageous personality combinations you'll find working here... only half-kidding!"
But seriously, it was encouraging to hear from women who were bucking the trend, though it is clear that the industry has been a tough one to crack.
A fundamental problem seems to be the way hiring is done. As several readers pointed out, the job posting and interview process is the first hurdle. One person wrote: "You must either be extremely well educated and well connected, or have gotten lucky to even land an analyst position. Most buy-side shops don't even post jobs; you need to know someone." On top of this, it's even tougher for women according to some: "Believe it or not, when I was going through recruiting, I had headhunters telling me many funds would never ever consider hiring a woman because it just 'looks weird,'" wrote one woman.
3) One of the women who made the list – deservedly so! – is ARK Invest's Cathie Wood, who Barron's profiled in depth: ARK's Cathie Wood Disrupted Investment Management. She's Not Done Yet. Excerpt:
Spiros "Sig" Segalas, co-founder of Jennison and Wood's boss and mentor, often brought in these economic luminaries to share their forecasts, and challenged Wood to debate them. "For four years, nobody believed us," she recalls. "I would have to go up against Henry Kaufman one-on-one. I knew my numbers; I knew what I was talking about, but I had to convince them I did because of my youth."
Segalas calls her a "lady with unbelievable, unwavering conviction." He installed Wood in a nearby office so he could pick her brain and tasked her with writing the firm's quarterly letter. "She was by far the sharpest," Segalas says. "She always made me look good."
Wood spent 18 years at Jennison, while raising three children. Interest rates began to decline in the 1980s, allowing tech companies more runway for growth, and setting the stage for a new era of innovation – featuring personal computers, semiconductors, and wireless capability. Wood decided that she wanted to become an equity analyst and portfolio manager.
Wood looked at places that other analysts were ignoring. "I was like a little dog looking for scraps under the table," she says. She found stocks that sat at the intersection of multiple industries, and weren't followed by analysts from any side. This, she realized, is where innovation happens. Reuters, for example, was this mystifying "database publishing" company that collected data from financial companies and then sold it back to them in aggregate. Nobody understood this business model, so Wood took it up: "I just felt it was something big, and, of course, it was the precursor of the Internet."
After leaving Jennison in 1998, Wood co-founded Tupelo Capital, a hedge fund; she joined AllianceBernstein as a portfolio manager and thematic research strategist in 2001, managing more than $5 billion. She continued to invest with strong conviction in high-growth, high-risk, smaller-cap stocks.
Wood researched stocks with the same dogged determination she applied to economics. "Cathie is insatiably curious; she was a voracious consumer of research from all over the Street. She read everything from everyone," says Lisa Shalett, Wood's boss at the time, now chief investment officer for Morgan Stanley Wealth Management. "She was tireless; she works 24/7 to make sure the team has the most thorough research and differentiated view."
Here are related articles in Barron's (ARK Innovation Falls 23% In Two Weeks. Here's What To Watch) and the Wall Street Journal's (Cathie Wood’s ARK Faces Test as Tech Rally Cools).
I admire Wood's drive, smarts, and incredible accomplishments – but not her risk management, which is why my friend Doug Kass of Seabreeze Partners (Will ARKK's Cathie Wood Need Her Ark?), my colleague Berna Barshay (What Will Be the Fate of the Reigning Queen of the Markets?), and Edwin Dorsey of The Bear Cave (Potential Liquidity Issues at ARK Invest) all recommend avoiding ARK funds (as do I).
4) Wood is best known for being very right on Tesla (TSLA), but she's not alone...
A little over a year ago, I was smart enough to realize that my old friend Arne Alsin had done some good analysis on Tesla, so I sent his fourth-quarter 2019 letter to both my Tesla and full investing e-mail lists (archived here) when the stock was at $109.44 (split adjusted), saying that he "makes the best bull case I've read for the stock."
Alas, I wasn't smart enough to listen to him and buy the stock (Arne's fund was up 274% last year)! Michelle Celarier has a nice profile of him in the latest issue of Institutional Investor: The Man Who Abandoned Value – And Found Tesla. I'm quoted in it here:
At the time, Tesla wasn't the battleground stock it would later become. But the company's heavy debt load and lack of cash had already lured some short-sellers, including Whitney Tilson. The former hedge fund manager and value investor, who shut down his Kase Capital fund in 2017, was burned by shorting Tesla in 2013 and 2014 and said it was the worst short of his career.
A year ago, Tilson, who'd communicated with Alsin as a fellow value investor some 20 years earlier, received a copy of Worm Capital's fourth-quarter report for 2019 – when the Tesla bet was finally starting to pay off. That year, Worm's long/short fund gained 13.04% and the long-only fund rose 29.15%.
Now the CEO of Empire Financial Research, Tilson says he was impressed to see Alsin "absolutely crushing it" in the tech space.
"I knew he wasn't just some dipshit bull market genius," says Tilson. He forwarded the report to his subscriber list of 5,000 people interested in Tesla, noting that it included the "best bullish analysis on Tesla" he'd ever read.
In it, Alsin details how Tesla's powerful brand, and its advances in software and battery technology, would result in structurally higher margins in the future.
5) Speaking of Tesla, my analyst Kevin DeCamp, who's made nearly 100 times his money on the stock (he explained how he did it here), came to visit my parents and me in New Hampshire recently and took us out for a test drive in his new Tesla Model Y.
We all took turns driving on the interstate and were very impressed with the comfort, acceleration, software/screen, and Autopilot. Here are three pictures below, plus a 17-second video of my dad driving:
Best regards,
Whitney