Origin of the Name
Dada was a cultural movement in the early 20th century that poked fun at the self-importance of the traditional art establishment. Sound familiar?
Dadaists rejected any attempts at finding meaning in their works. We use a photo of Marcel Duchamp's Fountain (a urinal signed "R. Mutt") as our Twitter @TMFDada avatar to remind ourselves to stay humble and be real with ourselves: We're no shining knights and we don't aspire to any capital allocation chivalry. Our goal is simply to have fun and make money :)
Our primary area of interest is international growth. By training and habit we are bottom-up investors, but we intend to keep a close eye on macro trends as well. We plan on holding between 15 and 30 positions by the time we are fully invested.
We look at potential investments with an expected value framework that equally weights the probability of an outcome and the magnitude of the outcome.
"The probability of an outcome" refers to our certainty and belief in our investment thesis. "The magnitude of the outcome" is our payoff and return if our investment thesis goes according to plan.
In Dadaist fashion, we try to dissociate ourselves from qualitative judgments beyond our expected value. That means we see no difference between these two situations:
1) A disruptive high growth stock with sketchy management that has a 40% chance of capturing an important new market, leading to a 300% gain, or a 60% chance of being a fraud with an -100% loss.
2) An established large cap with a proven track record that we feel 80% confident the market has left undervalued by 30%, but which could also drop 20% if something unexpected occurred to disrupt its business.
Despite the qualitative differences, both of these situations have a positive expected value of a 20% gain and thus, in our eyes, are equal. Of course, this is only an example. We don't presume to be able to calculate expected value so cleanly except in the hypothetical; we just wanted to illustrate our commitment to unemotional and objective analysis.
Our risk management theory is simple: Risk is how much you can lose if you're wrong. We manage risk from our wallets. We don't overinvest in situations we feel have low expected values and we keep in mind that each of our positions is only going to be one component of a greater portfolio. We accept failures; what we don't want is big failures. A -50% loss in a 3% position (-1.5% portfolio loss) is less of a problem than a -10% loss in a 20% position (-2.0% portfolio loss).
Dada Portfolio Articles
- 8/12/2011 - Sean - Rising Star Buys More: Jiayuan.com
- 8/11/2011 - Ilan - Rising Star Trade: What We're Doing With Bank of America
- 8/5/2011 - Ilan - 10 Outstanding Dividend Stocks to Buy in This Crazy Market
- 7/26/2011 - Ilan - Is Bank of America a Buffett Stock?
- 7/22/2011 - Ilan - What You Need to Know About Chimera
- 7/18/2011 - Ilan - Chimera: Dividend Dynamo, or Blowup?
- 7/14/2011 - Ilan - Next Stop: Economic Armageddon?
- 6/30/2011 - Ilan - Limited Brands: Dividend Dynamo or Blowup?
- 6/30/2011 - Ilan - What's Behind Bank of America's Big Settlement?
- 6/29/2011 - Sean - Rising Star Buy: Jiayuan.com
- 6/15/2011 - Ilan - Is Qlik a Buffett Stock?
- 6/10/2011 - Ilan - From the White House: What's Going on With the Economy?
- 5/27/2011 - Ilan - Timothy Geithner on Jobs, Debt, Taxes, Bailouts, and More
- 5/20/2011 - Ilan - Rising Star Buys: Annaly Capital and Chimera
- 5/13/2011 - Ilan - The Top 5 Dividend Stocks Right Now
- 5/11/2011 - Sean - The Best Video Game Stock Ever
- 5/11/2011 - Sean - MMORPGs -- The Best Business Model You've Never Heard Of
- 4/28/2011 - Sean - Rising Star Buy: KIT digital
- 4/27/2011 - Ilan - Live Blog: Bernanke's First Press Conference
- 4/06/2011 - Ilan - Rising Star Buy: Fast Retailing
- 3/25/2011 - Sean - Qlik Technologies: SWOT
- 3/25/2011 - Ilan - The Top 10 Buffett Stocks
- 3/18/2011 - Sean - Dada Coverage: China Yida 2010 Earnings Review
- 3/11/2011 - Ilan - Why We're Buying lululemon athletica
- 2/28/2011 - Sean - What's Wrong with Limited
- 2/28/2011 - Sean - This is an A+ Stock, Part 2
- 2/28/2011 - Sean - This is an A+ Stock, Part 1
- 2/25/2011 - Ilan - What the News at Annaly Capital Means for Investors
- 2/11/2011 - Sean - Rising Star Buy: Qlik Technologies
- 2/8/2011 - Sean - Rising Star Buy: InnerWorkings
- 2/4/2011 - Ilan - What's Next At Lender Processing Services
- 1/27/2011 - Sean - Rising Star Buys: Amyris Biotechnologies
- 1/20/2011 - Sean - Dada Stocks to Watch: Amyris Biotechnologies
- 1/10/2011 - Ilan - Did Wall Street Just Pull Another Coup?
- 12/22/2010 - Sean - How We're Shorting Lender Processing Services
- 12/22/2010 - Sean - How We're Shorting Bank of America
- 12/21/2010 - Ilan - Rising Star Shorts: Bank of America and Lender Processing Services
- 12/10/2010 - Ilan - What Foreclosuregate Means For Investors
- 11/29/2010 - Sean - Rising Star Buys: Limited Brands and Wet Seal
- 11/29/2010 - Sean - Recession's Over; Dada Says Retail's Back
- 11/17/2010 - Sean - Don't Get Blindsided by These Chinese Companies!
- 11/15/2010 - Ilan - Rising Star Buy: Annaly Capital
- 11/10/2010 - Sean/Ilan - A Joint Venture with Nature (video)
- 11/08/2010 - Sean - What You Need to Know About Chinese Stocks: Part 1
- 11/01/2010 - Sean - Why We're Buying China Yida
- On Twitter: @TMFDada
Sean Sun (TMFSysun) is the resident analyst on the Rule Breakers premium service team. He is a native Mandarin speaker with prior investment banking experience in Beijing and Shanghai. Sean believes the world is going to be constantly changing. As such, he is an international growth investor, looking at all markets for the innovators and disruptors that will become tomorrow's 10-bagger. See his Rising Star profile page here.
Ilan Moscovitz (TMFDiogenes) earned his Bachelor of Arts in Philosophy from Grinnell College and has extensive experience in epistemology, canoeing, and competitive eating. Ilan began working for The Motley Fool as a stock research analyst. He is currently an editor and writer for Fool.com, specializing in macroeconomics, financial reform, and shareholder rights. His portfolio seeks to profit from macro trends by combining macroeconomic insight with bottoms-up research.