Cole Wilcox on The Power Law of Investing | #584

In this episode of The Meb Faber Show, Meb interviews Cole Wilcox, Chief Investment Officer of Longboard Asset Management, about trend-following strategies applied to individual stocks. Cole discusses his early career experiences that led him to trend-following, defining trend as a strategy that aligns with the market flow while managing risk through disciplined stop losses. They explore the concept of "big winners" versus high batting averages in investing, referencing studies that show a small percentage of stocks generate most of the returns. Cole explains Longboard's approach, which involves identifying stocks at all-time highs and using volatility-derived stop losses, and contrasts it with traditional multi-asset trend-following, highlighting its potential for higher returns and consistency, albeit with moderate correlation. He also shares insights on portfolio construction, sector caps, and the tax efficiency of their strategy, emphasizing the importance of active management and benchmarking. Cole touches on memorable investments like Tesla and Bitcoin, underscoring the value of disciplined, unemotional trading and the potential of the American stock market to produce outlier equities.