Michael Steinhardt banks on variant perception. Just those two words, variant perception, were revealed in a recent interview with the investing legend as his holy grail of making alpha returns as an investor.
Michael Steinhardt banks on variant perception and it has earned him a well-heeled place in the elite list of world top investors.
Indeed, the trader legend is often referred to as “Wall Street’s greatest trader” and with a personal net worth at $1.05 billion, according to Forbes 2017, Steinhardt has easily earned his stripes as a world top investor.
“Michael Steinhardt banks on variant perception and it has earned him a well-heeled place in the elite list of world top investors. Indeed, the trader legend is often referred to as Wall Street’s greatest trader”
In 1967, he founded a hedge fund, Steinhardt Partners, which averaged an annualized return for its clients of 24.5% from 1967 to 1978. In 1995, he closed his fund stating,
“I thought there must be something more virtuous, more ennobling to do with one’s life than make rich people richer.”
Michael Steinhardt banks on variant perception and when a top player takes to the stage to share his winning formula with his audience that is a true charity of the best kind.
So let’s take a closer look at Michael Steinhardt banks on variant perception strategy which the legend trader uses across varying asset classes that include stocks, bonds, options, and currencies.
“I thought there must be something more virtuous, more ennobling to do with one’s life than make rich people richer”
What is variant perception?
The crux of Michael Steinhardt banks on variant perception strategy is based on the investor/trader becoming sufficiently knowledgeable about whatever the subject may be. Moreover, to develop a view that at a time is at variance from the consensus.
But Michael Steinhardt banks on variant perception is more about just being a contrarian because going against the herd, think what most people think and breaking away from the herd mentality is one part of the equation. The other vital part of the equation is to develop variant perception is to be right as well, bearing in mind that there is no profit in being a contrarian and investing/trading and being wrong.
One of the few sure ways to make money in the market is to have a view that is off consensus and have that view turned out to be right.
Michael Steinhardt banks on variant perception and he explains why in the interview.
“That’s not enough you have to be right. A contrarian is a plus, but it’s not enough. To be a contrarian is easy, but to be contrarian and to be right in your judgment when the consensus is wrong is where you get the golden ring and it doesn’t happen that much, but when it does happen you make extraordinary amounts of money. And in order to do that, you have to be intellectually advantaged. You have to go through that same routine in terms of intensity, focus and commitment and the sorts of things that makes anybody in any area I think superior” – Michael Steinhardt
Steinhardt was famous for his in-depth research and for often being first to take a position in previously unknown investment ideas.
So Michael Steinhardt banks on variant perception which is what brought him fame and fortune.
By developing what Michael Steinhardt called “a variant perception”, in other words, a contrarian, differentiated view that had yet to be picked up by the market. Michael Steinhardt often moved into positions well ahead of other institutional investors.
Michael Steinhardt banks on variant perception using this differentiated approach which helped to play a big role in Michael Steinhardt outsized returns over the years.
So what led Michael Steinhardt to think that he could make a lot of money on Wall Street?
“In the period which I started which was in the 1960s in a vocational sense and before that as a teenager investor what became clear to me early on was (and I am not discovering America by saying this) is that there were trends in the market areas of popularity and unpopularity that reflected themselves in exaggerated price movements. Those exaggerated priced movements became the basis for what is popular and not popular. If one can find variant perceptions not only which are variant but in which you can in your own efforts create a degree of confidence that you may be right then there is no easier way to make money in markets then having correct variant perceptions,” said Michael Steinhardt.
Michael Steinhardt banks on variant perception. Put another way, Steinhardt’s variant perception principle is about identifying companies at key inflection points ahead of institutional investors and investing accordingly.
Michael Steinhardt banks on variant perception which also implies that the legendary investor is intellectually competitive-that are the key variant perception think differently (outside the box) and think smart to beat the herd.
“Other people have tried to articulate why some investors are good and some aren’t by saying they have a certain technique or they’ve always followed this style or they’re a value investor or a growth investor or this investor. I don’t think that has anything to do with it. I think it’s an internalized drive that’s both competitive and, to some degree, intellectual that combines all that with an ability to take a risk and be comforted by risk” – Michael Steinhardt
Michael Steinhardt banks on variant perception and so did John Paulson, the man who amassed a $12bn fortune betting on a US housing crash and made the biggest fortunes in Wall Street history.
Michael Steinhardt banks on variant perception but be warned that too can lead to a broken bank account because the flip side of being a contrarian, getting it right and bagging it is also getting it horribly wrong and blowing up the account. Michael Steinhardt interview
So invest accordingly.