#37 – The Analyst

John is our first podcast guest to return for a second episode. He is incredibly humble for such a successful investor. In our first podcast conversation, he said

“I like working. I never feel successful. I measure success by the recent past.”

Armitage attributed his success to a decent dose of insecurity and being a workaholic. His ingredients for success were:

• Finding something you like
• Feeling you have more to learn
• And always worrying

In this, our second podcast conversation, he explains how he started with $10m and 5 people and how they were thrilled when they got to $150m after one year. And he acknowledges that it would be a lot more difficult to start out on that journey today.

Stockmarkets are more difficult today because there is more competition in active management – the capital in investment management is human capital and it’s natural, given the rewards available, for talent to be attracted to the industry. Meanwhile, the performance of active managers is affected by the performance of single shares that they don’t own in a way it never used to be, as the rise of passive has reinforced the dominance of the big tech stocks while the active industry is structurally underweight.

He touches on his portfolio, where he has 35-40 long positions and is more concentrated in his top positions than he used to be, although the size of his funds inhibits that. John is concerned about concentration as he feels that it’s easy to get too familiar with the stocks and become complacent and then you suddenly realise that one has been underperforming for a while.

He talks about his recent investments in the insurance sector and how not owning Nvidia has made matching the benchmark an uphill struggle. He talks about how he sees AI and its possible impact on Alphabet and on Meta. And he explains his views on Tesla which were sceptical in our first conversation and haven’t changed much. John also talks about some of his favourite stocks and sectors, but you will have to listen to the show! John has invested in Japan but he questions the extent to which Japan is a macro trade, benefiting from the currency depreciation.

We also discussed his approach to investing and his focus on the long term. He explains why he requires his analysts to follow more than one sector and why he doesn’t employ data scientists. John considers himself an analyst, hence the title of this episode.

He reveals why he thinks his performance might suffer if he had permanent capital, and he thinks that liquidity is healthy for his investors. He doesn’t say it explicitly, but I felt that the performance matters more to him than the wealth he would personally accrue.

Armitage is an intense and thoughtful investor and has strong feelings about societal problems, perhaps reflecting his interest in history (studied Modern History at Pembroke College, Cambridge). In the interview he talks about Brexit; having backed the remain campaign, although he would have preferred a different result, he was also concerned that it might have left the country divided. And on Hamas and Israel, while he believes in a two state solution and is concerned about what is happening in Gaza, he points out that Hamas could simply release the hostages. It’s clear that John has a deep understanding of the geo-political landscape.

Steve learned a lot from sitting down with John for an hour and confesses to being rather in awe of him. John talks about having to focus on what’s important and while that seems obvious, it’s rather profound.