In his recent interview on the Invest Like The Best Podcast, Stephen Mandel discusses his strategy of investing in companies that are undergoing significant multi-year change. He also discusses comparisons from when he started Lone Pine, and his thoughts on short-selling. Here’s an excerpt from the interview:
Mandel: I think the same way I would define it now, but with a little bit of a twist on the short side versus the long side. On the long side, I think it’s really the same. We have invested pretty much forever behind change largely.
When I say that, sometimes it can be a large technological change, sometimes it can be a managerial change, sometimes it could be a regulatory change, but something that is changing the dynamic for a multi-year period. Investing behind those big areas of change has generally been what we’ve done on the long side forever. I don’t think that really has changed.
The other dynamic is, on the long side, the actors have changed quite a bit. There weren’t ETFs, passive was small, hedge funds were small. But there was a large amount of aggregate money invested long in public stocks. Whether it’s an ETF or a large mutual fund or a hedge fund or a family office or whatever, they own the stocks and somebody buys them and somebody sells them. There’s still sort of the same supply-demand dynamic.
On the short side, it changes a lot because, at the beginning there weren’t a lot of hedge funds. It wasn’t that big a business. The competition on the short side was much, much less than it is now. When there’s incremental capital playing on the short side, that does change the supply-demand dynamic. Because it’s actually truly incremental to incremental demand for a limited supply of good short ideas. Of borrowing and good short ideas.
You can listen to the entire interview here:
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