I look forward to these updates as much as any hedge fund letter out there! Impressive performance given the high % of cash. A couple questions: 1) what do you do with your "cash" to maximize returns and what was your return on cash? and 2) How do you make position sizing decisions such that you end up with the high average cash balance despite the fact you've found opps that meet your criteria and obviously have performed very well? In other words, why don't you just keep you cash lower and your position sizes larger? You might also consider calculating your Sharpe ratio as a measure of risk-adjusted performance - I suspect it may tell a story even more impressive than your performance relative to the S&P. Thanks as always for the transparency and year-end report! I'll be looking closely at those names - especially MRNA.
Hey Ryan - thanks for reading! Re: 1) I usually just put the cash in a short term govt money market fund, like VUSXX. 2) Position sizes are anywhere from 2-7%, and I size them based more on my estimate of magnitude of downside rather than potential for upside or attempting to maximize expected value. This was a lesson I learned from getting too overconfident in individual situations, like Spirit Airlines, where the magnitude for downside was high even though the expected value seemed reasonable.
In hindsight, it's true I would have had better returns with larger position sizes overall, but I think I'm leaning more towards the belief that there are too many unknowables in investing and business to size much larger, even for my "best" ideas.
I actually got interested in MRNA from your book rec ("The Messenger" by Peter Loftus)! I'm viewing it more as an angel investment w/proven technology more than anything, but it seems to offer pretty good optionality at these prices. If Bancel can actually realize the "mRNA platform" he talks about, and extend treatments beyond respiratory vaccines (i.e. cancer vaccine, rare disease therapeutics, etc) then there is a lot of potential. But that remains to be proven. Returns should also be relatively uncorrelated with the broader market (especially now that it's been dropped from the S&P 500 :P)
I look forward to these updates as much as any hedge fund letter out there! Impressive performance given the high % of cash. A couple questions: 1) what do you do with your "cash" to maximize returns and what was your return on cash? and 2) How do you make position sizing decisions such that you end up with the high average cash balance despite the fact you've found opps that meet your criteria and obviously have performed very well? In other words, why don't you just keep you cash lower and your position sizes larger? You might also consider calculating your Sharpe ratio as a measure of risk-adjusted performance - I suspect it may tell a story even more impressive than your performance relative to the S&P. Thanks as always for the transparency and year-end report! I'll be looking closely at those names - especially MRNA.
Hey Ryan - thanks for reading! Re: 1) I usually just put the cash in a short term govt money market fund, like VUSXX. 2) Position sizes are anywhere from 2-7%, and I size them based more on my estimate of magnitude of downside rather than potential for upside or attempting to maximize expected value. This was a lesson I learned from getting too overconfident in individual situations, like Spirit Airlines, where the magnitude for downside was high even though the expected value seemed reasonable.
In hindsight, it's true I would have had better returns with larger position sizes overall, but I think I'm leaning more towards the belief that there are too many unknowables in investing and business to size much larger, even for my "best" ideas.
I actually got interested in MRNA from your book rec ("The Messenger" by Peter Loftus)! I'm viewing it more as an angel investment w/proven technology more than anything, but it seems to offer pretty good optionality at these prices. If Bancel can actually realize the "mRNA platform" he talks about, and extend treatments beyond respiratory vaccines (i.e. cancer vaccine, rare disease therapeutics, etc) then there is a lot of potential. But that remains to be proven. Returns should also be relatively uncorrelated with the broader market (especially now that it's been dropped from the S&P 500 :P)