Every day I remind myself to be a shameless cloner. I do this when I walk by the 10 commandments of investment management, which hang on my office wall. But I failed to accomplish this last year. Instead of being a shameless cloner, I was a selective cloner. And this has cost me dearly.
My wake up call was Micron. On February 15th, 2019, through the 13F filing, I was able to see that Mohnish Pabrai bought Micron in the fourth quarter of 2018. The low during Q4 was $30. The price on February 15th was $42. The price as I write this in January of 2021 is $78. Micron is up 86% since the first chance I had to clone Mohnish on it, and there were price drops in the interim where I could have bought Micron for as low as $33 and been up 140%. The S&P 500 over this period is up 34%. And the entire time, Mohnish’s 10 commandments have been hanging on my wall, and I’ve repeated “thou shall be a shameless cloner” to myself hundreds of times.
Never doubt the human capacity for cognitive dissonance and confirmation bias. I viewed myself as a shameless cloner, and I confirmed that identity by looking at the selective clone investments I was making. I was a shameless cloner! But in reality, I wasn’t. I was a selective cloner who had shame and whose ego prevented him from taking advantage of shameless cloning and getting the better investment results that were available for me to get.
Micron is the perfect example. Instead of taking a portion of my portfolio, investing in Micron at or near prices Mohnish got it for, holding, and moving on and using my time and energy on getting better as a person and as an investor, I instead spent a great deal of energy and time trying to figure out if I should clone Mohnish on Micron or not. I have read up on the company, but it’s not a field I have a true grasp of or am really all that interested in. So I used those feelings as excuses to hold back from cloning Mohnish on Micron and I missed out on what would probably be a 100% gain right now. What I should have done is just be a shameless cloner, bought, and continued moving forward.
And the list is much longer than Micron. I could have had a 3 bagger with Charter Communications via Ted (I think Ted) at Berkshire, a 4 bagger with At Home Group via Cliff Sosin, and the list goes on and on. You can even count times where I found an investment myself, saw that there was insider buying, and then failed to clone the insiders whose buying let me know I was on to something. My missed “potential” 13 bagger with Kodak last year and my missed double on Schmitt Industries are examples of this.
I need to workaround my ego and understand that sometimes these clone plays will be in the direct center of my circle of competence and when they are I will probably have larger positions with those ones and do more buying and selling on my own as the price changes over time. And sometimes they’ll be at the outer edge of my circle of competence or even outside of it, and that’s okay. I’m not investing here for purity or to get a good grade on my final exam. What I’m actually doing with my investing is trying to protect my capital, become wealthy, and live a life where I have ultimate control over my time. And shameless cloning can get me there.
I plan to shamelessly clone the Superinvestors listed here. I connect with each of them in a certain way, I like the way they compliment each other, and those are the investors that I find work for me, in terms of cloning. I plan to buy when I see them buying. I will buy if I can get the stock for within 30% of the low during the quarter they bought. And I plan to sell when they sell, though sometimes I might sell before I see them sell. One exception on the selling will be when I get my hands on a wonderful business. For wonderful businesses I clone Charlie Munger’s mental model of basically never selling them. If a wonderful business becomes optically overvalued, I won’t sell. But if a wonderful business becomes egregiously overvalued, I’ll consider selling.
As far as bet sizing goes, I will pay attention to the Superinvestors’ allocations, but I’ll also have to fit things the way they fit within my own portfolio. And new cash becoming available to me and price changes providing buying and selling opportunities will also be factors I have to consider. And I’ll also still be trying to find investment ideas on my own as I invest through the years ahead.
In addition to the 13F cloning page on the site, I’ll also be making notes in my investing notebook where I keep notes on companies of interest. For example, if I invest in Bank of America at $24 as a Buffett clone, I’ll make a note in my Bank of America section “Buffett bought in Q3 2020 at $24” for easy reference going forward. For example, if there’s a big price crash and I’m confident that Buffett still owns, I’ll look back at my notes and go “oh he was buying at $24, price is $12 now, fundamentals and story still good, price is down for this other reason, so buy!”
My success in Discovery, Seritage, and Suncor in recent months, my miss on Micron, and Brad’s video (see 2 minute mark) have all woken me up to the fact that cloning is the way for me, and that yes, I’ll still treasure hunt for investments on my own, but that cloning my Superinvestors needs to be a big part of my investment process and that I need to make the change from selective cloning to shameless cloning.
The next 13F filings come out in about two weeks, and I’ve got a Mohnish Pabrai Japanese stock to look into as well.
2021 is the year I finally accomplish being a shameless cloner. And it’s ironic that achieving the ability to think less was actually one of the most enlightened and intellectually difficult things that I’ve done in my life. Very few people have accomplished true shameless cloning, and I’m proud to now count myself among them.