Dan Sheehan: Avoiding The Bad Investments Is More Important Than Picking Winners

One investor who is very underrated is Dan Sheehan who was a successful Canadian value investor and managing partner at Sheehan Associates LP & Credit River Partners for 20 years. In this interview with MOI, Sheehan discussed why the focus of investors should be on avoiding bad investments rather than finding big opportunities saying:

Okay well this is sort of my interpretation of something that actually Howard Marks spoke about recently which is that… you sort of talked about one of the key factors in his long-term success wasn’t so much about finding great investments it was avoiding bad ones.

I’m not sure if it was Munger or Buffett that said that most of their success didn’t come from slaying dragons it came from never having to slay them.

Avoiding slaying dragons, sort of sticking with easy decisions, and one of the reasons I think people like myself and in this business maybe overlook this idea that it’s really about avoiding bad situations is almost more important than anything else is because if you study someone like Buffett or Howard Marks, or any of the great investors there’s a track record. An easy trail to follow of all the decisions, all the investment decisions they made but there’s not an easy track record of all the things they avoided.

I mean obviously they avoided all the things they didn’t do but it’s hard to think about everything in the world and so if we go to investment conferences people present their best ideas, they’re not talking about all the things they’re avoiding they’re talking about the things they’re doing.

So the focus ends up being on trying to find something to do as opposed to focusing more on not doing dumb things, and so that’s something I’ve been trying to think about more recently because I think the tendency is to avoid that idea… the focus isn’t on avoiding dumb things it’s on trying to do something smart.

You can watch the interview here: