Matt Foley Capital

Goldman Sachs is lead underwriter for the SpaceX IPO. When Goldman did Tesla’s IPO in 2010, Lloyd Blankfein writes in his memoirs that senior bankers on the commitments committees voted to turn down the deal. As CEO, he made a rare decision to overrule them and do the listing.

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The 13Fs I have seen so far this quarter are, with maybe four exceptions, the most embarrassing display of professional herding I have witnessed in a decade. Every “widely followed” fund owns the same nine names. The differentiation between them, when you actually lay the holdings out side by side, is statistical noise dressed up as conviction. These are people charging 2 and 20, and 1.5 and 15, and a flat 1% on $4 billion accounts, to deliver portfolios that a Vanguard index fund could replicate at 4 basis points, except with worse turnover, higher tax drag, and a manager letter every quarter explaining why owning the same seven mega-cap names everyone else owns is, in fact, a contrarian act of independent thought. There is no work in these portfolios. There is no original research. There is no name on any of these 13Fs that required the manager to fly somewhere, sit in a lobby, eat a cookie, call a CEO at a number listed in a proxy statement from 2011, or do anything that any well-read 19-year-old with a Bloomberg login could not have done in an afternoon. The entire industry has, in the last decade, quietly stopped doing the work, because the work is hard, the work is lonely, the work makes you look stupid for 18 months at a time, and the work, when it produces a name nobody else owns, is the single greatest career risk in modern asset management. Nobody gets fired for owning Microsoft. Everyone gets fired for owning a $90 million market cap Pennsylvania bank that the LP committee has never heard of, even when the bank doubles, because by then the LP has already pulled the capital and the manager is already at a different firm doing the same thing he was doing before, which is owning Microsoft. You can do the work. You can own the small cap they will not. You can build a portfolio that does not look like anyone else’s. You will not be on Bloomberg. You will not be invited to speak at the conference. You will, however, in some ten-year window that you will not be able to predict in advance, outperform every one of these herded portfolios by margins that will, in retrospect, look obvious to everyone except the people who were doing the herding, who will, as they always do, explain that they were right in spirit and just wrong in price, which is, as it has always been, the entire reason the trade on the other side keeps working.

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