Tom Slater head of US equities for Baillie Gifford. He is up 112% this year and up 400% since 2016. In a wide ranging interview with Barry Ritholtz he shares his philosophy of investing.

  • 8 Foundational Investing Principles
  • Key Rules to Active Trading Success
  • 3 Current Big Idea Stocks

  • Investing Principles 0-22 min.
    • Run highly concentrated portfolios – just 10 names make up more that 55% of his portfolio
    • Does not care about valuation, he is willing to buy “growth at unreasonable price” because great companies always exceed the most optimistic expectations.
    • Buys companies that have unique sustainable edge and massive addressable market in trillions of dollars
    • Bets on the fact that stocks will grow into their valuation as they capture more and more revenue and market share
    • Bets on BIG ideas and the companies that can execute them
    • Valuation and quantitative screens do not matter. Better to make probabilistic bets and look for 10X and 100X from just one or two names which will pay for all the losses
    • Stocks can only go to zero on downside, but could rise 100 times purchase price on the upside
    • Over the total history of the stock market only 4% of all stocks made all the wealth for investors. Out of the 4% only 90 stocks from universe of 26,000+ made more than half of all investment profits ever.
  • The key to making high returns in active trading is 21 – 37 min.
    • Non correlated ideas
    • Run highly concentrated portfolios (10-15 names)
    • Hold for very long periods of time – the biggest mistake investors make is selling too soon. You must suffer through multiple drawdowns of 50% or more in order to realize 10X or bigger gains
    • (He has held #AMZN since 2005, #TSLA since 2016)
  • Current non well known holding holdings 37- 68 min.
    • Chegg (#CHGG) – education
    • Wayfair (#W) – ecommerce furniture and design
    • Lemonade (#LMND) – insurance underwriting using web based AI
    • Future bet on companies that bring the power of scale to their line of business – this implies a big move towards virtualization of almost all business activity to be done over the Internet and processed in the cloud

  • Final thoughts – market knowledge and finance knowledge is immaterial to investing success. Much more important to understand companies, business models and cultural trends