John Griffin is the president of Blue Ridge Capital, an investment partnership that he founded in 1996. Mr. Griffin was known as legendary investor Julian Robertson's right hand man. He and a few others are named as Tiger Cubs as they worked with Julian Robertson at Tiger Funds. Mr. Griffin is adjunct professor of finance at Columbia Business School and a visiting professor at the University of Virginia. He began his career as a financial analyst for Morgan Stanley Merchant Banking Group before moving on to Tiger Management, where he became president in 1993.
Blue Ridge seeks absolute returns by investing in companies who dominate their industries and shorting the companies who have fundamental problems. The firm employs fundamental analysis to make its investments.
On November 20, 2008, as part of the Value Investing Conference at the University of Virginia’s Darden School of Business, Griffin spoke on a panel discussion entitled “Developments in the Investments Industry”. Here are my notes on his remarks:
In what he called "the spirit of honesty", Griffin acknowledged that he has no position on the broader macro outlook. He has “no idea what is going on". He is not concerned with this because, over his twenty-year career as an investor, he has focused on picking stocks that can produce a superior return over a three to five year time period and shorting stocks that will underperform, or “not make it”, over a one to two year period.
The likely reason his shorts work, that is, the underlying companies fail, is a poor economic environment.
His portfolio is generally net long.
The shorts help the portfolio because they can go to zero in a poor market, whereas the longs may go down a lot, but they will come back based on the strength of the underlying businesses.
Constructing the portfolio this way makes it perform in a neutral fashion in a down market and gives Griffin the luxury of being somewhat indifferent to the macro environment. [Note: this is very similar to the approach that Buffett took in running his partnership, although in lieu of shorting, Buffett primarily relied on other forms of hedging (arbitrage, control investing, etc.) to protect his downside risk.]
When Griffin started his own fund in 1996, it was a very difficult period because he did not have a long-term track record, and everyone was fixated on his short-term record, i.e. what he had done in the prior week, month, year, etc.
When Griffin started, he had a large amount of cash to deploy. It was very stressful to go from the comfort of holding cash to putting it at risk. At the time, he wrote on the board in his office, “The future is uncertain; it is always a difficult time to invest.” He constantly reminds himself and his staff of this.
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