Brandywine Asset Management: Blood in the StreetsVW Staff
Brandywine Asset Management shareholder letter
Brandywine’s Symphony globally-diversified investment program lost – 1.57% in June and the aggressively-traded Brandywine Symphony Preferred Fund dropped – 5.94%. Year-to-date returns are +0.06% and – 0.37% , respectively.
Buying when there’s “Blood in the Streets”
In Jackass Investing, Mike Dever recounts the story of the siege of Paris in 1871 and the quote made famous at that time when Baron Rothschild told a new investor to “buy securities when there was blood in the streets.” We’ve seen great investors do this time after time. They take advantage of investment opportunities that others are afraid to exploit. But the average person does just the opposite. We know this with certainty (the data is presented in Mr. Dever’s book) and have based a number of Brandywine’s sentiment trading strategies on this return driver. In those strategies Brandywine looks for extremes in market sentiment to take short-term trades opposite the crowd. We apply this approach to both financial (stock indexes, interest rates) and commodity markets. If you’d like to read the chapter where Mr. Dever discusses this (along with an actual trading strategy for trading stock indexes that is revealed in the book’s Action Section), just follow this complimentary link: http://bit.ly/oDQYX8.
The same opportunity can also present itself when evaluating a manager with which to invest. Every investment manager hasperiods where they outperform and underperform their expected returns. Those managers with less-diversified portfolios tendto have more extreme performances, while those trading more diversified portfolios may have less extreme variations in performance. In the case of Brandywine’s Symphony program, our broad strategy and market diversification has resulted inperformance volatility of less than half that of the S&P 500. At the same time we are targeting returns of 12% annually, which isin excess of those to be expected by buying and holding stocks (of course we must remind you that past performance is notindicative of future performance)