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A good example is our trade in Fiat in 2003. We made 20 percent in a month on that single transaction. At the time, the broad market was rallying sharply in a rebound from the preceding bear market. Fiat had a big rights issue.5 At the same time, Deutsche Bank had announced that they would be disposing of their industrial holdings, and Fiat was one of their positions. Rather than exercise their rights, which would increase their position, Deutsche Bank decided to sell their rights. You had a situation where the market was going up, and while Fiat should have been going the same way, it was actually going down because of a big seller. And that seller was not driven by fundamentals, but rather by a desire to rebalance their portfolio to reduce industrial holdings. The rights were especially cheap because of the Deutsche Bank selling. We bought the rights, which effectively gave us a cheap call. Buying the Fiat rights was a trade where everything lined up. First, the market was very strong. Second, the stock was substantially underperforming the market and its sector for two technical reasons—there was a rights issue and a large seller for technical reasons that had nothing to do with the fundamentals. Third, the rights provided you with a way to put on a large position for a small capital outlay. Fourth, because Deutsche Bank was a large seller of rights and the stock was difficult to borrow, the rights were trading below their intrinsic value.
Hedge Fund Market Wizards
Jack D. Schwager
Expectations tend to rise with accomplishment. The better you’re performing, the more you demand of yourself and the less you notice incremental gains. Appreciating progress depends on remembering how your past self would see your current achievements. If you knew five years ago what you’d accomplish now, how proud would you have been? The 14-year-old kid who could barely do a flip would have been amazed by the progress I’d made in a few years. I started watching videos of my early diving days. It melted away my shame and marked my growth. Beating yourself up doesn’t make you stronger—it leaves you bruised. Being kind to yourself isn’t about ignoring your weaknesses. It’s about giving yourself permission to learn from your disappointments. We grow by embracing our shortcomings, not by punishing them. Make it feel wrong.
Hidden Potential
Adam Grant
I can tell you this, though: after a lifetime of swimming upstream, I am convinced that one of the real secrets to Wal-Mart’s phenomenal success has been that very tendency. Many of our best opportunities were created out of necessity. The things that we were forced to learn and do, because we started out underfinanced and undercapitalized in these remote,
Sam Walton
Sam Walton and John Huey
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