Sequoia: Bet Big When You Think You’re Right!

Johnny HopkinsSequoia FundLeave a Comment

In his latest interview on the Invest Like The Best Podcast, John Harris, Managing Partner of Ruane, Cunniff & Goldfarb, and the flagship Sequoia Fund discussed how his lack of conviction cost him significant returns. Here’s an excerpt from the interview:

Well, one thing 50 years gives you the opportunity to do is to screw everything up every which way you can do it and then do it multiple times over and over again. And we’ve done it all. And I would say it’s probably indisputable that the single biggest mistake we ever made as a firm was not buying more MasterCard on the day we bought it after the IPO. I think if you took a poll of our clients, very few of them would point to that.

They would all have their episode of where we actually bought something and it went down and it was an embarrassing result. And that was my mistake. It was me in the office with the person who managed Sequoia fund at the time. And I was the analyst on MasterCard and we had tried to get an allocation and the IPO and we didn’t get it.

We’re like the world’s worst Wall Street clients. We never get allocations on IPOs. But it was sort of a failed IPO. And the day that the company went public, it basically traded for the offer price. And so we were buying it in the aftermarket and we had all these things we were worried about and I was worried about, and I can’t remember what they were because I’ve tried to purge the whole episode from my mind. But basically we put 1% of Sequoia fund into MasterCard. And I think we probably made over a hundred times our money on that investment.

If we had just put a single percentage point more and held it as we did for, I don’t know, well over a decade, the amount of money we would have made is almost hard for me to contemplate. So, I guess what long-term ownership of great businesses teaches you over time is that every so often things can go right. And sometimes they can go really, really, really right. And capturing a few of those situations over your career as an investor is just way more important than the ones that, the mistakes, the overt mistakes that you make, where it goes down 20 or 30% you sell it.

You can listen to the entire interview here:

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