Simon Reinius, a seasoned fund manager at Carnegie, is not your typical investor. With a passion for graphs, a deep understanding of financial theory, and a love for Star Wars, Reinius brings a unique perspective to the world of finance. As he sits down at Carnegie’s headquarters, it’s not the latest Star Wars movie that he’s discussing, but rather the flaws in the assumption of a normal distribution in stock market analysis.
Reinius, along with his colleague Emanuel Furubo, recently completed a study on the topic, highlighting how the assumption of normal distribution leads to underestimated risks in the short term and overestimated risks in the long term. This deviation from the idealized normal distribution, with its asymmetry and fat tails, underscores the higher probability of extreme negative outcomes in the stock market than what a normal distribution suggests. Reinius emphasizes the importance of minimizing maximum loss risk to enable increased stock exposure over time, ultimately driving higher returns.
Drawing parallels between portfolio construction and cooking, Reinius stresses the importance of focusing on the overall risk-adjusted return of a portfolio rather than individual stock picks. He believes that the journey of investing, much like a culinary experience, is about achieving a balanced and satisfying outcome, rather than chasing after short-term gains.
In managing his fund, Reinius looks for companies with strong growth, profitability, and market leadership, particularly in sectors like healthcare, IT, luxury, and energy. Companies like Microsoft and Alphabet have been stalwarts in his portfolio, providing consistent returns over the years. However, Reinius is not afraid to admit his mistakes, such as selling off Garmin at the wrong time or missing out on opportunities like Nvidia due to cautiousness.
Despite the ever-changing market dynamics, Reinius remains steadfast in his investment philosophy, focusing on companies with reasonable valuations and operational resilience. He continues to navigate the complexities of the market, making informed decisions based on thorough research and a keen eye for long-term success.
As the discussion shifts from financial theories to favorite Star Wars films, Reinius reveals his top pick: “The Empire Strikes Back” from 1980. Just like the iconic saga, Reinius’ approach to investing is rooted in timeless principles, combining wisdom, strategy, and a touch of adventure to navigate the ever-evolving landscape of finance.