In the middle of a Cape Cod vacation, I drove into Boston for a research field trip. An analyst was taking a group of investors to see a company whose business I wanted to understand better, and I'd signed up weeks before. I dunno, it
seemed like a good idea at the time.
It wasn't entirely a busman's holiday, though. A few hours in the car by myself with Bob Marley blaring can be a beautiful thing. And in any case, there was a bonus -
the MIT bookstore was right around the corner, where, as fate would have it, the first book I laid eyes on was
Fried: Why You Burn Out and How To Revive. I silently gave thanks to the universe for the memo and promptly bought the book.
The good news was that according to the book, I wasn't fried yet.
The bad news was that I soon would be if I didn't start taking my vacation seriously. So I did. I read a lot of chick lit. I developed a Netflix hangover from watching old episodes of White Collar. I refereed sibling fights, shopped for shoes and chocolate, and went hunting for mushrooms.
But mostly I just watched the world go by on long walks by the sea.
Which meant I got to see a lot of creatures get eaten by other creatures. Let me tell you, it's a brutal world out there.
Watching all this predatory action reminded me of how I get when I'm stalking a new idea. My immediate ancestors may have been pig farmers, nonetheless, I get overcome with a hunter's blood lust when I think I've got a fat stock idea in my sights.
And if my prey gets away, I get frustrated in a most unladylike way. Howling has been known to happen, because watching a stock go up a lot that you don't own but did work on is highly irritating.
In any case,
as a kindred spirit to the predators, I watched their pursuit of prey on the beach very carefully, hoping to glean a few investment insights along the way. One walk in particular was memorable for the multitude of lessons taught:
Lesson Number One: Pick the optimal time to go hunting At the inlet to Nauset Harbor, as the tide was receding fast, I watched a flock of terns go fishing in the shallows. They whirled and dived, sleek and speedy. It was hard work, as the birds came up empty time and again. But every once in a while a tern would go shooting off towards the nesting grounds, a thin ribbon of silver dangling from its beak.
The terns went to work when conditions were ripe and the chances of success were high. Catching a three-inch fish by dive bombing from five feet above is hard enough; best to attack when there are a lot of fish, all forced to swim close to the surface.
Similarly, it's much better to go hunting for ideas when there's a lot of turmoil flushing values within reach - when markets are receding, or during earnings season, when all companies must surface their earnings results. That's the time to be in all-out hunting mode, circling above the waters, hoping to scoop up good ideas in the most efficient way possible.
Lesson Number Two: Process your prey properly Further down the beach, I spotted a seal. The young males swim very close to shore, only 5 or 10 feet from the wave breaks.
This seal had its mouth clamped around the belly of a striped bass, which was not going gently in that good night, no sirree. That fish, squirming this way and that, fought hard to escape, in stark contrast to the seal who floated peacefully on its back as though he were Winston Churchill enjoying a Cuban cigar.
When the fish finally gave up the seal flipped it around and - just in case the fish was faking it - neatly swallowed it head first, rather than risk an escape because of a tenuous hold on the tail.
The seal brooked no shortcuts - he stuck to his methods and this allowed him to be both successful and serene. In stock-picking as well, a process that is deeply ingrained and adhered to brings peace of mind in addition to efficiency.
Lesson Number Three: Help management open up by making them comfortable Further along the walk, I spotted a gull playing with a large clam at the spot on the sand where the waves peter out and head back to sea.
This gull had a different strategy than the usual fly-up-and-keep-dropping-the-sucker-on-the-rocks-until-it-breaks-open approach.
Instead, it allowed the clam to roll around in the surf, herding it so that it didn't get swept out into the ocean. At first, I just thought the gull was sloppy or stupid, but its movements were quite deliberate - it was trying to get the clam to relax and open up, thinking it was safe to burrow into the sand.
When management similarly relaxes they will help you understand their business, a critical step towards discerning what to pay for it. I'm always amazed at the mucho macho types who seem to go out of their way to piss off management teams by being confrontational and rude. Under these circumstances, why would management be interested in opening up and having a real conversation about the challenges and opportunities of their business?
And, the most important lesson of all The most important lesson I gleaned from all three predators was
how essential it is to have a cadence between effort and recovery. The hunt wasn't one long prolonged frenzy of activity, ever.
The terns worked flat out for a set period of time when conditions were just right, and then they disappeared back to their nests to rest. The seal let the fish wear itself out, expending little energy for the final kill. And the gull didn't frantically peck at the clam. It was alert and vigilant, letting guile and patience do most of the work.
All reminders that
being smart, efficient and tactical, and allowing ample time for rest and recovery along the way, is much more critical to success than nonstop, frantic activity.
So thanks to the book and to the lessons gleaned from mother nature, I made sure to get a lot of rest. It's a good thing too because September brings with it 20 million research conferences and company analyst days, followed shortly by October's earnings season. In short, the perfect conditions for stalking new prey after a well-earned rest.
