Karl-Mikael Syding's Investment Journey: From Hedge Funds to Personal Portfolios ????
Back in 2016, amidst my quest for a remedy for back discomfort, I fortuitously stumbled upon the monumental hedge fund manager. Engrossed, I promptly acquired his exceptional eBook titled “The Retarded Hedge Fund Manager,” and have been an ardent follower ever since.
Recently, I came across an intriguing investment course that he had launched. My curiosity piqued, I sought more details. Following some enlightening correspondence, I proposed an interview, and to my delight, he graciously acquiesced. But first, let's delve into some background information.
Karl-Mikael Syding's Journey
Karl-Mikael Syding, hailing from the perpetual night of Jukkasjärvi above the polar circle in Northern Sweden, was born in January 1972. Following the completion of his finance masters at Stockholm School of Economics, he commenced his professional tenure as an IT analyst during the tech boom from 1994 to 2000. Subsequently, he assumed the mantle of a hedge fund manager between 2000-2015 and 2020-2023.
Throughout his voluntary hiatus from 2015 to 2020, he disseminated his investment philosophy through numerous podcast episodes and blog posts. Furthermore, in collaboration with his podcast and business partner, Ludvig Sunström, he formulated an online course centered around value-oriented investing. Initially available solely in Swedish, it underwent adaptation to cater to an English-speaking audience, prompted by a request for a 14-hour lecture series for finance students at London Business School.
Now, let's proceed to the interview:
Shifting from Hedge Fund to Personal Investing
After years as a hedge fund manager, how has your approach to investing evolved now that you're focusing solely on managing your own money?
During my tenure as a hedge fund manager, my professional portfolio remained market neutral, balancing short and long positions, predominantly targeting large cap companies within prominent sectors such as technology and finance.
Conversely, my personal portfolio, then as well as now, embodies higher risk and is exclusively long-only, except for a brief period when I hedged against my portfolio of unlisted assets by shorting the OMX index.
Presently, my listed stock portfolio comprises merely five junior mining stocks, focusing on a niche sector comprising small companies, primarily start-ups with pre-revenue status. It's a long-only approach, devoid of short positions.
My predominant investments are channeled into unlisted start-ups and private equity across diverse industries, including software, services, fintech, crowd monitoring, precious metals, e-commerce, crypto, and manufacturing/services. Listed stocks account for less than 5% of my net worth.
Analyzing Equities
What key lessons from your hedge fund experience do you apply most frequently when analyzing equities for your personal portfolio?
Positive market trends often persist longer than anticipated, driven by procyclical forces attracting capital and clientele to specific sectors and companies, culminating in a positive feedback loop of Fundamentals/Valuations/Capital.
Hence, it's prudent to capitalize on these trends, even if one joins the fray late or encounters daunting valuations.
Conversely, undervalued stocks tend to plummet further than justified, affording ample time for meticulous research. A valuable tip is to procure falling value stocks incrementally, while reserving adequate resources and liquidity to capitalize during the “despondency” phase when valuations reach the nadir, rather than prematurely at just fair or slightly cheap levels.
Value investing's efficacy stems from the fact that expensive stocks become even more exorbitant, and cheap stocks become exceptionally undervalued, validating the strategy.
Consider this:
Amidst Coincidence of Opposites, “Value investing's inefficacy in the short to mid-term underpins its exceptional efficacy in the long run.”
Conversely, momentum investing thrives in the short term, fostering a frenzy of acquisitions until stocks become excessively overpriced. Ultimately, this results in a catastrophic denouement, akin to every historical asset bubble.
Idea Generation
Can you describe the process or tools you use to generate investment ideas now, compared to when you were at Futuris?
My approach to idea generation underwent substantial transformation during my tenure as a sell-side analyst, and throughout my stints at Futuris and Antiloop, not to mention my foray into public and private equity as a personal investor.
The market dynamics fluctuate, as do the spectrum of opportunities and my own perspective. The fundamental disparity lies in the long-term nature of my personal investments, focused on smaller enterprises, as compared to the broader scope of my hedge fund initiatives. Moreover, my reliance on detailed financial models has waned over time, with a growing emphasis on long-term prospects over short-term quarterly results.
At Futuris, I meticulously constructed financial models for the companies I invested in or covered, albeit substantially smaller in scale than my role as a sell-side analyst at Swedbank. I perused copious sell-side research and interacted with analysts to gauge stock sentiment and actual consensus expectations. Meanwhile, at Antiloop, I employed free online tools like KoyFin for preliminary screening.
My primary idea generation process involved:
- General news consumption
- Focus on the largest S&P 500 companies
- Immersing in sector-specific news
Given my broader economic, stock market, and consumer activity mapping substitutions.
…
and global developments, predicting which industries are likely to excel or decline in the upcoming quarter(s) or year.
Risk Management
How does your approach to risk management differ in your personal portfolio compared to your time managing a hedge fund?
At Futuris, I endeavored to identify the best and worst companies, striving to make profits on both longs and shorts. On the contrary, at Antiloop, I focused solely on tracking the largest 100 companies, investing in sectors showing positive trends for the upcoming year and selling shares from sectors expected to diminish in popularity. If I could generate a significant spread between my longs and shorts, I was content, regardless of whether either side lost value or not.
In my personal portfolio, I aim for high returns of 10-100x on risky small-cap long bets, while remaining prepared for about half of them to face losses. I have encountered around 10 total losses and three positions with 100x returns.
Currently, I hold 5 listed stocks: URC, GXU, EMX, Lemse, CCM. They are respectively: uranium royalty, uranium junior mine exploration company, gold/copper/battery metals royalty generator, junior mine exploration company, and a super junior gold property.
With uranium at $150-300 and gold at $3000-5000, and the rest of the minerals around current levels + 10-15% annual price increases, then provided the necessary permits, all five stocks should appreciate by 10-100x over approximately 5-7 years.
Annual doublings take 5 years to 32x, with 2 years doubling periods, 32x takes 10 years. I expect an average of that: approximately 30x for the portfolio in 7.5 years if everything unfolds as planned. => It might take eight years to increase by 100% five times, which is a considerable feat, but not an instantaneous phenomenon. I am aiming for end-valuations of 5-10 times profits.
Ten Times in Ten Years
However, stocks often defy expectations…, but I would still be content with 10x returns after dilution over 10 years. To achieve this, the companies need to obtain the correct permits, secure the right financing, construct the mines, commence production at the requisite cost level, and sell at elevated commodity prices
Investment Philosophy Influenced by Douglas Adams
How has your investment philosophy been influenced by your admiration for Douglas Adams and the significance of the number 42?
Aside from retiring within a week of my 42nd birthday, and maintaining around 42 stocks in Antiloop, the magical number has not directly impacted my actual research or investments. However, I do experience a level of excitement whenever the number surfaces, but it does not dictate my investment decisions.
Teaching Investment Strategies
What core strategies or principles from your professional experience are you looking forward to teaching in your upcoming investment course?
- Maintain an investment diary and use it to continuously reassess your investments and refine your strategy and investment note-taking processes.
- Exercise patience and consistency. Establish a logical strategy and stick to it.
- Refrain from trading when emotions are heightened. Take a break, calm down, and never make investment decisions influenced by FOMO or hurry.
- Invest systematically, not impulsively; it involves continual assessment and adaptation, and is not a finalized perfect system (due to the evolving marketplace).
- Avoid investing in more stocks than you can adequately track and that substantially contribute to your portfolio. Around 10 stocks serves as a good benchmark. The 11th stock is the one you are least familiar with and should constitute a maximum of 4% of the portfolio, thus exerting minimal influence on your returns.
- Balance your portfolio by selling your winners and acquiring more of your losers if your analysis remains valid. Optimize your portfolio through dynamic rebalancing (frequently update portfolio weights to reflect the current risk/reward ratios for your holdings).
- Diversify beyond equities. Consider a complementary asset like 10% gold, for example.
- Fully comprehend the drawbacks of your investments. You should be able to convincingly argue for the opposing side.
- Avoid going all-in on a single stock. Do not allow misfortune the opportunity to devastate you. Keep funds aside to ensure continued participation (investing).
- Adopt an inverted approach! For example: While the US economy might rely on Taiwanese semiconductors (and subsequently on China), China is dependent on US and global consumer demand.
Sector or Industry Focus
Do you concentrate on particular sectors or industries for your personal investments, and if so, how do you select these areas?
I seek long-term growth, secular trends, or very low valuations or new credible disruptors in more stagnant sectors such as robotics, automation, energy, cryptocurrencies, and AI.
I attempt to ponder, “What drives the world and people's behavior?” My thinking is governed by Maslow’s hierarchy of needs and basic infrastructural requirements: Energy and money form the foundational layer, including commodities like oil, battery metals, fintech, and crypto. Then there are necessities such as food, shelter, transportation, entertainment, infrastructure, and various technological support sectors including software, semiconductors, and AI.
Ultimately, everything aligns with my criteria in one way or another. Essentially, it all comes down to the individual company valuation. I want it to be clear when I will recoup my money – with a substantial compensation for the waiting time, for lending my money.
Portfolio Rebalancing
How do you approach rebalancing your personal portfolio? Is there a specific frequency or set of conditions you look for?
It is advisable to evaluate one's portfolio weights at least once a year.
However, a more effective strategy is to sell winning assets and invest in losing ones if certain asset pairs diverge by one or two annual return requirements in a short time span for no valid reason.
Behavioral Investment Aspects
As someone who has managed large sums, how do you deal with the behavioral aspects of investing, such as emotional bias or overconfidence?
In my book, The Retarded Hedge Fund Manager, I observed that I oscillated between hubris and depression every few years. No matter what I do, I tend to become overconfident after a period of strenuous effort and subsequent success.
This overconfidence usually results in losses, which necessitates scaling back and returning to the basics.
I see no easy way to circumvent this process.
I endeavor to be as methodical as possible, conducting thorough research, exercising patience, managing my risk level, steering clear of aiming for major wins, but ultimately, I inevitably pursue them.
As a manager, I adhere to certain risk limits, but as a private investor, I answer to myself and consequently, I undertake significantly higher and concentrated risks.
Market Adaptation
Given the evolution of the market and the constantly changing investment landscape, how do you adjust your approach to remain effective in investment decisions and strategies?
Adjusting to the evolving market and its dynamic investment environment requires constant vigilance, adaptability, and an approach that allows for flexible strategies. Being open to staying informed, exploring alternative options, and being receptive to change is crucial to staying relevant and effective in investment decisions and strategies.
Throughout the years, how have you adjusted your investment approach for your personal portfolio?
My investment strategy has remained rooted in seeking long-term value; however, I've grown more open to higher near to mid-term multiples and long-term profit forecasts. Despite these adaptations, the core principles and focus of my strategy have endured.
I've observed a significant shift in the attention of central banks and politicians towards financial markets. This has led to shorter downturns, early and increased stimulus, as well as higher valuations. Furthermore, the rise of valuation-agnostic index and algo funds has contributed to the sustenance of elevated valuations, especially for prominent companies.
Incorporating Technology in Investing
How do you integrate modern technology and tools into managing your personal investments?
My approach doesn't heavily rely on modern technology. I utilize free online screening tools and conduct basic calculations to gauge the potential future stock price based on typical P/E or P/S valuations over the next 4-5 years. I don't employ sophisticated screening methods or algos.
My strategy revolves around envisioning the market's landscape 5-10 years ahead, identifying promising sectors and countries, tracking the financial performance of companies, and projecting plausible valuation multiples such as P/E and P/S ratios.
Most Crucial Economic Indicators
Which economic indicators do you consider vital when evaluating potential investments for your personal portfolio?
For me, the overall market valuation levels in terms of cyclically adjusted earnings multiples hold paramount importance. A pricey overall market is perceived as a headwind for all stocks, possibly signaling a downturn or a market crash. I don't rely on short-term timing indicators like PMIs, interest rates, or GDP growth figures.
Long-Term vs Short-Term
Do you lean towards long-term holdings or short-term trades for your personal investments and what influences this choice?
My preference lies in long-term investments aimed at generating at least a 20% average annual return over 5-10 years. However, I typically set my sights higher than 20%.
Investing Journey Post-Retirement
Could you highlight some milestones or significant accomplishments in your personal investing post-retirement?
Following my retirement, some notable successes include my investment in Creditsafe multiplying about 100 times, similar growth in Wkit, and a 10-20x return on my investment in Vinter Capital, a crypto index company. Additionally, my investment in Apstec might achieve a 10x increase when it goes public or is acquired by a larger corporation. Furthermore, my investment in Polskenet has already grown by approximately 100%, and I anticipate further growth upon potential public offerings.
Guidance for Aspiring Investors
What advice would you offer expert personal investors aiming to effectively manage their portfolios, drawing from your extensive experience?
- Limit your focus to around ten promising stocks
- Instead of chasing every opportunity, gradually accumulate knowledge and experience on a select few companies before expanding your portfolio.
- Avoid excessive trading, maintain a disciplined approach, and rebalance annually or in response to significant unexpected shifts in valuations or potential annual returns
- Emphasize the big picture and substantial margin of safety, instead of intricate models and detailed calculations
- Avert stocks offering only 10-15% annual returns; in such cases, consider investing in an index fund instead
- Focus on understanding what you don’t know, and assess your areas of uncertainty
- Exercise caution when investing in a single stock unless you have a comprehensive understanding of the market trends
- Implement appropriate measures if a stock is declining, unless you are completely confident in the market's misjudgment
Investment Course Launch
You mentioned an upcoming launch of your investment course in English. Could you provide more details about the course, its inception, target audience, and its contents?
Since commencing my finance studies in 1990, I have delved into the intricacies of valuing companies. From my experience as a sell-side analyst and a hedge fund manager to my ventures as a business angel, I have accumulated extensive investment knowledge. The Investing Course (TIC) encapsulates all this knowledge, drawing from my extensive journey.
The idea for the course emerged around five years ago, and after running a 12-week course in Swedish multiple times, we streamlined the English version to six weeks without compromising on the core content. The course incorporates an array of multimedia materials, comprising approximately 14 hours of audio and video content. It is tailored to cater to a diverse group of individuals seeking to enhance their investment prowess.
I am thrilled that TIC, a result of my series at London Business School, aims to impart the most efficient practices in valuation and investing to the everyday investor.
This course offers substantial value to individuals who already have a background in finance or have been investing independently for a number of years. However, its primary focus is on those who are relatively new to the investment world and are eager to rid themselves of the guesswork and dependence on blind recommendations for their investment decisions.
If you possess at least 10,000 USD to allocate to stocks, then The Investing Course is tailor-made for you, particularly if you are inclined toward understanding the companies you invest in and their true value, as opposed to simply analyzing stock charts and succumbing to blind momentum investing.
Essential Valuation
It's similar to buying a house – the price you purchase it for sets the stage for your future returns. If you are unaware of the valuation you are acquiring, you risk encountering substantial losses in your investment journey. Think of it as building a house on shaky grounds.
Our clients aren't required to possess prior knowledge in finance or economics before commencing the course. As long as you're eager to learn and have an average IQ, dedicating around five hours per week for six weeks to the course should present no hurdle in passing the exam.
Investing is not necessarily intricate or reliant on esoteric accounting knowledge, but it does harbor complexities akin to a labyrinth with intricate feedback loops at every turn. TIC serves as a guide in dismantling this complexity into manageable components that can be analyzed and reconstructed into a strong, adaptive investment strategy that evolves over time.
TIC is designed to teach the art of Discovering, Analyzing (valuing), Investing, and Managing a portfolio of stocks. This online course condenses my best investment practices into six enriching weeks of blending text, audio, video, summaries, and case studies, with a dedicated theme for each week. The inaugural group avails the course at a discounted price, inclusive of complimentary access to all future updates.
Thank you for your time, Mike!
For More Insight on The Investment Course
Mike, where can we find further details about the course?
You can access all the pertinent information right here:
The Investing Course – A 6 Week Online Course in Stock Investing
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