"King of Short-term Trading" Stanhart: Never believes in brokers' views

From the perspective of a trader.

When it comes to long-term investing, everyone will instinctively think of the "Stock God" Buffett. But who comes to mind when talking about short-term trading? Today, we will introduce Michael Steinhardt, a Wall Street billionaire trader and short-term trading master.

For over thirty years on Wall Street, Steinhardt transformed from an unknown investor to a globally renowned billionaire, known as the "Modern Hedge Fund Godfather" and the "King of Short-Term Trading." Unlike Buffett and other long-term value investors, Steinhardt is known in the investment trading circle as the "King of Short-Term Trading" because he focuses on short-term operations rather than in-depth research reports on companies or industries.

Between 1967 and 1995, his hedge fund averaged nearly 27% in annual returns, leading Steinhardt to become a billionaire. After earning substantial profits, he closed his fund in 1995 and chose to retire. A decade later, he became a major shareholder of WisdomTree Investments and assisted in the company's operations.

As early as 1993, he made it to the Forbes 400 list of billionaires. According to the real-time Forbes billionaire ranking as of January 29, 2024, the 82-year-old Steinhardt has a wealth of $1.2 billion.

Steinhardt Owned Stocks at 1 Year Old

Steinhardt can be considered a genius investor, with experiences and intelligence beyond ordinary people. He owned stocks at the age of one, started trading stocks at 13 based on his own research, and by 16, while other teenagers were still in high school, the talented Steinhardt had been admitted to the Wharton School of Finance at the University of Pennsylvania and graduated early at 19.

It is reported that Steinhardt was born in 1940 into a jewelry family in New York. When he was just 1 year old, his parents divorced. His father gave him 100 shares of Philadelphia Dixie Cement Company stock and 100 shares of Columbia Gas stock as compensation.

As Steinhardt grew up, at the age of 13, he began studying trading reports in Brooklyn and tracking stock prices published in the World Telegram. Despite knowing nothing about stocks at the time and having no one to ask for advice as nobody he knew understood the stock market, Steinhardt frequented the offices of the financial management and advisory firm Merrill Lynch, watching the screens with cigar-smoking old men. It was then that he became fascinated by stocks and soon started trading.

Entrepreneurship Partnership Leading to Millionaire Status

In 1960, after graduating, Steinhardt embarked on a legendary investment career on Wall Street. He first found a job in securities research at Calvin Bullock Mutual Fund, then worked as a journalist for Financial World magazine, and later became a chief analyst at a securities firm.

During his time as a chief analyst, he met Fain and Berkowitz, and the three of them hit it off. In 1967, they jointly raised $7.7 million to establish the hedge fund Steinhardt Partners, which experienced explosive growth. In its first year, the company made a profit of 31%, followed by a staggering 84% profit the next year, while the S&P index only rose by 6.5% and 9.3% during the same period If an investor bought Stanhart's fund in 1967, they would have obtained 100 times their wealth after 20 years, with an average annual growth rate of 27%. By 1969, the company's capital had exceeded 30 million US dollars, and all three partners had become millionaires, while Stanhart himself was only 29 years old at the time!

Later on, Fain and Beckosz left one after another to start new funds, while Stanhart continued to manage the arbitrage fund on his own with remarkable results. Before he was even 50 years old, he had become a billionaire.

According to Forbes Magazine, in 2023, Stanhart ranked 2324th on the "2023 Forbes Global Billionaires List" with a net worth of 1.2 billion US dollars.

Why is Stanhart known as a world-class short-term killer?

1. Stanhart Focuses on Short-term Investments

Stanhart focuses on short-term investments, believing that the returns from long-term investments are relatively illusory. He thinks that accumulating profits of 10% or 15% is much more reliable than hoarding stocks for future gains. He once said, "By the time stocks in long-term investments make money, the profits from short-term investments have been sitting there for a year." Moreover, Stanhart is very accurate in his directional judgments. When he learned that interest rates might be cut, he decisively bought bonds without hesitation.

2. Stanhart is Skilled in Long and Short Positions

Stanhart is very skilled in both long and short positions, especially in short selling. For a period of time, his fund was consistently short selling, yielding returns of 30% to 40%. When going long, Stanhart tends to choose stocks with low P/E ratios but stagnant stock performance, while when going short, he selects the most famous and popular stocks.

In 1972, he shorted Polaroid, Static Industries, and Avon Industries; in 1973, he shorted Kaufman and Broad Company's stocks, earning substantial returns.

Stanhart often simultaneously goes long and short, resulting in profitable outcomes. In 1983, he bought 800,000 shares of IBM at $117 per share. The stock slowly rose by 15 points. Most investors would notice this upward trend but would be reluctant to close their positions, thus taking no action.

Subsequently, the stock fell back to $120, erasing most of the gains. Stanhart borrowed $100 million to buy at $117 per share, sold near $132, and netted over $10 million. Then, at the peak price, he shorted 250,000 shares, closed the position at $120, and made several million dollars. Stanhart acknowledged that IBM stock could indeed yield long-term profits, but he didn't just wait for the stock to rise to his price, he did more and got more Stanley Hart spends $35 million a year to purchase all the information on Wall Street in order to obtain market information as soon as possible. He has four to five traders who deal with 80-90 brokers, constantly receiving calls from Wall Street providing information on potentially profitable trades.

3. Stanley Hart never believes brokers' views

Despite spending a huge amount of money on Wall Street intelligence, Stanley Hart never believes brokers' views. "If a broker can earn huge profits, he will not sell his views because the return is too low." He always believes that those people just follow the crowd. Stanley Hart tends to think independently and diversify his investments. He invests in various areas of the stock market, where stocks are chaotic and lack inherent logic, but this can combine to form one of the most powerful investment portfolios.

In addition to not easily believing other information, Stanley Hart also mentioned that the secret to success is: "Courage is more important than knowledge, and timing is more important than direction."

Stanley Hart's fund lost $1.3 billion overnight

Even geniuses have moments of failure, including Stanley Hart. During the 1994 bond market crisis, many hedge funds estimated that some European countries would cut interest rates to stimulate weak economies. Stanley Hart bought a large amount of bonds, waiting for appreciation.

As usual, using a large amount of leverage, Stanley Hart and his fund only held $30 billion in bond positions. However, the Federal Reserve raised interest rates by 25 basis points due to a strong domestic economy, forcing Europe to follow suit. Stanley Hart encountered his biggest investment failure, losing $1.3 billion in his hedge fund overnight. However, Stanley Hart quickly returned to 25% annual compound growth in 1995.

Stanley Hart tired of short selling and retired

In 1995, Stanley Hart stated that he was tired of short selling in the market and claimed that he had enough money, so he decided to retire and seek other stimuli. The company had assets of $2.6 billion at the time. Since then, he has been actively involved in charitable activities, such as donating to New York University and the Wildlife Conservation Society.

In addition, Stanley Hart bought many properties with tree-lined avenues, reservoirs, and large swimming pools around them. He even bought many animals, forming a wildlife park where he feeds them every day.

Return to the investment world

Stanley Hart returned to the investment market in 2004. He worked for Index Development Partners, Inc., now known as WisdomTree Investments. He is the chairman of WisdomTree, which provides dividend and income-based index funds rather than market capitalization-based traditional index funds. As of September 2022, WisdomTree manages $74.55 billion in assets Stan Hart's 6 Investment Principles

Stan Hart shared his investment principles with the investing public, and it is with these principles that he has achieved investment success.

Principle 1: Make Mistakes Early

Make decisions and implement them immediately, constantly correcting the decision.

Principle 2: Do What You Love

By following this path, your dedication can ensure long-term happiness and fulfillment, rather than the emptiness after short-term speculation.

Principle 3: Stay Relatively Agile

Always research all areas that may bring wealth, and perceive changes in trends earlier than others.

Principle 4: Make Full Use of Information

Much information is useless, the key is how to grasp the existing information and focus on the most important issues.

Principle 5: Trust Your Intuition

Experience is a form of wealth, and it must be acknowledged that intuition is also an accumulation of experience. The key is to find a balance between intuition and experience.

Principle 6: Avoid Small Investments

Human time and energy are limited. When taking risks in investments, ensure that the returns are sufficient to compensate for the expenses.

Controversies in Stan Hart's Later Years

1. Stan Hart Involved in Sexual Harassment Controversy

Since 2015, Stan Hart has been accused of sexual harassment by female employees. In September 2018, the Jewish Journal reported that Hillel International, a Jewish campus life foundation, was investigating Stan Hart for "inappropriate sexual remarks" towards two female employees of the organization. The foundation immediately removed Stan Hart's name from the board of directors.

Stan Hart's response to this was: "If I had been immediately informed of any concerns about anything I said at the time, I would have apologized immediately. It was not until recently, when Hillel International called me about comments I made several years ago, that I learned of this investigation. I am sorry and deeply regret any embarrassment, discomfort, or pain caused, as this was never my intention." As of March 2019, six women have accused Stan Hart of sexual harassment and inappropriate behavior.

2. Plundering Antiquities

Stan Hart is a lover of antiques. In 2021, he was accused of plundering 180 antiquities worth a total of approximately $70 million. According to information from the Manhattan District Attorney, Stan Hart relied on an underground network of antique smugglers, crime bosses, money launderers, and tomb raiders to expand his collection through illegal means, plundering artifacts from 11 different countries. Although he returned all the artifacts, he was banned for life from purchasing antiquities