There Are No Lanes – Investing in 2021

Hedge fund activist Dan Loeb tweeted the following yesterday:

It’s difficult to compete as an investor now if you don’t expand your investable universe into private securities. First, you miss the best entry points; second you will not be tuned into the new innovators that maybe about to disrupt your public cos.

Also, you miss out on the fun of working with entrepreneurs to help build businesses. VC is the tip of the spear of what makes free enterprise the greatest system to improve lives innovate and deliver products and services to customers while creating jobs and economic growth.

Back in 2018, I was in Dan Loeb’s Third point office pitching Dan our (Social Leverage’s) third fund. My friend Matt Ober (who runs data for Third Point) set up the meeting. I thought the conversation/pitch was going well, but halfway through Dan said I reminded him of Ron Popeil. It was like getting an uppercut to the chin. I could not think straight the rest of the meeting and let’s just say Dan is not an LP.

The SPAC’s, IPO’s, crossover funds, hedge funds starting venture funds is all just a much overdue reaction to the fact that in 2020, just 5 companies accounted for north of 25 percent of the S&P.

COVID was a trigger point for the unbundling of the indexes that was long overdue. Of course, technology got pulled forward and new leadership is inevitable.

Retail went from 10 percent of total trading to 25 percent and maybe it sticks. In a Robinhood, Tik Tok world, the yoots may accelerate the unbundling of indexes that I have been writing about as they choose to own 10-30 stocks not the S&P Index.

In my last New York dinner with friends back in February (boy was it a fun night at Carbone’s), I wrote:

SPAC’s have been on my mind the last few weeks. Here is the Wikipedia definition. The hottest SPAC I can remember of the last while has been that of Virgin Galactic ($SPCE). I am tired and can’t remember if I mentioned it in the last few days here but the ticker $SPCE has been the most popular ticker of all time on Stocktwits. It recently surpassed the volume of Tesla. As fate would have it, Adam Bain joined us for dinner and he was one of the people that owned and coordinated the SPAC that pulled off the Virgin Galactic deal. It was fun to hear him talk about the process and what he has learned. I was also at the offices of Dan Loeb (Third Point Capital) meeting with my friend Matt Ober and had no idea that they just completed a successful SPAC called Far Point Acquisition Corp ($FPACU). While all this may be the sign of the ‘top’, the optimist in me thinks that smart people with big ideas are tired of looking at a shrinking universe of public stocks. They see opportunity. It’s both amazing and ridiculous that just FIVE companies make up 18 percent of the S&P 500.

The writing had been on the wall, we just needed a trigger and COVID was that trigger.

Ben Carlson took a deeper look at the data at the time and asked at the time if investors should care? It is worth a read.