Achieving Alpha is a Lonely Pursuit
The story of American superinvestor Shelby Cullom Davis
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The Story of Superinvestor Shelby Davis
American superinvestor Shelby Cullom Davis (1909-1994) invested his wife Kathryn Wasserman Davis’s $100K inheritance using a quality-driven value investing approach and proceeded to grow the portfolio to over $900 million during his lifetime.
Upon Shelby’s retirement, his son, Shelby M. C. Davis, took over the portfolio’s management and noticed that his father had published an ongoing newsletter sharing his investment principles and strategies with the public. Curiously, there were relatively few subscribers.
When his son inquired about the lack of public interest in his portfolio-building secrets, the senior Shelby explained that he was an introvert who made money slowly. In contrast, he had discovered during his career that the public was more interested in following extroverts who promised fast money.
The moral of Shelby Cullom Davis’s story is that most financial advisors and newsletter editors underperform their market benchmark. Nevertheless, more than a few earn millions in advisory or subscription fees. They achieve alpha by selling a dream of fortune based on unreliable yet feel-good predictive analysis instead of the more noble achievement of compounding capital gains and dividends paid better than Mr. Market.
Regardless of the professional discipline and method of delivery, entertainment often prevails while valuable information trails. On the contrary, quality-driven value investors strive to be informed, rational, disciplined, and patient to combat unproductive and unprofitable crowd thinking while reserving entertainment value for activities sought merely to be amused.
Whether using a money manager, newsletter editor, self-managing, or a combination thereof, portfolio results matter when investing.
Achieving alpha with lower fees and lesser risk should be the prevailing rules of engagement for quality-driven investors.
Remember, outside of fees collected from the crowd it serves, the financial services industry, on the whole, almost always misses in achieving portfolio alpha over the long term.
Like introverted superinvestor Shelby Davis, learn and practice to become your portfolio’s independent investor guru.
Biography: Shelby Cullom Davis was born in Peoria, Illinois. After obtaining his secondary education at Lawrenceville School in New Jersey, he graduated from Princeton University, received a master’s degree from Columbia University, and earned his doctorate from the International Institute of Graduate Studies in Geneva. Davis also served as US Ambassador to Switzerland. A life well lived.
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