Going the Distance

Great investment careers can span 10 years, 20 years, 30 years and more. Reputations are normally built by stepping away after a streak of good years, or evolving and adapting your strategy, or simply by making sure you have the duration to grind through the tough years to get to the good ones. When your performance is public record it adds pressure to perform and makes going the distance even more difficult. The ultimate goal for any stock picker is survival.

I’ve always enjoyed studying the greats of different areas and seeing how they navigated success. Seeing how some retired at the top of their game, some kept going way past their prime, some stayed too long but persevered, and others reached for too much but kept their legacy in tact. 

“Seinfeld” first premiered on NBC in the United States on July 5, 1989. It ran for nine seasons until its final episode aired on May 14, 1998. Jerry Seinfeld was offered over $110 million for one more year. He said no. In 2013, Jerry Seinfeld was on the Howard Stern Show and was asked about the decision to end the show and not reach for more: 

“To be honest – the love affair with the people making the show and the audience was so intense, so white hot. I had to respect that. I could not let the show get to the point where it started to age and wither. It doesn’t take long. You go see a comedian and at an hour you love the guy but at 70 minutes you are like “ehhh” and walk out with a whole different feeling. It’s a small amount of “too much”, too much cake, too much anything, and it changes the whole feeling. I wanted it to end with “it was never bad”.  As a comedian, I have a sense for timing. I knew it was time.”

Jerry Seinfeld

The Simpsons was created by Matt Groening in 1989. The show revolves around the Simpson family, consisting of Homer, Marge, Bart, Lisa, and Maggie, residing in the fictional town of Springfield. This fall will mark the animated sitcoms 35th season. The first nine years of the show were historic for ratings – each episode pulled in over 15 million viewers. Then it declined. And declined. Earlier this year an espisode had less than 1 million viewers. Why doesn’t it get cancelled? Between licensing, streaming, merchandise sales, The Simpsons is still a money maker for 21st Century Fox (Now Disney). For Simpsons fans it’s painful to watch its owners try to get every last coin out of the piggy bank. With every passing bad season you forget a little bit more about the great seasons. Greatness has a shelf-life.  

In 1999, at the age of 30, Barry Sanders shocked the NFL and fans by announcing his retirement. Despite being in the prime of his career and coming off a season where he rushed for over 2,000 yards, he decided to step away. Barry Sanders is widely considered one of the greatest running backs in NFL history. He played his entire professional career for the Detroit Lions, from 1989 to 1998. He rushed for 15,269 yards, which ranks him third in all-time rushing yards in the NFL. He led the NFL in rushing yards four times (1990, 1994, 1996, 1997 (Won MVP). In Sander’s autobiography, he writes “Physically I knew I could still perform at a high level, but mentally I just wasn’t as sharply focused…I lost my edge, and I wanted to stop before that started to show.” There is something beautiful about seeing an athlete retire at peak performance. It’s the ultimate sign of discipline. 

Albert Pujols retired at the end of 2022 and is considered one of the greatest hitters in Major League Baseball (MLB) history. He played 22 seasons and his career statistics are impressive: .296 batting average, 3,384 hits, 703 home runs, 2,218 RBIs and 1,914 runs scored. Pujols had a distinguished career that straddled two distinct phases. In the first half of his career with the St. Louis Cardinals (2001-2011), Pujols put up blistering offensive numbers hitting .328, 445 homers, and 1,329 RBIs. He won three MVP awards and two World Series titles. 

From 2012 to 2022, Albert Pujols played for the Los Angeles Angels and briefly for the Los Angeles Dodgers, and finished his career with the Cardinals. During this second act he had six seasons he hit below .250. Another baseball statistic – On-base plus slugging (OPS+) is a sabermetric baseball statistic calculated as the sum of a player’s on-base percentage and slugging percentage. The ability of a player both to get on base and to hit for power, two important offensive skills, are represented. From 2017 to 2021, Pujols OPS+ was 13% worse than the leagues average hitter. It was painful to watch the decline, but he was such a likable person fans chose not to watch. When he blasted his 700th homer in 2022 everyone cheered, and we all cheered even more when he retired. It hurts us to see immortals become mortal on a grand stage. 

In the 1990’s, no one sold more albums than Garth Brooks. In fact, he’s sold more albums than Elvis Presley, and is second only to the Beatles in total album sales. Billboard recently ranked Garth Brooks the greatest male solo artist of all time. By the late 1990’s he was on top of the world. In 1999, Garth Brooks took a break from country music, and created an alter-ego for himself around a fictional pop-rock artist Chris Gaines. He even came up with the storyline and developed a movie “The Lamb” around Chris Gaines which was supposed to debut in 2000. He recorded a pop-rick-rap album called Chris Gaines Greatest Hits which was meant to build an audience for the character and gain momentum for the film. The album hit #2 on the charts but fell flat with Brooks core audience. The movie was never released. I don’t know whether it was a God complex, boredom, subconsciously wanting to fail at something? Why did he think this was a good idea? I don’t know, but sometimes it’s hard to grow without reaching for too much. 

Peter Lynch ran the Magellan Fund from 1977 to 1990. Peter Lynch started with $20 million and grew it $14 billion in AUM during his tenure. 

“When the fund reached a billion, critics said it’s too big, stop managing it, then $3 billion, they said get out now. In the last five years I managed the fund we beat 99% of all funds and it was the largest fund in the country. That’s what I’m most proud of.”

Peter Lynch

Under his leadership the Magellan Fund delivered a compounded annual return of approximately 29.2% compared to 15% on the S&P 500. In May of 1990, Peter Lynch retired at the age of 46. “One of the reasons I left Magellan was that I wanted to retire while I still had a good record. I left the party when the cake and champagne were still being served.” I love Peter Lynch. We all love Peter Lynch. Why? We never saw him decline. In fact, four years after he retired he gave the speech below. You can see and hear he was an absolute force of nature – the whit, charisma, storytelling. This is how we want to remember our investment heroes. 

In 1985, Greenblatt started a hedge fund, Gotham Capital, with $7 million, most of which was provided by “junk-bond king” Michael Milken. During his tenure at Gotham Capital, Joel Greenblatt established one of the most impressive 10-year performance records in the industry, achieving an annual compound growth rate of 50% from 1985 to 1994 (with a net return of 34.4% for this period). Following this extraordinary run, Greenblatt returned all the capital to his partners. Greenblatt said of this time he was “young enough to pursue other interests and old enough to realize what a great run we had.” He was also burned out by the run and stress of trying to beat the market while managing larger AUM. He stepped away for a few years, wrote a book, taught some classes, and then stepped back into the ring again. It’s like Roger Federer said, “If you look at the big picture, sometimes you have to step away to come back stronger.” 

Bill Miller, as the head of Legg Mason Capital Management Value Trust, achieved the impossible, 15 straight years, from 1991 to 2005, of outperforming the S&P 500 Index. Morningstar named him mutual-fund manager of the decade in 1999. The fund had an annualized return of 15.8 percent, compared with 11.9 percent for S&P. The fund’s AUM grew from $750 million to $20 billion. Miller would step down from managing The Legg Mason Capital Management Value Trust after underperforming the S&P from 2007 to 2011. He parted ways with Legg Mason in 2016, and in 2017 completed a deal to buy out Legg Mason’s 50% stake in his boutique LMM LLC, which bought out interest in his two funds. He flew under his own banner, Miller Value Partners, until is retirement in late 2022. The core, Miller Opportunity Trust, has underperformed since inception, but I love Bill Miller. I think he would have done a lot better not trying to institutionalize his approach. He’s now a billionaire. His personal portfolio is mainly 2-3 massive core positions. He was the largest individual holder of Amazon for a time period. He forms deep conviction and swings hard. Howard Marks once said, “There are old investors, and there are bold investors, but there are no old bold investors.” Not true. Bill Miller is 73, He’s still a “gunslinger” making bold bets. 

While at Morgan Stanley, Robert Auer turned $100,000 (1986) into $32 million (2007) using an investment discipline developed by his father. From 1986 to 2007 their performance beat most of the greatest investors ever. In 2007, Robert Auer started the Aeur Growth Fund by rolling the $32 million into a public fund. I interviewed Robert Auer back in 2012 when the fund had reached $100 million. The Auer Growth Fund has underperformed since inception with 3% annual returns vs 8.6% on the S&P, although the last five years it has beaten the benchmark. The Auer’s are good people and I hope they have another 20-year streak. 20 years of massive outperformance followed by 15 years of underperformance. Investing is hard.

How does Jerry Seinfeld know when to say No to one more episode? How does Barry Sanders know when to say No to one more season? How does Peter Lynch know when to say No to one more year? Discipline is having the strength to say No, right? I think many factors come into play. I think it’s when you know you’ve been lucky, it’s easier to shut it down. I think it’s when your interest, curiosity, and desire starts to fade. I think it’s also if your life, strategy is sprinting versus running a marathon. You get tired and burnout.

Jerry Seinfeld knew the show’s “white hot” intensity wasn’t sustainable. Barry Sanders knew that NFL running backs have a shelf life – father time catches up slowly and then all at once. No one worked harder than Peter Lynch – how else do you stay on top of 1000 stocks in the portfolio. He burned out. 

Whatever game you are playing you have to decide if you are playing it for a season or a lifetime and set up your environment so you can do so. Yes, investing is about the W’s but also about survival. I love this statement from Marc Cohodes: 

“I’ve been doing this since 1982. When you go at it that long – you’re like Nolan Ryan. You set the record for wins. You set the record for losses. You set the record for strikeouts. You set the record for walks because you’ve been doing it so damn long.” 

Leadership speaker and Author John Maxwell was once asked, “How did you become such an accomplished author?”, and he replied, “I’ve published 70 books. When you write 70 books one of them has to be good.”

Love of the game. Curiosity. Desire. Consistency. Growing without reaching too far. Survival. 

If you love to invest and pick stocks like me, you want to be Peter Lynch, but Albert Pujols is much more relatable. Albert Pujols loved to play baseball, so he kept playing. In the final 51 games of Albert Pujols career he batted .313 and hit 15 homers, some of the best offensive numbers of his career. Samson was given his strength one last time. It’s the way we all deserve to leave the game.

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