Blackstone’s vice chairman and investing guru, Byron Wien, believes in concentrated bets.
He learned that from his mentor, Edgar de Picciotto, the founder and chairman of Union Bancaire Privée who passed away in March.
Picciotto taught him “diversification is for the weak minded,” and that “concentration in the ideas that you’re really excited about is the way to make some serious money,” according to a podcast Blackstone released Friday.
Wien has written a series of market commentaries on “The Smartest Men in Europe” over the past few years. This June, he eulogized his late mentor by noting that, after Picciotto’s death, there would be “no essay on The Smartest Man in Europe this year.”
In Friday’s podcast, Wien also elaborated on investing lessons from Picciotto he’s been sharing with his own mentees (emphasis ours):
“I don’t think I originated this but I’ve been lucky enough to build up a significant personal net worth, and I’ve done it by taking risk. I’m a big believer in taking risk by concentrating (that’s the lesson I learned from Edgar), and by cutting my losses quickly and letting my winners run. So I have some stocks in my portfolio that I’ve literally made 100 times my money on and I’ve used those stocks to make charitable contributions. I’ve never sold them but took the capital gains to use them as kind of a charitable piggy bank. But that’s been very satisfying for me. So it isn’t an original idea but take risk, cut your losses quickly and let your winners run — and that’s the way to make a sizeable net worth.”
That may sound counterintuitive, given how top hedge fund managers are still reeling from losses from big, concentrated bets on companies like Valeant. Wien mentioned how a herd mentality is also present in technology stocks such as Netflix and Facebook, and asked investors to heed Piciotto’s warning: crowded trades are almost always dangerous.