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Jared Dillian
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Was it Worth It?

In this piece from 10th Man, author Jared Dillian discusses how the ETF revolution is less about ETFs and more about indexing; about how people have come to view stocks less as stocks and more as blobs of stocks.

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November 1, 2003

Oracle Partners' Redemption

By Kathryn M.Welling

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  • Oracle Partners' Redemption

Larry Feinberg, founder and president of Greenwich's Oracle Investment Management, has a simply fabulous record as a health sciences investor. Isn't used to coming in second, much less losing. No way, no how. So finding his funds under water last year for the only time in his career was nothing Larry enjoyed - or intends to repeat. His trading foibles now deconstructed as thoroughly as the basic research behind

his biotech and medical technology favorites, Larry is as committed as ever to companies-profitably-bringing leading edge bioscience to market. But he's a lot more attuned to pragmatically trading their shares, long and short, while waiting for a "rational" market.

What's he buying and selling? Read on. - KMW

What's new in your sleepy little corner of the business?

Sleepy! The entire business of "hedge funds," particularly in my arena, which is health care, has changed very dramatically in the 15 years since I started doing it for Odyssey Partners. Oracle Partners has been a standalone now-this is our 11th year. We have compounded at a 27 percent annualized rate of return-and that's after a little bit of a hiccup last year.

A little?

Okay, our first-ever losing year. I clearly underperformed for the first time in our 15-year history. Which is why we made some adjustments as a firm about a year ago - to address changing market conditions. It wasn't fun, but it was a learning experience - and what we learned was discipline. In the process, I reviewed what we're good at and what we were doing wrong. What we do right, unlike many of the so-called hedge funds out there, is that we are investors. This is a foreign concept to many people who have been involved in the market for the last several years, but we actually do invest based on the underlying fundamental trends level.

You're still fundamentally a smart aleck-

Surely you're not surprised. My point is that we are not speculators. Still, the major difficulty we ran into last year developed because I didn't respond quickly enough. The world has become a much different place for investors. We have always been very successful at finding trends at the industry level and at the sub-sector level, in generic drugs, HMOs, biotech or whatever-and then investing in the best companies and shorting the worst in those areas. What we didn't have previously was a discipline about when to take profits on the upside and when to stop losses on the downside that was appropriate in a highly volatile market environment. But we learned. When you have a tumultuous market, like we had not only on the way up in 1999-2000, but on the way down in '01-'02, you learn a lot.

You're telling me discipline is the difference?