“When investors place monthly expectations on a manager, rather than yearly ones, the manager is pressured to attain short-term performance and it compromises their core investment strategy.”
Real contrarianism, not just knee-jerk fading, requires a long timeframe when measuring success or failure. It does not lend itself well to monthly performance gauges. Market Folly‘s dissection of the recent T2 Partners investor letter is loaded with important insights on the topic…
Now they are attributing poor performance to contrarianism. Some will undoubtedly say this is just excuse after excuse and wonder what the fund will blame next. Putting that aside, T2 does underline a prescient point worth extracting: sometimes it’s painful to be contrarian.
In the letter, T2 goes on to highlight that, “it’s easy to deviate from the crowd, of course, but it’s much harder to be right – and even harder to be right on the timing.”
If a value investor can stomach the near-term anguish (and assuming their thesis is proven correct), they’ll make it to that mountain top eventually.
Jay goes on to make a comparison to the global macro style versus the value style of portfolio management. The whole thing is worth a read, including the letter from T2 itself.