Sniper or machine gun?
I like Sniper movies. I feel it is more about the person behind the gun rather than the gun itself. Whereas if someone was firing from a machine gun, the gun overshadows the person.
I was drawing a corollary to investing styles. Are you a sniper or a machine gun type? Both the guns serve different purpose and in a given situation one cannot replace another. Yet, there is something charming and satisfying watching a sniper get his/her target rather than the machine gunner.
Snipers are artists, with years of practice and very skilled at their jobs. They respect resources, the war environment and have maximum impact with the least of noise/frills. An experienced investor is like a Sniper, waits patiently for its target to make a mistake or show up on the radar. Such investors value money/bullets and make optimum use of each resource available to them. They are deadly since they quietly keep doing their job and looking for opportunities and are not flashy. When the markets are choppy, they stay clear and do not fire/invest.
A machine gunner on the other hand, is continuously firing. If it is in the right direction, it is bound to get many of its targets. Many times early stage investing looks like this. Reasons could range from Power Law to momentum investing to simply put deploying gunpowder towards the end of the commitment period of a fund. This strategy has also worked in favor of many investors. Looks like a ‘spray and pray’, but there can be method to the madness. You might not be called a ‘great stock picker’ and you might have many bullets which do not hit the target, but you need one or two big winners to cover up most of the other losses.
Say $500M VC fund wants to invest $1M in a deal. I would recommend a machine gunner strategy since you have enough bullets to fire and miss the target. But if you fire wide enough and over time long enough then you will hit the enemy. There is less skill set, tactical know-how, experience required to be a machine gunner. All you need to know is “Which direction to point the gun at”
What works for you depends upon your style, resources and the market. The point from where you are shooting matters, because only you can see what is in front of you and that is ever changing. As I said, I personally like the Sniper style, a sniper can shoot all day and not even get noticed and would have done maximum damage. As a sniper, you can hit an enemy which would never come in the line of fire of a machine gunner, thus your rewards can be manifold.
But it is not easy, being a sniper in the zone where everyone is carrying a machine gun. Machine guns work the best in close combat situations, quick firing and hitting max target possible in the quickest amount of time. Thus it is a function of time, place and the situation. In a bull market, having resources to ride the wave becomes important and in a bear market, the sniper strategy wins. In the case of unlisted stocks, it is similar to ‘hot sectors’ ‘hot markets’ where a machine gun will make more sense and for contrarian bets a sniper strategy makes more sense.
Is it easy to shift between the two strategies for the same person? Very unlikely. Its best to know your strengths and stick to your style of investing to be successful. Both styles can produce winners, if done right. Snipers have telescopic view, which means closer and more detailed oriented but a narrow focus, whereas a machine gunner has a wide view, no details but does the job. Many sector/niche focused VC funds are using the sniper style to identify opportunities whereas sector agnostic funds use machine gunner style of investing.
Machine gun is an area weapon whereas a sniper rifle is a point weapon. Both serve different purposes. One is for short range and the other for long range. One is multiple targets at a time and the other is one target at a time.
Figure out, what works for you.